Quick disclaimer: I really want to start a discussion with this post, not an argument. I recognize that the ideas below might not be watertight yet, but I think it's worth discussing. Nothing here is meant to indicate that we should all agree on how to do business OR how much to charge, because that could lead to anti-trust issues. Instead, I have some thoughts on how to change the perception of our value to consumers. Our time is valuable. We should treat it as such.
I've written about this topic in the past, but I have some new thoughts with regard to how real estate agents are typically paid, and I am wondering if our current model makes sense. If you're an agent reading this, I am not going to advocate any type of "discount" brokerage, or any major, sweeping changes in our industry.
Over the past few years, I have witnessed a push among real estate agents and brokers to "raise the bar" in real estate. I like this idea. I think it's probably too easy to get licensed and start selling. Frankly, it was even easier back in the late 90's when I got my own license.
If we want the general public to take us seriously as professionals, here's one idea:
Stop working for free.
If you can name a profession that does as much as we do with no assurance of being paid, I would love to hear about it. Plumbers charge a trip charge. Consultants typically charge by the hour or project, but nothing is done upfront without payment. Even the guy building your patio wants half upfront.
For those of us who have been selling for any reasonable length of time, we know how it feels to lose a buyer client suddenly and often without notice. Sometimes they just decide not to move, or they go directly to a builder who refuses to pay commission, etc.
I've been considering something relatively small that could help save time for agents and brokers, while also solidifying the relationship between agents and their clients, particularly buyers.
Have you ever considered charging a reasonable retainer fee to buyers? My thoughts on what constitutes "reasonable" may differ wildly from yours. One market might be able to justify $100-200. Another might be $500 or more. The point here is that it wouldn't really have to be expensive. Instead, it's just enough to make clients think twice about spending an inordinate amount of time looking with no intention of purchasing. It would also make it more critically important to get financing lined up quickly.
Yes, I recognize it could be a tough sell when your competitors aren't charging to show homes and you decide to ask for a deposit to protect yourself. It could also set you apart as someone who is worth it. This takes real confidence in your abilities.
In Texas, our residential contract include option periods that require a cursory fee from the buyer. This enables the buyer to have the unrestricted right to terminate the contract within a certain number of days (typically 7-10). It's just a small amount of compensation to the seller for holding the house off the market for a few days. If the buyer closes on the house, this fee is credited back to them at the closing.
Why couldn't we handle showing fees in the same way? For any buyers who are serious and qualified, this is essentially a no-risk proposition for them. You could decide your refund policy, but I would make it non-refundable unless they follow through on the purchase. The only exception would be if they are unable to get a loan for some odd reason.
Again, this is just some food for thought. Our profession is not well-respected, and often for good reason. Every time I have a client who is relocating to Austin say, "We haven't had good experiences with Realtors", my first response is, "I understand that. Actually, I've also had plenty of bad experiences with agents, but there are a lot of good ones, too."
EDITED HOURS AFTER THE ORIGINAL POST:
Okay. If you're read this far, I have to let you know that I wrote this for several reasons:
1. I was curious to see if it might get featured ( which it did).
2. I was interested in stirring up some controversy (mission accomplished).
3. I wanted to test my ability to debate, then decided against arguing with my friends.
4. Keep reading and you'll see my real point below.
While I think this idea or something similar could work under perfect conditions, I don't think it's realistic. Most people will tend to gravitate toward the "free" option, often even if it's far inferior, partially because they don't know any better, and partly to simply protect their pocketbooks.
Jane Peters is a very sharp agent in Los Angeles, and a friend of mine. She astutely noted in her comment below:
"The idea of requiring payment is like forcing people to work with us. If we build the kind of relationship we need to keep them then there is no need to charge them. The odd one will stray, but so be it. Having them stick with you because of the money is not the kind of position I would like to be in."
And therein lies my opinion about buyer's brokerage agreements. Some agents absolutely refuse to show property without having a signed agreement in hand. I have never used them - they are not required in Texas to establish an agency relationship. It can be implied or it can be established through an oral agreement. Like the idea posed above, they are really nothing more than a litmus test. If you get it signed, you didn't need it in the first place, because they are loyal. You will occasionally lose a buyer (I lost one this year), but that's okay. I don't prefer the idea of forcing someone to sign a piece of paper to work with me as a buyer.
If you had a choice, would you choose to sign with an agent you just met, or to work with someone who doesn't require extra paperwork? Give it some thought.
I apologize for making a somewhat outrageous assertion above. I figured very few people would agree with me, and I originally thought I might debate this post longer, but Jane made the comment I was waiting for, so there you have it. We get paid well precisely because part of our gig involves working with a (hopefully small) percentage of buyers who will not close for whatever reason.
Beyond that, I truly did want to stimulate some "outside the box" thinking here. I remember when no one thought that there was any value in having a real estate website (1997) or in requiring registrations on our site when no one else was doing it (1999 - 2000) or blogging (2007).
My advice: Be careful not to discount new, odd ideas too quickly. There is a reason that we are self-employed independent contractors. I could charge $5 to list and sell a house, or 10%. The market will either teach me a lesson or I will be wildly successful, depending on the presentation, supply and demand, etc. It never hurts to innovate, even if it doesn't work out the way you originally hoped or intended.