Question Details

Dorene Slavi…, Real Estate Pro in Torrance, CA

Hourly Business Model.

Asked by Dorene Slavitz, Torrance, CA Tue Jun 25, 2013

What do fellow Realtors think of an hourly business model for Real Estate? Much the way other professional services are charged. The client would pay an hourly fee for your services which would "cap" at 2.5 %. The fee for services would pay regardless of completion of sale result.

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Unfortunately it is hard to charge for the intangibles. As Realtors, we spend years networking and cultivating relationships. This time and effort may result in a signed contract for the seller with less than a week on the market. Realtors should be rewarded for being efficient and selling a home as quickly as possible while incurring the least amount of expenses.

There shouldn't be a system where an agent is paid more if they work harder not smarter.

It may also create headaches for you when the owner requests an itemized list of expenses and then wants to dispute each one with you at the closing table.
1 vote Thank Flag Link Tue Jun 25, 2013
Interesting idea. I have to tell you up front that I will be billing you for this post.

Cap at 3 percent. And, what happens if everyone switches to buyer representation?

It might not be that attractive to the seller who just wants to float a high price.

It might shake out the same as commission only. Has anyone tried it?
1 vote Thank Flag Link Tue Jun 25, 2013
Yes a Fellow Broker in California has tried this. I quite like the idea and was wondering how others felt.
Flag Tue Jun 25, 2013
I can see some benefit -- for example when you put in many long hours and then your buyers decide against buying a house, or when your listing doesn't sell because sellers refused to take your advice on price reduction, staging, or whatever. Would be nice to still get paid in those circumstances. BUT on the other hand when you DO sell a home there is a big financial reward with the commission based model. And I think the commission based model gives agents a HUGE incentive to get that home SOLD, and it makes me work harder for my clients and it makes us agents work together to get the deal done. Everyone benefits.
1 vote Thank Flag Link Tue Jun 25, 2013
Most agents are going to gamble on closing escrow with a client at 2.5% or 3% rather than taking hourly payments that may never reach that goal. As long as those brokers are available to consumers, consumers will prefer that reduced-risk approach rather paying up-front with no guarantee of finding or selling a home.
0 votes Thank Flag Link Wed Jun 26, 2013
I 'LOVE' this idea.
Buyers and sellers want options.
More options.
It matters not if these options are better, pedatory, a total waste of time, more costly or the greatest thing since sliced bread.
They want to feel they have a choice.
This is one of the BEST 'no choice' options i've heard in ages.
The sole value of presenting this option (in, optimisticly, 97% of situations) will be the consumers flat out REJECTION.(there's more later)
This response (rejection) sheds a more intense focus on the value a professional really brings to the table for home buyers and sellers.
The educaton process that must follow the question, "How long do you think it will take?" wll allow professionals to properly focus on the 90 day market. Those interested in an 'hourly' structure will be motivated and clearly ready to pull the trigger. A macro-focus on the 90 day market is highly profitable.
This if very close to the 'RED FISH" (deliberately misnamed) model.
Prepay for service.
HOWEVER...what makes "RED FISH" work is the reality it relies on the conventional compensation model to create the revenue for the rebate. It can not stand on it own premise. I like to refer to these situations as a truth married to a lie.
The versions of this model I have used worked very well for those who understood it was a pay-as-you-go propsition. Those who participated DID make decision quickly, were focused on their goals and worked within the budget THEY established. This truly created a 'No Touch' consultation environment for me. This model would triple an agents bandwidth.(think about that a minute)
The conclusion was this model creates an environment where the buyer pressured themselves into making a decision. Now what can go wrong with that?
Although the Buyer Elite Plan still exists, the vortex of uncertainty surrounding the current real estate market has made this option unappealing to buyers at this time. They simply do not know how to budget for such competive situations.
As a listing agent, you can bet the compensation stucture will be modifed to accomadate and anticipate such arrangements. Imagine all MLS listings showing $1 compensation to buyers agent.
Now that could REALLY be exciting. Think about it,,,,everyone (buyer and listing agents) WILL, in all dimensions, receive a bump in compensation. Exactly the opposite of what the consumer perceives. That is choice I LIKE!
0 votes Thank Flag Link Wed Jun 26, 2013
Thanks Anette, I'm working on something with a California Broker based on this option.

Flag Wed Jun 26, 2013
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