Fast full-service buyer’s brokerage at a flat fee: That smells like a big win to me . . .

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

This is from a comment by Jeff Brown, responding to an earlier post. I’m only showing a snippet here, but Jeff’s ideas are worth apprehending in full and pondering at length.

Once and for all, the money paid for representing a buyer OR a seller is based upon only one factor: The ultimate value perceived by the client. Is the client better off being represented by you than not represented period? Is he better off with you vs. another agent?

Here’s the thing: The market will bear what it knows about. This is the purpose of marketing, to educate your own buyer.

So think of it this way:

I personally can sell about a house a week. More than that, and I can’t juggle all the eggs. But even assuming I have enough ready, willing and able buyers to sell a house a week, the effort involved for some transactions can exceed the time I can afford to spend on it. Because we don’t relate costs to compensation, sometimes we make good money, and sometimes we take it in the shorts. No other personal services/consultation business works this way — except for contingency-fee attorneys.

So: In ideal circumstances, I can sell a house a week at $250,000 each, on average, earning $7,500 each, on average, for a gross income of $375,000. Not bad. My marketing costs and other expenses are huge, and, practically speaking, some of those transactions were under-performing: Either the deal didn’t close at all or my costs exceeded my return. And, of course, I don’t always have a buyer to work with every week. Unused Realtor capacity is a hidden cost in this business, one that would be accounted for in the books for in any other business. But still, after everything: Nothing to sneeze at.

But suppose I can structure my business a different way. What if I were to charge a flat fee to represent a buyer in exchange for a non-refundable retainer. My marketing costs just plummeted, especially for the high-end clients whose homes we want to list — now and also when they move again. My exposure for under-performance just plummeted, first because buyers won’t abandon their retainer, and second because I’m partially-indemnified if they do.

Moreover, the beautiful thing about doing something different is that you get to educate the buyer to do things differently, as well. I want to cut to the chase, doing the jobs that I alone can do. I want the buyer to take on explicitly the responsibilities many are already implicitly undertaking: Eliminating the dogs without my help. When I’m along, I want to be looking at viable short-list candidates, not everything under the clear blue sky. In other words, my labor costs per transaction just plummeted.

Let’s add one or two licensed assistants, and I now have both the ready, willing and able buyers and the staffing to sell and service a house day, not a house a week.

Put my costs as high as you like. Let’s say I net out only $2,500 a house, after everything. That’s on the order of $750,000 a year, double what I can do at peak performance — before costs — the traditional way.

Plus Cathy gets access to a huge number of listings per year, many of them high-end listings. I would happily list the same way, flat fee with a retainer, again using licensed assistants for support functions.

And that’s just an interim step between traditional real estate brokerage and business as it is done in every other business.

From my point of view, what the market will bear is of only secondary interest. The time of my life is my sole capital, and my interest, therefore, is to maximize the profit I make on that time. If I can make more money by charging less, then I am doing the right thing for everyone involved.

I’m just spit-balling ideas for now, and obviously this business model would not work for everyone. Someone wanting to do the broad, unfocused search of everything available would not go for this at all. But for people who are ready to jump and have a fairly clear idea of where and how they intend to jump, something like this would be an answer to their prayers. Not discounting a la Redfin or other bottom-feeders, but full service at a price appropriate to the effort expended — and we make it up in volume.

That smells like a big win to me…

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