Real Estate Consulting - Putting the Decisions to the Customer
What Is Real Estate Consulting?
Those who choose to bill themselves as real estate consultants generally set up their practice to:
- Offer a-la-carte services to buyers and sellers on an hourly basis
- Package services into pre-priced bundles based on customer needs
- Offer ancillary services such as assistance with property tax disputes, market valuations for insurance and others
How Is This Good for the Consumer?
The consumer gains a great deal of flexibility in choosing only the services they need.
If a buyer or seller believes they're capable of taking over some of the tasks associated with property showings, contract negotiation or anything else, they can elect to pay the real estate consultant only for the services they need.
This can save the buyer or seller significant money, as the true consultant does no work for free, such as free CMAs, free buyer showings, etc. This means that sellers can get lower listing commission costs and buyers can get credits/rebates if they've paid for services rendered up to closing.
How Is This Good for the Real Estate Consultant?
The true real estate consultant will get paid for all their work. They're not marketing themselves by giving away services such as CMA's, driving buyers around to view properties, etc.
Real estate consulting can also open up new revenue streams, such as helping homeowners dispute property tax valuations, value their home for sale as a FSBO, or help a FSBO to go to closing once they have a buyer.
One other new source of business for real estate consultants is working with investors. These are savvy buyers and sellers who will embrace a method to save transaction costs and increase their return on investment.
How Does this Work for a Seller?
A seller can elect the consulting model and pay a portion of the listing fees up front.
This is non-refundable compensation for the real estate professional to do all those up-front listing tasks that would be done for nothing if the listing expires unsold:
- Getting a comparative market analysis and pricing assistance
- Having the photos and virtual tours prepared and placed online
- Just about everything that's done in listing setup that's never compensated if it doesn't sell
After the up-front payment for services, the sellers can pay hourly or packaged prices for contract negotiation and closing services.
How Does it Work for Buyers?
If a buyer, particularly an investor who does many transactions, wants to save money on the purchase of a property, they can opt for the consulting model. This will allow them options that might include:
- Paying hourly to be shown properties
- Locate their property without assistance
- Pay the consultant hourly for transactional services
Using this approach, the consultant is paid for all their time/work and the buyer can save money. If paying as they go, the buyer would be credited/rebated the entire buyer side commission at closing, as they've already paid for their services.
The Logic of Real Estate Consulting
Taking the approach of being a professional with value to bring to the table in real estate transactions, a real estate consultant can structure their practice much as an attorney or accountant would.
We give away so much of our time and expertise in this industry as a marketing strategy. How many free CMA's have you done? How much gas and how many hours have you wasted showing buyers properties and never getting to a transaction?
We work on contingency without control. What does that mean? Though many lawyers will take a case on contingency with payment only if they win, they get to examine the case and decide based on its strength and probability of being won. We, on the other hand, do free visits and home valuations just for the privilege of competing for a listing with many other agents. Far too many of these are wasted effort. We'll also work with buyers who may not be as serious about making a purchase as they profess to us. At least the attorney knows her client wants to go to court and win.
It's just so logical to give your customer, buyer or seller, the ability to share our risk and save money accordingly. If a buyer or seller is paying by the hour for us to take them from a contract through closing, and the deal falls through on inspections, the real estate consultant still gets paid for the time to the point of termination. Logically, our client has some incentive to be forthright in their disclosures and to want the deal to close.
Then there's always the happy consultant who is getting paid for all their time and expertise, giving little or nothing away, and enjoying a lifestyle commensurate with their knowledge and abilities.
Why Isn't Real Estate Consulting Gaining in Popularity?
Simply, buyers still don't perceive that they are paying for the services they receive now under the current commission system. They only see money going out in a transaction that could blow up and they will have to start over.