The Cost of Doing Business?
The $20 for that credit report? The $15 to run automated underwriting? $400 for an appraisal here & there? The gas burnt driving buyers around? At one time or another I've heard each and every one of these things referred to brushed off as "the cost of doing business". Let's say a loan officer closes 5-6 loans/month with a few of the above costs considered "the cost of doing business". That's $2175 in a month, minimum. Now being a licensed loan originator isn't cheap, but it also sure as heck isn't that expensive. I've noticed a trend amongst loan officers and real estate agents alike to consider a lot of expenses "the cost of doing business" when in true business terms these things are really business mistakes and nothing more than losses on paper.
A funny trend I've seen & have experienced myself is that when a company covers things like printer toner, credit reports, marketing pieces, and appraisals, these things are considered by individual employees as "the cost of doing business", but when those bills fall on the individual completely, they are referred to as "expenses".
Let's face it - the real estate industry is a people business. People don't like to be nickel and dimed, so we tend to avoid charging for small things along the way. The mistake is made when business people don't consider the fact that those small things add up to some very large bills. Another mistake is being afraid of discount companies - discount brokers, internet lenders - sure, they're out there serving their niche, but they're not stealing your business because they're saving someone $15-20. Consumers aren't afraid of paying for things if you show them what they're paying for. Most people just want to ensure they're getting their money's worth.
The cost of doing business is something we should all consider very strongly. In the past, I used to charge for an initial credit report unless a potential client was a referral from someone I trusted. Sure, credit reports are only $20, but when you're taking 10 applications/week, that monthly bill can get steep for an individual. It was also a good gauge to see if someone was serious about the process. If someone wasn't willing to contribute $20 toward the purchase of a home, what were they going to do when they saw the costs of appraisals, inspections, or surveys? I don't charge people for credit reports anymore. I do charge for the big ticket items. Appraisals, any type of credit repair work, and usually anything that costs more than a minimal amount (in my mind, $50) is being passed along to the people having the work done for them. Am I stingy? No. Am I cheap? Hardly. Am I frugal when it comes to my business? Absolutely. You should be too if you're serious about your business.
Good businesses of all shapes and sizes strive to do 2 basic things to achieve success - minimize losses and maximize profits. Many businesses struggle to stay above water because they don't manage costs and expenses effectively. As owner-operators of our own business, we all have the opportunity to analyze our expenses and decide for ourselves what "the cost of doing business" truly is. Are you content burning through gas to show people 20 homes all over town without buyer agency? Are you OK risking $400 for an appraisal for someone on the fence? It's OK if you are, as long as you're considering the big picture, and are smart about the cash you're tossing away.
For the sake of most consumers, though, the "cost of doing business" is a figment of your imagination. Think of every other industry on the planet, and name 3 where the workers work with no expectation of payment. Can you do it? Off the top of my head, I can't. People are accustomed to paying the people they hire for work. Why should we be any different?
What do you consider "the cost of doing business"?