"Meat-in-the-Middle" Toughest for FSBOs - Part IV Source: Julie Garton-Good ©2001 You're a FSBO who's convinced (finally) that you need help. You've opened your mind (and your wallet) to the idea of paying a professional to assist in the sale of your home. What type of payment options could you negotiate in a fee-for-services arrangement? Is there any way to partner with the professional in order to reduce the amount of fees you pay? And what if you find that you need more professional services than initially planned? Could you defeat the purpose and actually overpay using the fee-for-services approach? While still in the infancy stage in most markets, the concept of real estate fee-for-services is picking up incredible speed. Fueled primarily by the bidding-war seller markets (most markedly in California and the Northeast) and online aggregators, consumers are making it known that they want to access what they need AND are willing to compensate the professionals who provide it. With equal vigor, consumers are designing thought-provoking, unique ways to compensate fee-for-services professionals. And conversely, professionals compensated by these new income models are reporting that, for the first time, they're being compensated in direct proportion to their expertise and the services they provide. Here are just a few of the many innovative approaches: 1. Percentage Fee: This isn't that typical "traditional or range of market" fees we see when glancing at multiple listing service ads, but one determined by the amount of participation by the agent as well as what stage of the transaction the agent enters to assist the seller. For example, an agent entering the transaction mid-stream might receive 50% of the percentage commission "range of fees" typically seen in the marketplace. But should the seller be capable of doing some additional seller activities without aid of the agent, it could serve as additional fee bargaining power for the consumer. 2. Hourly fees: As discussed in Part III of this series, hourly fees are often how consumers feel most comfortable compensating the fee-for-service professional. This is particularly true if they're 1) accustomed to paying professional fees (to attorneys, CPAs, etc.) and/or 2) a professional themselves who charges professional fees and/or 3) a die-hard FSBO that balks at the thought of paying a percentage commission or other fee he terms "unjustified." I suggest that consumers protect themselves against run-away hourly fees by capping the total they'll pay (i.e. up to a maximum of "X") and/or if fees do approach the cap, have the ability to renegotiate a more cost-effective fee structure with the professional. Believe it or not, this could be to switch to a percentage fee! 3. Flat fee: This provides a safety net for the seller, but does not reward the seller for any work he does to assist the agent nor does it compensate the professional for any extra work he provides. That's why a more attractive alternative could be--- 4. Flat fee (plus possible hourly fees & rebates): This is a unique combination of a flat fee that's whittled down by a predetermined hourly fee whenever the consumer assists the professional in the sale. Conversely, the professional receives additional hourly compensation (up to a cap) for work provided that exceeds a predetermined amount of hours. The consumer could assist with something minor like holding an open house or showing the property when the agent isn't available, or something major like successfully negotiating price and terms with an unassisted buyer. The agent isn't strapped doing activities that the seller is capable of doing (emphasis on "capable.") Conversely, the seller saves money and becomes a "team player" with the professional. Obviously, the downside of this type of rewards system is the possible administration involved. It's best to work on the honor system, using language in the fee-for-services agreement that defines what type of activities the rebate will and won't cover. Additional rebate fee models include: rebate to buyer for services not used (which could create a credit to the buyer at closing), and percentage commission with rebate back to the seller for services not used (i.e. a quick sale and speedy closing.)