West Windsor, NJ

When I was younger, I loved to play baseball. Countless summer days turned to dusk and my friends and I would still be out there...playing with passion to the best of our ability... until we could no longer see in the dark of the warm summer's night. There's something about the feel of a well hit baseball on a good wooden bat. You could feel it in your hands at the moment of impact. It felt good... solid and strong. You immediately knew that your chances were good for getting on base. The coaches referred to this as "getting good wood on the ball', and it is what they tried to teach practice after practice. "It's a matter of good body mechanics and good timing" my coaches would say. But for me, it was mostly about timing.

When the game was slow, I was a real slugger. But as the kids grew bigger and stronger, their pitches came faster. Once they learned how to make the ball curve and slide away from me at the plate, the game got much, much harder. No longer would it be enough for me to get by with good body mechanics. Now I had to properly time my swing as well. I needed make a good decision as to what kind of pitch was coming, and I needed to do it quickly. Would it be a fastball or a curve ball? They all looked the same to me as they left the pitcher's hand!! I found myself taking far too long to decide which pitches to swing at. ‘Stop over thinking it" my coaches would instruct. "Just get some good wood on the ball!" But try as I might, my swing came too late. If I was lucky enough to make contact, it was rarely on the good wood...the "fat part of the bat". The feeling in my hands became different. The contact felt "thin" and weak. At times... especially on colder days, my hands stung. I finally came to understand why playing competitive ball...I mean really competitive ball...is enjoyed by so few. It's so damn hard to see the ball, decide what you're looking at, and know what to do about it before it gets past you. All the body mechanics in the world couldn't make up for this fact. And it was during these split seconds of indecision at the plate that my childhood dream of playing professional ball died.

I fear that so many of today's buyers are at risk of suffering the same cruel fate. As the market as cooled over the past few years, so many have decided to wait...believing that they can "properly time their swing" in the marketplace. The have become real scholars of price trends and watch interest rates like a hawk. I would argue that there are some that have an even better handle on these issues than many licensees working out there today. But the problem with timing the market lies in the complex ingredients that make up affordability: price vs. interest rates. Let's oversimplify things a little and plot them both out on this "V" diagram. Historically when prices are on the higher side of the diagram, affordability is achieved through lowering the interest rates on the other side. When prices are on the low end of the diagram, banks can charge a higher rate on their side without diminishing affordability too much. We are finding it helpful to have our buyer's mark a diagram like this one with the points where they believe price and interest were during different markets. During the late 1970's it was low prices vs. high interest. And in our recent run up market? We were dealing with low interest rates vs. higher prices. But what about today's market? Today's buyers are facing an unprecedented opportunity with historically low interest AND affordable prices. And yet so many of them are still waiting.

I call the bottom part of this diagram (the part circled here) the "sweet spot" in this housing market. It's the point where you will get good wood on the ball if you decide to swing. And it's the place where the market is TODAY. Could you wait just a bit longer and get to the absolute bottom point on the diagram...where prices and rates are both the lowest? Probably not. The only way to know for sure where the bottom lies is to see it from the other side. And today's real estate game is getting harder. It's tougher than ever to see the ball, decide what you're looking at and decide what to do before it gets past you. In my market, there is an enormous amount of pent up buyer demand. When the media finally shouts "swing" from the stands, it will be far too late for many. "Stop over thinking it" we implore our buyers. "Just get some good wood on the ball!" The buyers who are listening to the coach are making contact and achieving success. The ones who are still waiting at the plate could easily strike out...their dream of home ownership going the way of my major league baseball career.

"Caught looking" is what my coach used to write in his notebook when I returned to the dugout. And let me tell you first hand...it's a lousy feeling.

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.

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Now before I get going on this particular post let me set the stage. By no means do I support the idea of a "Full Service Agent" providing discount brokerage fees as a standard of business. There are, however, events, situations and scenarios where discounting makes sense. Here is what I believe are "ACCEPTABLE" reasons to provide a discount in my service fee's:

Friends & Family:
I love all my friends and only some of my family :-) but they say "blood is thicker than water" and I believe in helping the people who are close to me (even those I didn't choose :-) lol).

Double Siding a Transaction:
When I am working with a listing & and also get the buyer within 90 Days. Yeah I know its conditional but my costs are way lower if I find a buyer for my own listing within 30-60 days and they can close within 30-60 days after I show them the house.

Multiple Properties:
When a client lists more than one property with me at the same time & they are aggressive about marketing and selling them. Aggressive means they actually listen & follow the advice I give them about preparing, showing availability, pricing, condition, etc...

Distressed Sales/Short Sales/Foreclosure/REO:
I start my short sale commission rather high for all the work that is involved in getting these guys through the process and the banks always always negotiate what they are willing to pay. I also use part of my commission adjustment to reduce the amount my seller has to pay back to the bank. (sellers love this and referrals will flow afterwards - why... because the bank does not have the client best interest at heart, I do).

Multiple Transactions:
When a seller is also my buyer under Buyer Agency Agreement (Buyer Contract) or the Seller signs a buyer agency agreement with a referral (if moving out of my area/state).

When using my Staging Companies:
It's my belief (backed by fact) that Stagers are a vital part of our business today. When a home is properly staged it will sell faster, and for more money... don't believe me... Look it up (google "Home Staging Results").

I welcome your thoughts and i would love to hear about your experiences when it comes to discounting... when you will entertain the idea and when you won't.

Today I thought about all the things that I've been blessed with. A beautiful wife, smart and healthy children, 1/2 a brain to have common sense, book and street smarts, really good friends, and a supportive family. Business has been good and picking up and today I hired my 2nd Buyers Agent in 2 weeks.

This got me thinking... many are not doing so well... heck... last year I wasn't doing so we until I figured out what I needed to figure out. What was it you might ask? Well, I figured out that I needed to build my business the way I saw it 10 years from now.

I think most people don't think that far ahead. I usually don't so this was a bit unusual for me too, but think about it. In 10 years will you be doing business the same way you're doing business today? Do you want to be a day to day struggling agent? How about the leader of your own team? I thought about owning my own brokerage (KW of course). So... how would my day to day business work? How would I treat buyers... sellers... distressed property owners....

I changed my business after putting together my plan for the future. Piece by piece, section by section all starting from "The Millionaire Real Estate Agent" by Gary Keller.

VISIT YOUR LOCAL KELLER WILLIAMS REAL ESTATE OFFICE... Tell the Team Leader that Jerel Washington from the Princeton KW sent you. You'll be glad you took 30 minutes to listen to why KW might be a good place for your business.

Retire with dignity by having a business worth having.

Jerel Washington
www.NJGoodLifeTeam.com