Once upon a time, four friends listed their property for sale. The only options were going it alone or listing with a traditional commission-only salesperson. The going rate in town was $500 plus 3% of their sale price, plus GST.
Ken took responsibility for his sale.
He knew that ultimately he was in control of his property selling, or not. So worked hard to present it at its best, and priced it realistically. Putting a smart strategy in place, he targeted achieving a sale in the first few weeks. It worked a treat, receiving multiple offers and a premium price of $400,000. Ken was a dream client for the real estate agent, needing only $800 in marketing expenses and six hours of direct work on his behalf. Although Ken was happy with the service, he felt the $14,375 in commission was a lot – considering how little work was involved for the agent.
Claire, on the other hand…
Wanted to move but put little effort into presenting it well, and set an unrealistic price. After months of little interest, she eventually accepted the market – selling for $400,000. The agent outlaid $1,600 in marketing expenses and did 12 hours of direct work – twice as much as needed for Ken – yet Claire paid exactly the same $14,375 in commission.
Mary lived on the other side of town…
Like Ken, her property was also perfectly presented and realistically priced. In under two weeks, she had multiple offers driving the price up to more than expected. She was ecstatic to sell for $200,000. Her agent did exactly the same amount of work as for Ken ($800 in marketing expenses and 6 hours of direct work). However, Mary only paid $7,475 in commission.
Then there was Larry…
He wasn’t really serious about selling but thought he’d throw it on the market for a silly price. Thinking it would make them try harder, he listed it with two different agents at the same time. It wallowed on the market for six months. In that time, Larry turned down three fair offers before finally taking it off the market. He told all his friends the agents were ‘hopeless’ as they ‘couldn’t sell his house’. Between the two of them, the agents spent $4,000 on advertising and did 30 hours of direct work. Larry paid nothing.
What’s odd with this story?
Ken did everything right. He made his agents job a lot easier and less expensive, yet still had to pay the same fee as Claire who needed twice as much work. And, just because his property was worth more he had to pay twice as much as Mary, across town, who needed exactly the same amount of work by the agent. Larry required the most work but paid nothing.
It doesn’t seem right, but that’s the way the commission-only scheme works: Higher valued sellers pay more for the same service. It rewards the few who take time and resources but ultimately decide not to sell, and it punishes the majority of genuine clients who do everything in their power to make the selling process easier. In other words:
Genuine sellers are paying for the work done for non-sellers.
This is just common sense: Any business that gives away time, effort and money working for some clients, must recover it back from the others.
Can you imagine how different this picture would look if the real estate industry dropped the commission-driven sales culture and worked on a professional service based model? Like how you’d expect a professional to operate. Where the client/patients best interests are put front and centre. Where the fees are based on the actual expertise, work and outgoing costs involved for serving each individual client – rather than a % of your assets value.
At Restate, we’ve developed such an approach. Where you are given the choice of a more efficient fee structure. One that simply makes more sense. Where the easier your property sells – the less work needed by us – the less you pay.
So far it’s helped over 200 clients bank considerably more from their sale (compared to what they would have under the commission model).
The only one in this story who’d be worse off is Larry. Although in reality, we wouldn’t have accepted him as a client. And maybe if the entire industry worked on a professional service model, Larry wouldn’t have wasted everybody else’s time and resources. In which case the industry wouldn’t have to charge the genuine sellers a premium to cover the losses incurred working for Larry.
Of course, like everything in life, it’s your decision which way you choose to go. Commission or Professional Fees? The main thing is that you now at least have a choice. A choice that gives you more control over how much you bank from your sale.
“When Carl explained his new real estate model to us it was a no-brainer, it made perfect sense. Carl & his friendly team were great to deal with, they made the whole process so simple & accommodated all our needs. The result speaks for itself with our home selling for $11,000 over asking price & saving $4,800 on our fees. The Restate team kept in contact with every step of the way. We couldn’t be happier with the restate team & would recommend them to anyone considering selling their property.” – Jess & Dan O’Neil