The Consulting Times

ACRE® Ron Stuart posted the following on our members-only Coaching Exchange. I wanted to share it with others:

Here's an actual email received from my website www.halifaxrealestatechoices.com (name changed and identifying info obscured).

Hi there, I am a first time home buyer and close to entering into a private sale agreement with a friend. He is selling a town house on ********* Court, near ******* Ravine Park. Since all of the homes on his street are identical, I am interested in meeting with a realtor to discuss what similar homes are selling for so I can determine if the price he is asking is reasonable. I think that it likely is, but I would like to speak to a professional before entering into an agreement. I was just wondering how much it would cost to meet with you for a consultation? This sale is quite time sensitive since he plans on listing with a realtor very soon if I don't buy. I can be reached any time at 902-880-****. Thanks! Peter.

How do you think most agents would respond to this?

I'm currently writing a book due out in September. Unlike my previous book, where I had a traditional publisher who took care of everything (financially and otherwise) but left me a minuscule royalty on my books that sold, I went a different route this time. I hired a "Book Shepherd".

Follow me on this because I'm going to get to the tie in with real estate in just a moment. My "shepherd" acted as my editor and manager of the process. I paid him by the hour to edit my manuscript and then guide me as to what needed to be done. While I am publishing my book myself, I am certainly not doing this by myself. My shepherd has provided excellent recommendations for an interior designer and cover designer. He has advised me where to get my ISBN numbers. I have paid for each of these experts as they provide the service and am getting great results because I each of these experts (including my book shepherd) were compensated very well for their time and talents.

When the book is published, I will only pay for the costs to print them. The difference between the printing costs and the jacket price goes into my pocket.

A recent post in Active Rain asked very simply "When Do Realtors Stop Working for Free?" She mentioned that she: "got an email today from a colleague who is a real estate investor. He is very savvy and someone who "gets" it. His advice can be summed up in a couple of snippets. If we are as smart as we think we are and we give great advice, why are we giving it away?"

The comments were overwhelmingly from agents that agreed with her premise but questioned how they could get paid in any way other than by commission. But there were a few responses that blew me away - one actually said that she "hated this conversation" because she maintained that we are (I guess she thinks we always have to be) commissioned salespeople without ever letting her mind expand that practices change when businesses do.

"Don't get too close to me...I have a cold!" We have believed for so long that breathing the same air will spread germs, that it's almost a given. But if you talk to medical professionals, they will tell you that colds and viruses are rarely spread by breathing the same air. It's the exchange of body fluids that spread the germs.

In our profession, we have been told, and continue to tell the consumer, that a commission is a payment for services rendered. We've repeated it for so long that, almost universally, we believe it to be true. But logically, it's not. The consumer knows this and with a tight economy, they are increasingly asking some very logical questions:

Yesterday's Toronto Globe & Mail Report on Business grabbed me with an article about the duties of financial advisors to their clients and how they are paid. It's hard to miss the parallel to our business as this piece explores the need for the financial services industry to assume their appropriate fiduciary duties.

The takeaway from this is that if consumers want transparency from the financial services industry they want it from the real estate industry as well. Consulting is clearly the way to deliver it real estate clients!

Here's the link

If you scroll down far enough after reading the article,

If any of you wanted to listen to Joeann's interview with me yesterday (April 13th) but were not able to make it, I'm pleased to tell you that Joeann has kindly offered the recording to anyone who'd like to listen. Just copy the following URL into your browser:

Click the link:

http://recording.freeconferencecalling.com/mp3/624313/624313/IA9688_04132010110154600_1050055.mp3

A new Inman report that just came out: A New Decade in Real Estate. The report is based on a survey of Inman readers that got over 500 responses.

The report is fascinating: especially Part 1: The Future of Real Estate Fees. When asked what will change the most about real estate compensation, the largest share of respondents - 40.4 percent - said that fees will increasingly be based on the consumer's selection of services by the year 2020. Additionally, 17.4 percent of respondents said that brokers will increasingly charge a flat fee for real estate services. So, more than half of respondents (57.8 percent) believe that real estate services will increasingly be fee-based in the next 10 years!

If by way of example a consumer purchases a $400,000. home and has prepaid the consulting fee throughout the buying process and at time of settlement has no money owed to the Acre, how does the percentage of the sale price, normally reserved for the buyers agent, flow to the borrower? Is there a resistance from the lenders as to how to handle the transaction? Where does the rebate of 2-3% of the purchase price appear on the Hud 1? Thanks in advance,

Glenn

If by way of example a consumer purchases a $400,000. home and has prepaid the consulting fee throughout the buying process and at time of settlement has no money owed to the Acre, how does the percentage of the sale price, normally reserved for the buyers agent, flow to the borrower? Is there a resistance from the lenders as to how to handle the transaction? Where does the rebate of 2-3% of the purchase price appear on the Hud 1? Thanks in advance,

Glenn

Homebuyers sometimes believe that since sellers pay the commission in most real estate transactions, their agents are really working for them for free.

But is that the case?

Agents and consumers often tap-dance around the topic of how much a buyer's agent makes (or nets, for that matter). Often, the commission - or any bonuses offered - are a bit of a secret. In many real estate purchase contracts, the amount the brokerage and agent make are omitted.

In a recent post on Active Rain, an agent posed this question and her answer was "Sometimes you need to make adjustments." Of course her "adjustments" were to simply cut her commission when a deal was threatened. She included an image of a tightly fitting corset.

I would answer the question totally differently: maybe it's time that we abandon the corset and start wearing underwear that fits with our times. In other words, maybe the adjustments we need to make are with how we're paid rather than continuing to loosen the corset more and more till it's lost it's usefulness.

Our roundtable panelists today are Ron Stuart, Merv Forney, Mollie Wasserman and Brent Fraizer, and the moderator is Mary Pope-Handy.

Mary: Do you do an "initial consultation" prior to showing homes? What is involved in your first appointment?

Brent: Yes, I do an initial consultation prior to working with a buyer. It is the same process for ANY potential client. A needs analysis is performed 1st, a service proposal is prepared along with a customized Smart Plan. All of this is reviewed during the initial consultation.

Mollie: If a buyer is not willing to sit down for an initial consultation, I won't work with them. To me it's like asking a doctor to prescribe medication without an office visit. I'm a consultant, not a tour guide.

Ron: Yes, I do not take on a Buyer client without a qualifying interview. Even before consulting days I insisted on at least an hour with the Buyer before looking at properties. First, I make two points with them. One, this isn't about selling you anything; it's about helping you buy wisely. Secondly, part of representing you is to treat our business together in strictest confidence.

I then tell them we have two main areas to cover: (a) my gaining a thorough understanding of their needs, wants, likes, dislikes, financial capacity, timing, etc. and (b) making sure they have a good understanding of the process including such things as agency, financing, closing costs, sourcing and showing properties, contracting and how I can be paid.

Merv: Absolutely. I do an intense initial appointment to make sure that they are serious buyers.

A recent post on Active Rain initiated a wide ranging discussion of how REALTORS® get paid. Two ACRE® colleagues, whose judgement in such matters I respect, happened to notice my little contribution to that discussion and suggested I reproduce it here...

To me, our method of remuneration is inextricably tied to how we see our role and how we practice. Perhaps adding a little context will usefully extend the discussion in this thread.

There was a post this week on Active Rain from an agent explaining how when asked, he will not cut his commissions. By weeks end, there were nearly 200 comments to his post, some agents cheering him on for his stand, others arguing the opposite, some comments from lenders, appraisers, and home inspectors arguing for and against.

But of the 200 some odd comments on the subject of cutting commissions, only two brought up the idea that maybe there is a choice other than cutting or not cutting commissions - from ACRE® Ron Stuart and myself.

Here's what I said:

The problem with discussing commissions as payment for services is that the consumer doesn't buy the reasoning. If it's a million dollar home, can you honestly say that you do four times as much work as you do on a $250k listing? We, in the industry defend it because what we make on an expensive listing makes up for all of the work we do with homes that don't sell and buyers that don't buy. While that makes perfect sense from our vantage point, you can't blame the seller for saying "What's in this for me? Why am I subsidizing the deals that don't close?"

We're very excited to share that ACRE® has just been named a Constant Contact Email Marketing All Star for 2009.

This designation is awarded for regularity in email communications, strictly adhering to permission-based contact, and providing engaging content that our audience is eager to receive, open, and read.

While we knew that Hot off the Wire and The ACRE® Alert were popular (our open rates are double what Constant Contact considers "good"), we are thrilled to have our efforts recognized by Constant Contact, the leader in permission-based marketing.

Here's looking to further growth, enthusiasm and participation in 2010.

Should one have a real estate license in order to become an ACRE® ?

PT - Ontario

This is the first in a series of "round table" interviews with experienced ACRE® agents on their real estate consulting practice, led by our Times Community editor, Mary Pope-Handy.

Today's interview is with Ron Stuart, Laurie Furem, Mollie Wasserman, Merv Forney and Paula Bean, regarding how home sellers pay for professional real estate help in the marketing & sale of their home.

As an Accredited Consultant in Real Estate, you counsel clients rather than sell to them, and you provide a variety of ways in which you can assist clients in reaching their goals (and a variety of compensation models too).

The question I have for you is this: how frequently do your consulting clients end up with a traditional type of commission arrangement for selling a home as opposed to paying a flat fee, fee for service or an hourly rate?

Ron: Rarely
Merv: About 50/50
Paula: Not often with a "regular sale"
Laurie: It's mixed...
Mollie: My experience was like Laurie's

Let's dig a little deeper. It sounds like in many cases; clients opt for something other than hiring with a commission compensation plan.

Can you fill us in on that a little more?

We're having a great discussion on our private ACRE list serve, The Coaching Exchange, about consulting. It's clear from the discussion that there is still a lot of confusion about the role that a trained consultant performs and how they are paid for their services.

As we've said many times, consulting is not about a fee schedule! Consulting is a practice that provides quality, transparent choices with commission being just one of the choices offered. You can do 100% of your business by commission and yet practice as a consultant because you have the tools in your toolbox to offer other choices, both in the services you offer and how you can get paid. Providing choices is a wonderful thing - it brings you the business regardless of how they ultimately pay.

I get this question asked ALL of the time from my past and future clients. So here I will share with you my 30 years of wisdom on this topic.

I started in real estate in 1979, with the great S & L bailout, mortgage rates in the double digit figures, no MLS, no internet, no company training, lol...what WAS I THINKING??!! To make the matter worse, I was 21 but looked like I was about 15 (ahhh, wish those days were back!). So, I quickly learned that if I was going to 'make it' in this cut throat business, I needed a leg up on all the other experienced agents.

After getting my real estate license, I got my mortgage brokers license because that was in the day that mortgage officers only worked Mon - Fri, 9-5. I wanted to know evenings and weekends how to prequalify a buyer.

Next I went on to take appraisal classes in order to accurately assess a property value. Then, I went to hang out with a Title Company office, so I could fully assess what happens from start to finish in a real estate transaction. I also tagged along with a home inspector, termite inspector and I took as many classes as I could on negotiations, contracts, law.

SO drumroll please ;-) ...... Here is what I've learned in 30 years and will share with you about the BEST time to buy or sell a house. let's start with the best time to buy.

This post arises from a letter I wrote to the facilitator of an excellent seminar I attended in December. On reflection, I thought parts of it might be useful to ACRE® colleagues (or others interested in Consulting) in helping to refine their articulation of the consulting mindset and value proposition.

An ACRE® can offer you both the traditional system of real estate services by commission as well a variety of other compensation models, so the most obvious answer to 'when' is always.  It's always ideal to work with an ACRE® as your real estate professional because with an ACRE® you'll have far more choices in how to receive the services you want and need!

To elaborate on the 'why', an Accredited Consultant in Real Estate (ACRE®) can offer some more cost effective solutions as you only pay for what you need, and ACRE®s understand that real estate is not a "one size fits all" business. It's like going to a car dealership to buy a new car, but if all they had were red sedans of the same make and model, you'd go to another dealership where they had more choices, right?

Sometimes you need to get some real estate help, you know it is going to take some time and effort for the real estate agent to do the job, and you'd actually feel better about it if you could simply pay for the service. Often, though, realty professionals are only paid by commission.  You can ask one to do you the "favor" but in turn your business (or referrals) will be expected down the road.  Not what you had in mind?  Time to find an ACRE, who will consult with you on your special project, charge you appropriately, and there will be no lingering sense of obligation for a favor done.

At the end of this month, we'll be embarking on a laboratory experiment: teaching the entire ACRE® course...to a live class.

I've taught consulting before ACRE® was born and have had several requests over the last three years which I've always put aside, mostly for lack of time. However, I received a request two months ago that changed my mind.

A couple of months ago, I posted on the members-only Coaching Exchange that it was our intention to upgrade the ACRE® course. Counsel Member Tom Pickering (our education guru) is working on this project; taking my "prose" and making it into a true course book, both because it needs to be, and because it will better ACRE®'s chances of being picked up for CE credits.

Once the new course book is completed, it is our intention to raise the bar in terms of the requirements to become an ACRE®. Clearly, in order to become a successful consultant, one needs to not just understand the model, but also have developed a strategic focus (I don't want to use the phrase "business plan" as it makes most agents' eyes glaze over) and most importantly, have calculated your hourly rates and any fee packages that you want to offer. Without this practical work complete, the theory is useless.

We are busy putting together a new, expanded, and more user friendly Consulting Times. Here are just two of the changes (that I know about!)

First, a new course site will be integrated right here on The Consulting Times. The current course site was set up before the TCT was envisioned and the two sites have never talked with each other, not only providing conflicting information, but making for a lot of extra work behind the scenes.