Have you ever heard the commission-negotiation-avoidance strategy of creating a menu of packages for a seller to choose among? For example (all figures are illustrative only), you might offer a 4% package which includes minimal services; a 5% package which has a moderate level of service and a 6% package that includes a kitchen-sink level of service.
Sounds good, doesn't it? After all, it demonstrates to the seller what you actually DO to sell a house and probably reduces the likelihood of his asking for a discount. If he wants to pay less, he gets less. HIS choice.
Sorry, but I think this is a lousy idea. Why?
Oh, let me count the ways...
You want to sell the house don't you? Yes? Well, then why are you asking your SELLER how to market it? As the expert in selling houses, YOU know what needs to be done and you, as a professional, should do those things.
You should also know what doesn't sell houses in your market. And you shouldn't be offering and charging for those services if you (as a professional real estate agent) know they aren't effective.
When I get a new listing, I really want to sell the damn thing and I spend a lot of time and energy figuring out what we need to do to make that happen. By "we," I mean me and my seller. I don't market every house exactly the same, nor do I advise every seller to do the same things. It's part of my service to analyze each situation individually and proceed accordingly. Some listings will benefit from Open Houses, some won't. Some (most) homes need staging, some don't. Some listings will benefit from newspaper ads, most won't. It's my job to know these things.
Besides, you want to provide exceptional service to all your clients, don't you? Don't you want their future business and referrals? By purposely limiting your service (especially if it affects the marketability of the home), you may be blowing your reputation and credibility with this client and potential source of future business. And of course, you may also be blowing your chances of getting a paycheck if your seller doesn't pick the right package and the house doesn't sell.
I do offer two commission options, but they aren't priced according to the service provided; they're based on whether or not the seller pays an upfront marketing fee. You can learn more about this strategy on my website... and yes, I tell the world what my commission is - which is a topic for a different blog, but it works amazingly well!
Be a professional real estate agent and do what it takes to sell your listings. That's your job.
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Jennifer, great post. I am going to forward this with your book info to my REA friends.
Sorry, but I don't agree with you on this one. I'm not asking the seller how to market his house. I'm offering the seller choices and informing the seller how I will market his house. One size does not fit all, as you mentioned. Some won't benefit from a brochure box, or an open house. Some can't even have a sign. Some sellers hate virtual tours. If there is a service that I either cannot provide (HOA rules, for example) or the seller does not want, I don't feel the seller should have to pay for that service, since I'm obviously not paying for it either. On the other hand, if a seller wants newspaper advertising or the listing would benefit from paying a higher co-op commission, then that is what we do, at a higher commission rate. Offering a menu of services is not about discounting your commission. It is about offering a seller choices and superior service, based on the particular needs of the seller and the house, earning me tons of referrals and happy clients along the way.
Really enjoyed the calls with you and Borino. Also really like this blog. With your permission I would like to send it to all my agents as we are constantly having this discussion
I think Kelly is confusing a menu of service with different level of services for different situations. I am against the first and in favor of the second... at least as far as being a sellers agent is concerned. For a buyer I think there is some merit... different price structure... (also in buyers agency there is from a standpoint of liability you may need to spell out services).
I think this is a good post and it makes a lot of sense. I think depending on who you might be up against it might be nice to have a menu of service.
Terri - Very cool, thanks!
Kelly - I agree with your analysis except that I don't think we should be asking our sellers "which" package they want - we should be telling them what needs to be done and charging accordingly. If an agent wants to charge less (or more) for listing a condo due to marketing restrictions (for example), he or she can do so, but I believe as professionals, it hurts our credibility to ask our sellers "which package do you prefer"?
Charlie - Of course - please do! Borino and I are having another little conference this Saturday - stay tuned.
Perrin - Good point about buyers - never thought of that.
Hi Jennifer. Great points. Commission is an interesting and undertalked about issue. Did your picture change back?
Ken
Chuck - but is our job to beat out the competition or best serve our client? Yes, I can see where this technique is effective at GETTING listings, but I don't think it benefits anyone once that sign is in the yard. Not you, not your client...
Ken - I have two different AR blogs, with two different pictures... maybe that's what you're referring to?
Good points. After all, we are supposed to be the professionals here, right? The people who know the market and know what it is going to take to sell the house? Good, I thought so.
Very well said Jennifer. I agree we should not allow the Seller to choose. In fact, I think the Seller is paying me to pick what works and what doesn't work.
"we should be telling them what needs to be done and charging accordingly"
Hmmm, telling instead of consulting. Interesting idea.
My main objection to the menu is that I get judged on RESULTS regardless of what the client pays. If they client's home doesn't sell in a reasonable amount of time, it's my name out there associated with it. If something is important enough to be included in the marketing plan, it must be a necessary part of selling the home quickly or I wouldn't be doing it, right?
Ron - GREAT point. It's the same thing as taking an overpriced listing but making sure your seller knows you think it's overpriced... doesn't matter. As soon as your sign goes in a yard, you OWN that listing and if it doesn't sell, it's your fault. Thanks, but no thanks.
Debbie - Exactly. Exactly.
Susan - Well, that's how I see it!
As a Realtor, you are the professional, and you should be paid for your services... You are not Used Car salesmen. If you are a full service agent, you should charge full service commission. Anything else undermines the relationship and your reputation.
I'm curious which of your commission plans your clients choose most often. (I visited your website.)
Joe - they usually choose the 5.2% plan.
Robert - I don't care what agents charge their clients; it's the services provided that can make the difference between a sale or a non-sale. I just don't think we should be asking our sellers to make that decision.
Interesting two tier pricing strategy Jennifer. I look forward to the 2nd edition book. You provide us all with a wealth of information and I like your view on selling listings.
I could never do the a la carte commission structure -- I would end up giving the full service anyways... too much passion to do whatever it takes to get those suckers sold!
Paul - funny - at one point in my career I considered doing bare-bones listings and realized the same thing - there's NO WAY I could pull it off!
Gary - the two-tier pricing structure really works well from a lot of angles...
And... I certainly do like the spreading the risk concept. Something tells me Sellers who choose the 5.2% plans have less of a tendency to ask for a higher listing price for "negotiating" room...
Am I correct?
Paul - probably so... I don't know if I can relate it directly to the commission structure, but it might!!! I like the way you think.
I am curious about your book and will defiantly check it out. I agree with Paul Francis, I would end up giving my services away..(maybe your book will help me out). Great job presenting your opinion on this matter! Have a great week.
In this market more than ever, we simply have to be worth what we are charging - I am all for discussing options. However, I am not for competing based on commission. Houses are harder to sell than ever before, why would we want to work harder and for less? Does that make sense to anyone?
I tend to agree with Ron and Paul. I believe we have an obligation to our clients to do everything possible to get the listing sold. I doubt if the home doesn't sell, the seller would ask himself if he should have chosen Plan B instead of Plan C. He'll just think he chose the wrong agent.
Interesting way to plug your book. Commission issues aside, you generated curiousity and possibly several sales of your book.
I have to wonder why Jennifer is against "alternative choices" but provides "alternative choices" on her website?
Most times, I'm sure sellers will ask for a reduction in commission. Sure, you can offer it, but the consumer gets less service.
We get the same in the mortgage business. I want a low rate! Sure, here's what it'll cost you. But I don't want to pay those fees. Sure, here's a higher rate. That rate's too high. And guess what? We wind up somewhere in the middle. Basically, it's a trade off. By asking a lot of questions up front and showing the pros and cons to each approach, you can help the customer decide for him or herself which product best fits their needs.
For Realtors, providing a consumer 'alternative choices" is not a bad idea. For 4%, here's what we'll do, and here's what you'll do, Mr. and Mrs. Seller. However, for 5%, we'll do these additional services and help take some of the burden off your back. And, for 6%, we'll take care of everything for you so you can relax and enjoy life! Which do you prefer?
With proper explanations and the pros and cons to each approach, which do you think the seller will pick? In most cases, he or she will most likely pick the one that will most likely get the house sold and with the less tress on their part! They'll of course most of the time pick the package with the highest commission.
Just my two cents worth.
Paul II - That's exactly right. Once your sign is in the yard... it's All Your Fault if it doesn't sell.
Mark - I used to be a "discount broker" and while I don't regret it, in this market I feel perfectly justified charging more.
Terrie - Thank you!
Anonymous - Oh no! Plugging my book? Nah, actually, I was hoping for lots of visits to my website, but I'll take book sales, too...
Great advice. I suspect that the sellers who opt for a lower commission rate actually end up being the harder cases to work with in the long run anyway.
Remember the 80/20 rule: 20% of your clients will provide 80% of your income.
And 20% of your clients provide 80% of your headaches.
Great post!! Always do your best at marketing and selling each home you take as a listing and you can't go wrong.
Jennifer good post. Whether there are those that agree or disagree, this post is well written and you even stated that it is just your opinion. I checked out your website as well. I am enjoying my subscription to your blog.
I agree with your blog title. Menu bad idea. We need to show seller's we are worth what they pay us.
Happy selling! Veronica
I would love to hear more about your "up front marketing fee" as that's an interesting idea. Do you find people prefer to pay that and the lower fee? Great post!
How do the buyers agents feel about getting less than 50% of the commission? I'm not going to get into the what commission should be discussion but for the most part in our neck of the woods the commission is either split 50/50 or the larger split most often goes to the buyers agent not the other way around. I've never seen a HUD-1 where if I was working with the buyer that my gross was less than the listing agent. Maybe I've been lucky :-)
Cindy - good question. Here in Denver, our "typical" buyer agent fee is set - that is, no matter what the listing commission is, the buyer agent almost always gets the same percentage. If I were to charge 4%, for example, the buyer agent wouldn't get 2%, she'd get the same percentage she'd get if I charged 6% or 10%.
We only believe in giving a discounted commission to repeat clients. We work too hard listing and advertising to take less.
Jennifer, I have not implemented the "shared costs" commission option but have thought about it. It makes sense. I have found in tis more difficult market that commission rarely comes up. Sellers just want the best person for the job and are willing to pay for it.
Offering the seller is a straight commission or a commission and an upfront fee is an interesting idea. I have to admit I'm intrigued and considering implementing it myself. From a sales standpoint, I can see why it is good to give them an option and offers an opening for an either/or close.
I will also agree that offering services à la carte is not a good idea. Especially in tough markets, we need to position ourselves as the professional and guide sellers through the process. Allowing sellers to pick what services they want is akin to a doctor asking their patient, which drugs and treatment they want for their illness.
Quite honestly, a good deal of what my clients pay me for it is not my marketing skills but my pricing skills, negotiating prowess, ability to keep buyers on the line and to save deals from coming apart when things go wrong.
JA,
Wowo! i`ve been offering a Menu of services for over 5 years quite successfully!
I`m speechless reading your blog and quite frankly believe you`ve been out of touch with reality or in this case real estate for too long!
This is truly amazing based on today`s market conditions how you can assume it`s not working.
How many listing do you have year to date if I may ask?
I believe a commission should be flexible and negotiable and be tailored to the seller's need his or her expectations and the market conditions. The more time and money consuming the job is, the more commission I want. If the listing is a walk in the park and pretty much sells itself I do believe that this should be reflected in the commission.
Anne Hensel
no comment, just don't know how to get notified of new comments without posting something. :o)
I guess I can see both sides of this, but I would not try the menu option, personally. I think it depends on the individual situation, but even those Realtors who use the menu option should really probably be the ones choosing the options and explaining which methods they will be using, as they are the experts, not the sellers.
I couldn't do the flexible. I would end up giving the full service even if I unbundled them....
Earleene - me, too.
Carrie - Exactly.
Anne - I feel the same way, too, in theory, but on the other hand, you never know when a Walk in the Park will turn into a nightmare!
Scott - So nice to hear from you! Out of touch? Uh, no. What part of my blog, specifically, do you disagree with?
Jacquie - Very well said - practically a blog in itself!
Bryant - Personally, I prefer it when my clients choose the lower option because at least my marketing costs are paid and the seller has a bigger stake in the outcome.
Phil & Terry - While I wasn't really debating discounting commissions, I agree with your statement.
Lewis - if you read the blog more closely, you'll see that I offer an alternative that is NOT based on the service provided. And I think a menu of options can work well in other fields, just not this particular one (listing houses)
Laura - I can't imagine doing otherwise... just wouldn't feel right.
Kimberly - thank you!
Veronica - Yes, indeed!
Many real estate agents are doing what you are saying and getting the listing because many people like the 4%
Amen Sister! If you are a professional and have a tried and true method for selling you SHOULD make a point of treating each client the same way, offering the same high level of service. You are NOT doing them any favors by working less hard to sell and market their home. I always felt felt that if they wanted a lower level of service they should hire a discount brokerage which is set up to market their home differently than I did, but that I would not be a good fit to be their realtor. I expect my sellers to have as much dedication to getting their home sold as I do and that is NOT served by cutting my services!
You are better off with a Flexible pricing model like Russell Shaw's - No Hassle Listing. Creates the illussion of discounting while increasing deal flow for you as an agent. In reality most of the time the listing is a full commission listing since someone from the MLS generally sells the listing.
I've tried a menu-type offer in past listing presentations and it didn't work for me. The sellers always chose the most comprehensive package (and often still asked for a bit of a negotiation, which I rarely will do). But I also felt uncomfortable publishing those different menus. I felt like if someone were to choose the lowest level, I would still do what I thought was absolutely necessary to sell their home. I did away with it after less than a year.
In this market, commissions should actually be trending up. It's taking more of our time and money to market and sell properties, and the sellers need the expertise and strategies that a professional broker brings to the table.
Jennifer, as a former Realtor and just a loan guy, I use to work under a "menu" office..... the funny thing is most sellers picked the discounted model and expected more, which we as someone trying to get the thing sold .... DID, So who won? The seller of course..... Menu selling is not a business model that I believe in for that reason and if you are new or hungry enough in this market you will toss in "extras"...... Now some of you that offer menu services and can stick to that great(wonder how your client feels about you playing hardball), but for those of us that just believe in customer service, menu service just doesn't work
We agree with you. A menu of services is not seemingly in anyone's best interest. The seller might select the lowest level and therefore there are missing elements needed to actually help get the home sold. And neigher the seller nor the agent taking the listing gains anything from the house not selling.
You are exactly correct...sellers don't know what they don't know so how could they know what they should know to use or not use...no use to us !
I have to say that I both agree and disagree. The service menu option is a good idea, and offering the seller options is a good idea. But, doing things that you know won't sell it, and leading the sellers to think it might isn't good at all.
Excellent, well thought-out post. After contemplating a menu of services and trying to work it out many different ways, I came to the same conclusion you did.
I have toyed with the idea of a menu of services and I guess after 35 years doing it one way I'm slow to change.
Great article that was well thought and written. I always considered offerrng a menu of services, but thanks so much for another perspective!
Jennifer - it's got to like birthing a baby - Congrats on finally getting your book out - I always learn so much for you and will take a look at your site to learn some more! Congrats on the feature - hope all is going well for you!!
Jennifer- I believe that if you have your mind set on what your fee is going to be and you make that a part of your business principles that deviating from that only leads to ill feelings. We have our set commission, which is very customary in our area. We don't have discount brokerages here. We also work in mostly high end homes with very wealthy and professional people that respect us and often pay us over what our fee is. The other part of our market are short sales and we charge a premium fee for short sales, commissions are never an issue there because the seller is not paying, and the lenders have their own set fees that they will pay. We have had this issue of a seller trying to negotiate our fee, and my answer is, thank you for your time, would you like me to refer you to an agent that I know that will do your listing for X fee? And we start packing up our stuff to leave. I do not compromise on our service, our value or our fees. There are so many listings to get out in the marketplace. If you view this from an abundance perspective you will always find people who will pay your fee.
Great post! I personally do not let the seller adjust what level of service I give them. If they do not want a 100% of me I do not want any % of them. I would agree that there are many agents that would take advantage of just listing a home in their local MLS for $299 (it's happening here) and be done with it, myself on the other hand would want my name out on every listing possible in full marketing manner and not just half A$$ed. If someone from the outside was looking in and saw a listing that didnt have alot behind it due to the fact of the seller being cheap it only reflects the same to the listing agent.
I think the upfront marketing fee is a great way to do it. I spend so much on marketing that it would be a great off set. Thanks Girl!
The comments here are confussing Jennifer. I thought you were saying NO to the menu approach yet many of the comments appear to think you are advocating it. It's weird how that happens. Anyway I agree with you. People should expect the best service from professionals and we should be compensated at our normal fees. Would they want to work with a doctor who offered the menu of fees for less service? Let's see ...I can treat your sore throat but avoid contact with you ear infection for $35 but if you want the whole illness treated it will cost you $50. I don't think so. Great post
First of all I really like the idea of charging an upfront fee for some of your services and a commission for the rest. It saves your client money and reduces your risk. At the end of the day I bet you make more money doing it this way, because more of your listings get sold. Ive had a similar idea as a buyers agent ie charge a non-refundable fee up front and in exchange offer a commission rebate at settlement.
Ive always thought of the menu of services like a partial FSBO, ie...here are all the things that need to be done to get homes sold in this market; I will do them all for a certain commission or you will do some of them yourself and pay me less. There is no less work done, no necessarry steps get skipped, no lack of professionalism,
Referring back to PaddyPizappi's comment. for an analegy. I know a guy that had a miserable recovery period after a hip replacement. He needed a series of shots for pain management, monitoring of an antibiotic drip, help to and from the bathroom, and with bathing, and help with food preperation. The doctor gave him a menu choices...stay in the hospital, stay in a nursing home, stay at home and hire a visiting nurse service, or train his wife to give the shots, bath him prepare his meals, etc. There would be a different fee for each level of service.
I dont think the doctor showed any lack of professionalism, or that the patient suffered any more because his wife did the hard work..
By the way, as someone who prefers to work with buyers rather than sellers I think you would better serve your sellers by offering them the option of paying more to the buyers broker.
Don't get me started Ron I would not want to hijack this blog from Jennifer. Options for treatment as you described are not a lack of professionalism. It is however a lack of professionalism to give less service than the buyer or seller deserves. As for advocating for more pay for the hard work that a buyers agent does to sell the listing agent's listings I believe in equal distribution of the commission (minus any unusual advertisement expenses) but that is for a different blog
Jennifer, I do totally agree. My reason though is a bit different. I am a buyers agent. I am paid by the seller. We don't collect a dime more from our buyers and we are OK with that, but offering lower commissions as a way to "buy" a listing affects more than just the selling agent. It affects those of us who do not pick homes based on commission but on rather or not it meets our clients needs and are going to work just as hard no matter what we make.
I have to agree that the menu of services isn't for me. I'm intrigued by your upfront marketing fee.
Regarding the upfront marketing fee, I work for RE/MAX and they don't get involved in my commission structure. However, I suspect that more traditional brokerage firms may not go for it, or may certainly want a piece of it. Just something to think about.
Stephen - in Denver, the buyer agent always get the same commission, no matter what the listing fee is.
Great post! Thanks for saying it so well.
Li
Li Read, RE/MAX Salt Spring, B.C., Canada
liread33@gmail.com
Jennifer,
Completely agree here without a doubt. I don't like the idea of cutting my clients short on possibilities to sell their home. Therefore, I will not do it.
I don't necessarily agree with putting it into practive, however, if a seller is asking you to lower your fee, I think it can be effective to explain all of the services you provide say, "Okay, well, which of these services do you feel is not valuable?" Say this of course with no intention of cutting your fee. The truth is, MOST sellers want it ALL, and when they see all that you will do for them, they're less likely to ask. I have also heard of agents taking out a dollar bill and explaining how it gets divided (if working for a broker) and how taxes and expenses have to come out. Low and behold out of the whole dollar, a fairly small sliver is left!
Liz - I might have to argue with the dollar-bill strategy... I don't think sellers care much how their money is split up; they just want to feel good about where their money is going. To me, the whole bit about whining how little we end up with at the end of the day is unprofessional and immature. Yes, the seller needs to know that the buyer agent gets a piece of it, but beyond that, it's really none of his business. I'd much rather leave my seller with the impression that I believe I'm WORTH that whole dollar (or at least half of it) instead of making myself look a bit pathetic with my little sliver. I'll spend my time showing my seller prospect how I EARN my money and make him feel good about spending it on me...
I know you said you don't do this,but I wanted to toss in my pennies...