Time and Preparation Listing Pricing

Real estate has both drastically changed and remained the same over the last several decades. At its core, real estate buying and selling is the exchange of property from one party to another. That is the same as its always been. 

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What has changed is how that is accomplished. The internet and MLS sites opened up a whole new world to agents and their clients by providing real time listings and updates, as opposed to printed books held at real estate offices (what??). Transporting contracts and documents went from driving miles across town to the fancy new fax machine to the paperless document systems we enjoy today. And lets not pretend that the larger property websites circulating up to the minute property availabilities and their "estimates" of value to the general public haven't been both a blessing and a curse.

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In our area, most listing agents will charge roughly 6% of the final price for commission and split this 50/50 with the buyers' agent. If you don't know, it is common for the seller to pay commission for both agents in a transaction in our area. And, as one would expect, sellers feel the value in this proposition less and less as the tools to market their own properties via the internet become more available, easier, cheaper, and even free. Is it any wonder there are ever increasing calls to justify a 3% listing commission on a property?

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Now - don't get us wrong. The process of buying and selling real estate should 100% involve professionals who can negotiate favorable terms, understand those terms and explain them to the parties, coordinate the purchase process, and act as a fiduciary to their clients to both serve their needs and protect their interests above all else. There are legally binding contracts, timelines, large sums of money, the transfer of real property, and countless other details that those who don't specialize in real estate don't know and, worse, don't know that they don't know. 

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So what is the solution? How do we evolve? Recently, we challenged ourselves to look past the old lines of thinking where our compensation is based on the sale price of the property we list. We first asked ourselves why that was the case. Why does our pay depend directly on the sale price of the home? Well, because that's kind of what we've always done. Wow. Ok. Next question - is there that big of a difference in preparing, marketing, and negotiating the sale of a $400,000 home versus an $800,000 home? The general, short answer we came up with was actually no. Do we really work TWICE as hard on the $800,000 sale? Again, no. What about a $1,000,000 home - do we work two and a half times as hard and spend two and a half times as much to market and prep that home? I'll give you one guess....... yeah, no. 

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Solution time. Time and Preparation Pricing. Other professional industries utilize similar pricing structures and it just makes sense. We charge a fee for the preparation - the time, materials, photos, digital media, advertising/marketing, meetings, coordination, more meetings, design consultation, project management - all the prep that goes into a listing. From the live listing, charge an hourly fee for time actually spent negotiating, communicating, managing, educating, supervising, coordinating, and closing. Because that's really how it should be. Some transactions take more time than others, and compensation should reflect that. So we also cap the total compensation at 3% of the list price for those reallllllly time consuming transactions so our clients know they won't just keep paying without an end point. Because that just makes sense, too. 

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Reimagining long standing practices is just one of the ways we take our client service to the next level. Call us and learn more.