Mike, there is an old adage in the advertising business: if you don't have anything to say, sing it.  In real estate: if you don't have anything to say, talk about commission.  

In the advertising business we had to compete against two chicks and a computer.  Yes, they could use the software programs well enough to design something for you, but the client suffered through bad ad, bad design, wrong media mix.  It is happening in every industry.  Marketing is so important, yet some companies would choose to go to www.adsRus.com and then wonder why their advertising wasn't working.

I think this business model is here to stay, and it will take time for the consumer to figure out that you have to make a commitment to the best to get the best.  

Now, there maybe someone out there who has figured out how to give Ritz Carlton service on a budgetotel price, but they are few and far between.  Something has to give.  Time, Quality, Advertising, Attention Span, something will have to be reduced in order to continue with that business model.  You will continue to see the discount broker touting commission, because there probably isn't much else to talk about.  

thats my .02.  Not worth much, but at least I didn't sing it!!

Shelly

Mike - I always go back to the best saying that I have ever read; To those that get it, no explanation is needed, to those that don't, no explanation is possible.

You could do a white paper on it and it would probably not change their method of advertising a failed or failing plan and they would go down continuing there rant.

I have chosen to ignore it and continue what I do and let the public sort it out. I feel the differences will become more and more obvious with time and the proof will be in the results.

Real Estate will always remain a competitive service environment and the weak and ill planned programs will fall by the side and be but a distant memory of another Sam wanna-be trying to apply a retail business plan to a service sector. Absent the ability to purchase services from China, the profit margins may and will be insufficient to exist long term.

I posted this on the other thread, so I'll bring it here:

Ok, I can see your point there, Mike, but it's just business.  Remember how upset I got because I thought folks didn't believe I was not a "limited services" agent because my broker is considered a "discounter?"  I was being over sensitive...

I'm trying to be more like Scarlett O'Hara - "tomorrow's another day, I'll worry about it tomorrow.  Fiddledeedee."

My motto is:

"charge what your worth BUT be worth what you charge"

maybe I should copyright it huh?

I like that Dan.  Hope you don't mind if I use that??

"If all real estate agents charged $2995 it would put an enormously unfair burden on the consumer. Does anyone know why I say this?"

For several reasons:

1. It would eliminate competition amongst Brokers.

2. We would all have to offer the same services, because we would not be able to afford to do otherwise.

3. Due to limiting our services the owners would have to contribute more of their efforts to selling their home. Most do not want to do that which is why they are hiring a Broker.

I am sure there is more, but this is my big three...

I agree with you Mike. I do not appologise for what I charge, I explain what they are getting for the money. Then I invite them to, if they are not satisfied, compare what I am offering with what the other guy is offering.

My services are the Ferarri of real estate (as said in the other blog). I get my clients to close faster than the Yugo, with a smoother ride than the Tempo, and more Awe (money in pocket) than the Corvette.

However, some can only afford a Yugo, so I send them to the Yugo dealership.

Arthur

Commission has always been and will always be negotiable. Like Mike, I don't care who charges what, everyone needs to run their business they way they choose. The rate they charge and the services they provide are totally up to the business.

I have never been real clear on someone who charges a flat fee, say of $2995. What about the property that is priced below 50k? If the flat fee covers every property how is that flat fee fair to the smaller priced properties. I have sold some I would have loved to have made $2995.

I just feel that the discounters would do themselves a better service if they had something to really advertise about their services instead of just being "cheap". Actually I think as more companies decide to go that route to survive, they will end up beating each other up and whoever is left will go back to the traditional way. Just my 2 c.

Amen Mike, Is it more politically correct to call them "limited" service providers? or should I just stick with "slimy"

I'm glad I ran across this site.  It's great.  Did anyone happen to watch the 20/20 special the other night on ABC about Real Estate?  They had these 2 guys who wrote a book about Real Estate and Brokers and how they make too much money and how they think eventually every Real Estate transaction will be $500 towards the broker.  

It continually amazes me how very little the average person knows about Real Estate and how commissions and Agents work in general.  

Several times during the show they talked about how the Real Estate Agent gets 6% commission to sell your house and how much money that was to pay them to sell your house.  

Later in the show they finally mentioned that the Agent has to split that commission with a selling agent who then had to pay a certain percentage to their broker, which gave a better perception of how it really works.  But they only did it (as I found out a few minutes later), to say that agents don't really have an incentive to sell your house for what it's worth, that dropping the price 10,000 is no big deal because they only lose $150 in commissions.  

I heard a funny story in a training the other day.  An agent apparently actually does this to clients who ask about reducing her commission.  She takes out a 5 dollar bill and says something to the effect of "This represents my 6% commission."  She then rips the 5 dollar bill in half and puts it in a box saying "this is the 3% that I have to pay the selling (buyers) agent to bring their client to buy your house."  

She then takes her half of the 5 dollar bill and rips it into thirds.  She puts them all in different boxes and points at each one... "This third goes to my broker, this third goes to taxes, and this is what I am left with to live on and support my business."  

I thought that was a hilarious (and accurate) demonstration.  Apparently the fact that she tears up a 5 dollar bill really gets people's attention.  I'm going to have to try that sometime.

One more quick (true) story regarding this subject matter.   A house down the street from me went FSBO about 9 to 10 months ago.  Tried to sell it for about 3-4 months by himself.  Then he went to a discount broker.  It sat for 3 months.  After that the seller went back to For Sale By Owner for 3 more months.  He finally decided to go with a Real Estate Agent and it sold in 3 weeks for 10,000 more than what he asked when it was listed with the discount broker.

Moral of the story:  You get what you pay for.

If we ever get to a point where agents only make 500 dollars per Real Estate deal I can't imagine they would do anything more than put the listing into an MLS and stick a sign in the yard.  How would you have any time to do anything else with the massive number of transactions that you would have to complete to survive each week/month/year?

Let's put it this way...

"t's unwise to pay too much.  But it's worse to pay too little.

"hen you pay too much, you lose a little money; that's all.

"When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

"The common law of business balances prohibits paying a little and getting a lot. It can't be done.

"If you deal with the lowest bidder, it is well to add something for the risk you run.

"And if you do that, you will have enough to pay for something better.

"There is hardly anything in the world that some man can't make a little worse and sell a little cheaper - and people who consider price alone are this man's lawful prey."

-- John Ruskin, 1819 - 1900

Mike:

  Thought I was done with this, I really don't have time and the only people I want to be accountable to is my customers and clients. But... since you copy and pasted stuff from my website on the other thread and characterized it as “constant complaining” about traditional real estate. I have one more brief contribution:

#1 John came into this business from a career where he was very successful. He has not been in Real Estate very long, but always an entrepreneur and businessman.  He left his previous business because he was getting undercut by people hiring illegals for labor.  For him to compete, he either had to do that , too (break the law) or move on to something else.  This is what he chose. His philosophy came from the consumer side of things as a seller and then as a buyer of his own property.

#2 The reference “unfair burden” has to do with “escalating prices” of homes. If a home that sold for $300K ($18,000 commission) two years ago, but is now $400K ($24,000) commission as we have seen in our area, should it cost $6,000 more to sell that house now a 33% increase in just 2 years?  Thinking people should be able to see his point. As long as you base the real estate fees on a percentage, this will result. Other occupations do not see that kind of income increase in just two years, do they?

    Mike, I would appreciate it if you do not copy and paste stuff from my website anywhere. I will be watching for your response. However, I am very comfortable with what I do.  As I think the “thinkers” can see now, I do not consider even the quote you copied and pasted to be a knock on you, but an examination of facts pertinent to our market.  I wish you the greatest success.

Ah - this one is not my battle - not a flat fee agent.  fiddledeedee!

Troy in you #2 example didn't the seller also realize a 33% return on the $300,000 home that went up $100,000. Seems to me that things stayed pretty relative. But that's not good if you are trying to make a point, is it?

Gary,

  Thank you for so clearly demonstrating for everyone our objective in our business model. Our objective is to let the Seller keep more of his money, while providing him excellent service. How about putting your post on your website as an operational phylosophy? I think you will have people signing up in droves to list their home with you.

   I think that if you visualize your potential clients reading these threads and making choices about which of us if fighting for them, the answer is pretty clear.

Looking at the whole picture:  I think if we are looking for holes in Troy's #2 - what has the cost of living done gone up?  stayed the same? Or gone down?  What has the market done?  Two years ago you could stick a sign out in front of a house with no roof and get multiple offers before you even go it into the MLS.  FSBO popped up everywhere.  We had four Help You Sell offices within a 10 miles radius of my office.  (There is one left).

Personally I am getting tired of the discount debate.  We are now in a "normal" market.  All the bells and whistles need to be pulled out to get the job done.  I suggest we table this debate for a year or two and see who is left.  

Jana

Troy I make the exact same amount I did two years earlier when I sold a $400,000 home. You can twist it any way you want to try to make your scheme look better but I really don't see thinkers buying into your deception of facts. I guess if I use your twisted logic than in a down market that the $400,000 home is now $300,000, I am now the good guy because they pay me 25% less. You and John continue to work on it and you can use my above example if you would like to promote full service agents. Just get their permission first since they may not consider it a favor.

The bottom line -----> Will not "sell" discount or flaky listings, Place looks really "nice" but I'm outta here.

- Radley / Atlanta

You won't sell them even if the SOC is 3%, Radley?

It is not the fact that they discount. Commissions have always be a negotiable item. It is the fact that they have to disparage other plans in an attempt to make themselves look good. They don't try to sell anything harder than their price. The real thinkers realize that price and cost are two different things. When you have the cost associated with selling three properties v/s one, somewhere there has to be cost cuts to be profitable. They twist the facts so that it appears that agents in other plans are somehow doing the client a disservice. Perhaps if they took the high road and just told the clients, here is what you get and here is your cost, it would be more palitable. I have never seen a full service web site that knocks the discount brokers and claims their lack of service will hurt them or even mentions their services.

I agree with Jana, ask me two years from now the same question. I am sick of responding to the Troy's of this world.

Amen!

I am tired of the debate too.  The true discussion isn't around discounting.  We've all done it to a limited extent one way or another.  There is one "traditional" company that I know of who offers a discount for active military personnel.  Some discount for volume---give me ten listings over a year's time and I'll give you a break!  So What?!?  I have 2 levels one with priority print advertising and one without print advertising.  The reason I do that is because a large number of consumers here still use the newspaper as opposed to the Net.

The real action seems like we are all trying to be the one to get the last word in.  I'm tired of limited service companies bashing full service companies and I'm tired of full service companies bashing limited service companies. If the only difference is price that is OK because sometimes that particular price is the important deciding factor for some people.  IT IS THEIR DECISION.  It might be the right decision or it might be the wrong decision but it is theirs to make.  

The limited service people certainly do have a gripe because you know and I know that there are some full service commissions out there that are getting charged and the agent put it in the MLS and nothing else. I can point my finger right now right now, can't you?  The full service people have a gripe because you know and I know that you, as a full service agent on one side, did most of the work that should have been done by the agent on the other side.  I am aware of a full service agent that will not pick up docs or deliver docs and does not have an assistant to do it either.  This person expects you, as the other agent, to do such mundane tasks.

It seems to me (in particular some local agents) that the ones who complain loudest are the ones who are charging full service commission but want to get away with limited service actions.  They don't have a decent website and some no website at all, they do little or no print advertising, no direct mail, they don't go to inspections, they do little negotiating, no flyers in the neighborhood, no open houses, no Realtor opens, don't run comps for their buyer, they barely show up at at listing appointment with the required paperwork, let alone a CMA or net sheet and discussion about what needs to be done, they will show it when contacted, they put a sign in the yard, enter it in MLS, and do the minimum amount that is required by our state law but charge X percent to do it and they aren't putting more on the buyer agent side either.  No wonder people get upset!  Those are the agents that the limited service companies should be targeting not using buckshot and aiming at all traditional companies.

As for percentages. ... Well, it is one way to insure that we get a payraise as inflation hits without having to specifically state that we are changing our prices. No one worries that our paycheck decreases when prices stagnate or decrease.  I know that in our case, I have a minimum dollar amount that I will charge, payable at closing - not upfront. If the percentage calculation is below that, the minimum kicks in.  You know yourself that if you are working on  REO property, they will have a minimum that they pay or a percentage of the sales price if it calculates above that.  Nothing unusual there.  On the other end of the spectrum, as the price goes up, my expenses may change some because of different marketing that needs to be done but certainly not to the tune of tens of thousands of dollars.  I have certain price points that the percent changes.

Ok, I'm done now....  :)

I love you, Velda - marry me!

I agree with you, Mike.  I don't understand the tearing down of others, period.  It's okay to as questions and to disagree, but ripping others is an immature way to try to get things your way.

Good post Mike, a couple of almost fist fights, an appearance by Scarlett O'Hara, something slimy or flakey, and to top it off a marriage proposal. Gotta love this place. lol

Me - I'm Scarlett "i'll think about it tomorrow."

Yes it was fiddledeedee Bee.

Not all, some.  It's just what I've seen in my small part of the world growing up.

Mike, answering your original question....

Because the consumer would have to fend for themselves since no agent could provide good service for that fee.

Hey Belinda you played Scarlett well. I like that fiddledeedee! I copied that because I did not want to spell it.

My vote is for "if your flat fee" then don't have a" full service company" you own also ready to gobble the client when the flat fee does not work. Remember MLS Realty and who owns it. And them lock them in for a year after they paid 2500.00 for the flat fee.

Ranging a commission is ok , at least you're the one deciding if it has to be a certain number to make it close. That's the only time I lower it under 5% I need to give at least 2.5 to the other side or it won't sell in my neck of the woods. I usually do 2 for me 3 for them.

That's in the MLS not the NLS.

I really don't think Flat Fee's should use the MLS, now that will fire some people up but that is how I feel. (not sliding scale commission, that is different)

Melissa~