Some real estate agents let sellers pay only for the help they need Source: Detroit Free Press ©2001- JUDY ROSE A menu of services : Some real estate agents let sellers pay only for the help they need Last month in Chicago, hundreds of the nation's real estate agents and brokers attended two seminars by Julie Garton-Good on unbundling services. It's an alternative to the one-package-fits-all real estate commission, an alternative that lets consumers choose and pay for just the services they want. The practice is still limited in Michigan, but expansive in California, Colorado, Florida, Boston and other parts of the East Coast. Garton-Good was speaking at the convention of the National Association of Realtors. In 2000, that group named her one of the 25 most influential people in real estate. She recently published "Real Estate a la Carte" (Dearborn Trade, $17.95), which explains unbundling real estate services -- "an alternative whose time has come," she says. It's good for real estate professionals and consumers, she says. Last week, Garton-Good talked with the Free Press. QUESTION: What do you mean by unbundling or real estate a la carte? ANSWER: We also call it fee-for-service real estate, as opposed to a contract that calls for a flat percentage of the house price if it sells. If the consumer only wants help negotiating with a buyer, it's available. If the consumer only wants a professional analysis of comparable sales in that neighborhood, it's available. Q: For the consumer, is this like getting a discount on your real estate fee? A: No -- this is important. Confusing unbundling with discounting is the biggest roadblock to change. Unbundling is like going to the bakery, where they have pies for sale at $8, but they're also selling slices -- one-sixth of a pie. If you don't want a whole pie, you can buy one or two slices instead. But typically they'll charge more for those slices than just one-sixth of the price of the pie -- say $2 a slice. That's unbundling. Discounting is if you go back the next day and now the pie is a day old, so they mark the whole pie down to $5. Q: Why do you say unbundling, or fee-for-service, is an idea whose time has come? A: Currently about one-fifth of all successful house sales are FSBOs (for sale by owner). A survey by NAR said that by the year 2005, FSBOs would climb to two-fifths of sales, and online Web companies would be another fifth. If agents aren't just going to walk away from all this business, fee-for-service is an incredible way they can attract business they otherwise wouldn't have. Also, today's consumer has become very well informed and greatly empowered by the Web. I'm seeing the handwriting on the wall. We (agents and brokers) need to reinvent our job description. Q: So, consumers want this? A: Consumers have long been asking for it. I ran focus groups before I wrote the book and found there's been a great shift in the past five years. Consumers don't mind paying for real estate services, but some don't like paying a predetermined percentage of their home's equity. Consumers want what they want when they want it. They want flexibility to choose the services they need and pay what they're worth. Q: How about agents and brokers? A: Some franchises are using it with great success. But some of us are so married to the Holy Grail of the percentage commission, it's almost like we can't see getting paid any other way. (This percentage is negotiable, but typically in Michigan it's about 6 percent, split four ways among the listing and selling agents and their brokers.) But this traditional business model is not working now. A six-month study by NAR found that in 2000 the median profit from selling a house dropped to $150. Where did it go? The broker's costs have risen astronomically -- the cost of the new technology, the cost of recruiting the best agents and retaining them. We've got to add new strains of profit, accept commissions in various other ways. Multiple levels Garton-Good divides real estate services into level one and level two. Level one tasks are easier, like preparing the house for the market, placing advertising and showing shoppers through. Level two tasks require more expertise in real estate, like negotiating with buyers and orchestrating all the puzzle pieces to bring a sale to closing. Pay should be more for level-two tasks, she says. Some services would have a flat fee; others would be paid hourly. Though she doesn't suggest specific numbers, Garton-Good says agents should set prices on their time and skills using the same formulas as other professional or skilled workers, like architects, plumbers and attorneys. Often sellers are willing to take on more of the easier level-one jobs, but are smart to hand off some of those at level two, like negotiating. "In home and hearth issues, if you negotiate for yourself," she says, "sometimes you have a fool for a client." Q: What's the toughest part of a house sale for consumers to handle on their own? A: It's what I call "the meat in the middle" -- the vital, level-two tasks that face you in the middle of the process. Most of the time, when the seller finds the buyer, that truly is the time when they need third-party assistance. They think when they find the buyer, that's it. But you not only have to negotiate, you have to troubleshoot the transaction all the way to closing. We find sometimes people learn this too late in the game. Q: Your book "Real Estate a la Carte" was written for the consumer. But most of your speeches and classes are for real estate professionals. Why is that? A: This is a time of a tremendous paradigm shift. An NAR study showed that -- with advertising, signs, clerical time, liability insurance and so on -- most house listings now cost the broker $1,200-$1,500, whether or not they sell. That's like writing a check for that cost and potentially never getting it back. So one of the things very beneficial to brokers is that with fee-for-services, consumers share the risk. Whether or not the house sells, they pay for the services they've used. Say the seller says, "My neighbor had an open house -- where's mine?" The agent can say, "Your marketing plan for this property clearly shows that's not our strategy. But as our menu of a la carte services shows, if you want an open house, that's $400. We can do it." Picking your shots Garton-Good says real estate agents should concentrate on the services that use their best skills and produce good profit and reduce those that consume time for less profit. Many tasks that the customer can take over will not only save their own cost of selling, but also save the agent cost. "In my reinvented world, showing the property is on my list of things it makes sense for the seller to handle." Q: How do consumers decide which services they need? A: In my plan, the agent has a meeting with the consumer to explain the services and assess their needs. It takes about 50 minutes and during that time the agent does no selling. I find consumers love that approach. It strips away the idea of heavy selling. They love the idea of paying as you go. It's like going to a financial planner who's getting paid to analyze your finances rather than to sell you stock.