Selling Soulfully with Jennifer Allan


UPFRONT Real Estate Fee Versus Pay for Performance... I'm torn...

I've been a real estate agent for twelve years. The entire twelve years, I've worked the traditional model... I get paid when the house closes. Sometimes I get paid BIG time, which sometimes doesn't seem proportionate (in a seller's eyes) to the amount of work I actually

But a significant part of why we make the money we do is that we agree to work on contingency - if we don't get our buyer or seller to a closing, we don't get paid, regardless of how hard we worked or how smart we worked. If we don't perform... we are not compensated.

Not many industries work under these conditions.

That's not really the point of this blog today, however. After all the fun a few weeks ago debating the value of our services, I got to thinking. Maybe I could offer a third fee option (I currently offer two; click here to read about them) - How about an upfront fee that is non-refundable, but significantly less than the seller would pay under a traditional commission structure?

Let's say, illustratively, the seller pays me $3,000 at the time of listing instead of, say, 3% at the closing. If my average sales price is $300,000, this saves the seller about $6,000. ($300,000 x 3% = $9,000 - $3000 = $6,000)

So, I was thinking I was pretty smart. I get paid upfront and in a world where a For Sale sign in the yard is certainly no guarantee of a paycheck in the bank, I might come out ahead. I was all ready to talk to my broker to make sure he was okay with it.

But... whoa, Jennifer, slam on the brakes.

I know how I feel when I pay upfront for something and don't get the results I expect. I'm mad, I'm disappointed, I'm frustrated. I'm certainly not feeling warm and fuzzy toward the person or company I paid upfront.

I don't want my clients to feel that way about me. If I take their $3,000 and then can't sell their home... do you think they'll be philosophical about it and happily refer me to all their friends? Probably not. They'll resent me and the fact that I took their money and didn't perform. Is this fair? Probably not, but it's how we human beings are wired.

So... I dunno. I'm kind of used to the idea of Pay for Performance and I feel good about it for myself and my business. I may not mess with something that's working...



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Comment balloon 36 commentsJennifer Allan-Hagedorn • July 30 2008 07:58AM
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