When One Size Fits Nobody...

Yesterday, one of my associates brought in a direct mail piece sent by one of the competing brokers in my marketplace. This particular broker is a very small franchise office (less than 10 associates) within one of the big name brands. On the mailer, the broker made the following statement "When it is time to sell, do not pay 5 to 6% of your homes value when you can receive the same high level professional service from a name you can trust for only 3 ½%." They went on to list the services included in their "premier full service plan" and even offered an unconditional service guarantee to prospective clients. An interesting business proposition...

What I find problematic about this pitch has little to do with the advertised fee. Whether this broker chooses to take a listing at a fee lower than I might is truly not my concern here. I'm all for competition in the marketplace. In my state, brokerage fees are fully negotiable. If someone creates a business model that is more competitive, I say go for it! (And let me see it...) What really troubles me about this flyer is that the broker has set their fee on the front end...without ever meeting a client, learning about their specific needs, or seeing their property. Can a real professional establish a fee for their service without knowing who they're working with or what the job requires? Of course not! All they can do is establish a fee for the stock services that they're willing to offer...regardless of the client's unique needs. And I believe that this "one size fits all approach" is bad for our profession.

What this broker is doing is exploiting 2 unfortunate perceptions that held by the public. The first is that Realtors are paid too much, and the second is that there is absolutely no difference between who we are as professionals and what we can accomplish for our clients. It's called the "commodity theory", and discount brokers have used it to leverage the market for years. The premise is as faulty as it is simple: each one of us does the same thing as the other, and achieves the same results as the other. So if there is no difference between brokers or agents, the only thing that matters is the price. Hey...do you compare the price on bananas when you go shopping? Probably not...a banana is a banana is a banana, right?

Wrong. If we want to be taken seriously as professionals, we need to protect our professionalism. And what a professional bring to the table is not their FEE, it's their VALUE. The truth is that some brokers and some agents have a higher level of skill, better tools and resources, and just outperform their peers. They achieve better results for the client. In a competitive marketplace, their services are more valuable...plain and simple. Would I be called upon to pitch an inning of relief for the NY Yankees in a tight playoff game? Nope...I just couldn't get the job done with my blistering 53 mph fastball! But Mariano Rivera can, and he's compensated accordingly. As I tell my associates time and time again...if you can't show WHY you're worth more...you're NOT worth more! The debate must be shifted away from "what the seller pays" to "what the seller gains". (If you want a really good read, check out Waging War on Real Estate's Discounters by Bernice Ross).

The truth is always in the numbers. According to our MLS, my office listings sell for a significantly higher sale to list price ratio than this broker achieves, and in significantly less time. In fact, our numbers are among the highest in our county. And in my market which is losing value at approximately 1% per month, these numbers matter...a lot. The VALUE that my team creates (at a modestly higher brokerage fee) produces a net gain to the seller at closing that far surpasses any potential savings generated by a discounted brokerage FEE...usually by 2-4% per transaction. As professional Realtors, we need to understand that this is the playing field where we can add the greatest VALUE for our clients. We need to know our own numbers, our company's numbers, and our competition's numbers. But what if we really aren't all that competitive by the numbers? Then find out what part of your professional game needs improvement and fix it! Do you need to get better at establishing the correct list price? Could you do better with your negotiation skills? Maybe we simply need to learn how to leverage Web 2.0 to achieve greater exposure and urgency for our listings. But in my view, a professional works on achieving better outcomes for their client...not on simply reducing their fees.

In a recession, people become afraid. And when people are afraid, they reach for what's comfortable. I get that. In today's struggling economy, there is real comfort created by the "sale price mentality". But as my father (a baby of the last great depression) always said "only the rich can afford to buy on the cheap" In the end, when we're shopping for the services of a proven professional...be it a surgeon, defense attorney, major league relief pitcher or a professional Realtor...one size NEVER fits all.

In the end, your clients usually get what they pay for.