Is real estate consulting discounting?

Commissions are, by their design, built on "high risk-high reward". In fact, the reason that commissions are a relatively expensive way for consumers to pay for real estate services is that the lion's share of what the consumer is paying for is risk mitigation. Discounting has nothing to do with what percentage is being charged (there is no such thing as a set commission). Rather, discounting is when an agent or brokerage agrees to continue to carry all the risks inherent in being paid on contingency, but simply agrees to less reward. That lower reward means that they have no cushion to cover them when other transactions don't happen. That's why I believe that discounting is a bad deal for our industry.

Consulting on the other hand, takes a very different approach: it offers transparent choices to the consumer in the services they can receive and how they can pay for them. A real estate consultant can lay out the cost of their various services and give the consumer a choice in paying for the services themselves (the way we pay most service providers) or pay for the risk mitigation that a traditional commission provides, but they MUST understand that they will pay a premium for that "insurance policy".

More recently, we sometimes hear from our colleagues that consulting is just "fee-for-service". Certainly, practicing real estate from a consulting model does entail offering fee options, but the consulting model encompasses so much more that. If you think of consulting as simply providing "fee-for-service" options to sellers, you're missing the boat on what consulting is all about. You're also missing out on a whole lot of extra income!

Consulting is a whole new approach to your business. It's having the "tools in your toolbox" to offer the consumer quality choices that pay you fairly for the expertise and years of experience that you bring to the table. It's knowing your value and having the confidence to walk away from clients who will sap your energy and not provide a good return on your investment. Consulting is about knowing what you are worth and settling for nothing less. What we teach in the ACRE™ (Accredited Consultant in Real Estate) Course and Coaching Program is not so much about setting up a fee schedule, as it is looking at your business AS a business and helping you articulate your value to the consumer.

In his recent article Consulting Is More Than a Fee Schedule, ACRE™ Coach Merv Forney said: "If the only thing we change about our business is implementing a different way to charge clients for real estate services, we have missed the point. I truly believe that when you can differentiate yourself from the crowd as a true professional consultant and can articulate the value you bring to a client, your fees become of secondary importance."

New Income Opportunities for Real Estate Consultants

While sellers today are often the most vocal in demanding choices, they are not the only consumers who could benefit from flexibility in the types of real estate services provided and how they can be paid for. What follows is just a FEW of the additional business opportunities that our ACRE™ grads are discovering:

BUYERS: Some of our ACRE™ grads are offering buyers the option of paying a base service fee and then paying them by the hour. Any monies saved from the offered co-broke can be then credited to the buyer at closing. This gives the buyer the opportunity to save money by using their consultant's time wisely, yet, unlike rebates where the agent has to work just as hard but get paid less, this option allows ACRE™'s to get paid very well for the time they put into the transaction. It also provides the added benefit of making the buyer aware of the value of our time.

INVESTORS: The investor is a prime niche-market for consulting. Some investors like to do a lot of their own "scouting around" and some like to have their agent do that for them. Being able to offer an hourly rate as an alternative way to be compensated gives ACRE™'s a tremendous advantage over the competition that only offers commissions. While investors usually BUY with agents, they often "go-it-alone" when selling. Consulting options give them great incentive to get help on both ends.

HOMEOWNERS: Homeowners are the "orphans" in real estate. Because agents traditionally only get paid for closed transactions, we don't tend to work with homeowners unless or until they decide to buy or sell. But homeowners definitely need real estate information and guidance...from staying up to date on the value of their property, appraisal/tax issues, refinancing, or "move versus improve" decisions.

With the lack of choices being offered by the traditional real estate industry, third party companies, both online and off, have stepped into the breech, providing information and services with questionable accuracy, quality, and expertise. As an ACRE™, the sky is the limit on the variety of services you can offer today's homeowner. And better than that, you have a way to get paid for it! And homeowner are more and more appreciating the opportunity to garner counsel on the real estate market and because they are paying for it, they can be assured that the counsel they are receiving is truly objective.

RELOCATION: Relocation clients are a wonderful niche for consulting. Instead of getting a commissioned salesperson who will oversell them because they are trying to get paid for their time, an ACRE™ can offer an hourly option. It's a win-win because if the client ends up buying in the area of the ACRE™ they worked with, the fee can be reimbursed to the relocation company from the offered co-broke. And if they don't buy in the area, the ACRE™ is still being paid!

FOR SALE BY OWNERS: ANYONE who owns a property and wants to sell it, is in fact, a "For Sale By Owner." It's just a matter of how much professional assistance they want and need. The term "For Sale By Owner" (FSBO) came about because of how our industry historically has been structured, basically, all or nothing.

As ACRE™'s we can offer choices that will allow the do-it-yourself consumer to get the services they need. And if (more likely, when) they get tired of playing real estate agent, you have already built a relationship of service and trust. To further "cement" their business many ACRE™'s are offering their FSBO clients a full or partial credit of monies already paid if they decide to list their home (something they would never get from the online FSBO companies).

There's another dynamic at play: in the traditional commission model, the FSBO thinks of an agent as someone who is waiting for them to fail. The consultant, on the other hand, is viewed by the FSBO as a professional who is there to help them succeed, whether that ultimately means a little help or a lot. They are given an opportunity to have a professional step in for just the services that they want and need. And the ACRE™ can get paid for the expertise, and time that they provide.

So, if you're thinking that real estate consulting is a fancy name for discounting or just a "fee-for-service" gimmick, think again. Today's Internet- savvy consumer is demanding quality, transparent choices that give them real value for their money. Real estate consulting provides those choices while compensating the hard-working professional for the enormous value they provide.