Ok, so I've been reading the blogs... The C-Word- Yep..we're going there...CONTINGENCY! by Michelle Molinari and RE: 'Contingency' vs. 'Deferred Payment Plan' by Tom Scanlon, which I'm pretty sure were sparked by my blog Why is 1% of the home's list price unrealistic for staging services?. I would like to continue the concepts and ideas of both in this blog.
In a comment on Tom's blog he writes,
"The home staging service-menu that is presented to the citizenry of Lafayette is extensive and (no doubt) impressive. So extensive in fact, that the services you now offer go beyond the scope of what we now call 'Home Staging'. The final product/service that you are offering your market is not known as 'Home Staging'. What is being described, is a: "Real Estate Developer". Real Estate Developers have complete control over the project. There are no complaints about the wrong sofa, and there is no controversy over the removal of wallpaper.Real Estate Developers customarily receive payment on a contingency basis. "
Michelle commented back,
"And as far as developers, go, that is exactly what I am, and what we all are. I am developing the concept of staging to exceed beyond what it is presently. I think there is a huge loophole in the system, and I noticed it right away."
So... here's my thoughts on this.
Are we in fact Real Estate Developers? Sometimes I think we are and sometimes I think we are not. In discussing the contingency issue I think it becomes a MUST. I don't know how things work in your personal business but typically when we go into a home we give them a play by play of recommended changes and then provide a quote for doing the work. Sometimes we get to do the work, sometimes the homeowner does the work and sometimes no one does the work - as in it remains undone.
Under a contingency contract I would assume that the work that is necessary would in fact be done. Wallpaper would be removed and fresh paint would find itself on the walls. Things that would remain undone due to budget restraints would actually take place afterall. This should yield a higher sale price - perhaps enough to cover the staging budget. It should also make it more likely that the home will in fact sell - again covering the assets of the stager who did the work and took the risk.
What I would think to be important is to address these costs. If the home was pulled off the market, it would be important for there to be a clause that the seller would in fact owe a certain fee. This would need to be disclosed in the contract itself.
I tend to agree with Michelle in that such a premise could revolutionize the staging industry. I've always been a supporter of get paid in advance. Over a year ago I wrote, in response to Homesellers - I'm not Popeye, so don't be Wimpy, a Craig Shiller post, with Craig - I'll call your Wimpy & Raise some Olive Oil. We began the discussion of getting paid at closing here. I definately feel it is a viable concept. The trick is getting the contract just right. You will need to ask for enough to cover homes that don't pan out and perhaps even more importantly, you will need to control how fast your business grows under such a plan.
A great builder here in town once told me something very interesting... Many business don't go under because they fail, they go under because they grow too fast and ultimately can't keep up.