Chicago Tribune: Fee For Service Gets A Boost In Indiana Source: Chicago Tribune ©2001- Mary Umberger Mention "fee-for-service" to most real estate agents, and in return you'll likely get either a blank stare, a polite nod or a look of horror. This fledgling concept in the real estate business is based on the premise that agents would charge an hourly rate or a flat fee for the specific tasks they performed, instead of the traditional commission that's pegged to a percentage of the sales price. Its proponents say that its time has come because consumers resent the traditional commissions and because agents are weary of working without pay for deals that never come off. Plus, the legion of for-sale-by-owner properties (read: no compensation at all) is a growing threat to the industry, according to the National Association of Realtors' own studies. In this tradition-bound industry, it's been an uphill battle. But fee-for-service (also known as "menu marketing") is about to get a significant boost. This month, Re/Max of Indiana, a franchise that encompasses the entire state, will begin a series of classes to teach its agents about it. Julie Garton-Good, founder of the National Association of Real Estate Consultants and the chief promoter of this concept around the country, will conduct six sessions in the coming year for the Indiana agents. "My goal is to get 300 agents trained this year," said Jonathan D. Nicholas, regional director for Re/Max of Indiana, which has 1,100 agents statewide. "We have to explore other alternatives at this point in order to stay at the cutting edge." Nicholas says he doesn't anticipate an immediate shift away from the usual commission arrangement. But he expects agents to warm up to the idea of getting paid on a consultancy basis for individual tasks, such as putting together a competitive market analysis (written report on how consumers hould price their properties), challenging their clients' tax assessments or just handling sales-contract negotiations. Nicholas' franchise conducted focus groups that discussed consumer dissatisfaction with real estate agents, and found a strong receptiveness to paying only for certain services, he said. The groups were asked how they'd respond if, when selling on a for-sale-by-owner basis, an agent offered just to negotiate the contract, charging on a per-hour basis. "Everybody said, `Wow, that's great,' " he reported. "I think that in the future, the consumer will have the choice of using a transaction coordinator, that expert who, just like the top litigator, is worth an hourly fee," said Nicholas, who himself has worked on a fee-for-service basis in the real estate business in Oklahoma. Neumann eyes the city. Neumann Homes, one of the Chicago area's largest tract home builders, is forming a city division. The Warrenville company hasn't purchased any land yet, but will be looking throughout the city and near-in suburbs, according to company spokesman Jean Neumann. Also to be determined is just how big the company would want these developments to be, but given the nature of city properties, they'll be decidedly smaller than Neumann's usual, perhaps averaging 50 to 150 units, she said. Only a couple of big builders have ventured into Chicago's city limits before, with varying degrees of success. But Neumann's decision is timely, given the announcement by Beazer Homes USA, one of the nation's largest builders, that it, too, has it eyes on some city landscapes. (See Live/Work story on this page.) One new Beazer division, Beazer Metro, will specialize in publicly subsidized housing in city neighborhoods. The company's regional divisions, which build mostly mainstream, traditional subdivisions, also will be looking at ways to build in urban neighborhoods, probably using the same kinds of "living over the store" floor plans as seen at Live/Work 2001 in Atlanta. Neumann Homes' stylistic plans are not nearly that far along, she says, adding that the company is researching city buyer preferences. In all likelihood, the homes will be different, she said, echoing the sentiments of Andres Duany, architect for Live/Work 2001, who told visitors to the project that "it's a mistake to build in the city in an attempt to emulate suburbia."