Nearly nine years after John Tuccillo, former chief economist of the National Association of Realtors, predicted...
"The next major revolution in real estate will be the spread of fee-based services, replacing the blanket commission pricing that has dominated the industry for so long." (National Relocation & Real Estate, Vol. 13 #2, 1997, page 81.)
...it's good to see bloggers discussing and experimenting with hourly fees in various parts of the country. The Real Estate Cafe has tried numerous pricing models over the past 11 years, and our straight hourly fee, 100% commission rebate is by far the most popular with buyer clients.
We just introduced a new sliding scale so buyers can decide how much they want to pay us hourly which in turn determines the rebate we offer. For example, if a client pays us $100 per hour, they get 100% commission rebate; if they pay $50 per hour, they get a 50% rebate, pay $35 per hour, get 35% rebate, etc. It's all about risk-shifting, as Douglas McCarroll, a computer programmer turned fee-for-service real estate consultant at The Real Estate Cafe, explains on his site.
One of the bloggers brought up the subject of separate fees for separate agents. As the Department of Justice suit against the National Association of Realtors unfolds, we believe that uncoupling the traditional two-sided commission will develop momentum in 2006:
In my opinion, participants in the real estate market (specifically referring to buyers) are not rational actors when it comes to the payment of real estate commissions. This has much to do with the historical structural compensation model established by the real estate industry, namely, the offer of compensation made by the listing broker through the MLS. Until commissions on both the listing and sale side of the transactions are separated, and purchasers are empowered to go out and shop for and hire their own agent on whatever terms they choose, buyers will continue to act like lemmings and allow sellers and their brokers to dictate the terms by which their buyer’s agents are compensated.
Would you believe that the Consumer Federation of America first recommended "decoupling" the traditional two sided commission 15 years ago as one of five structural reforms to the MLS that could save real estate consumers billions of dollars annually? Over the past three years, The Real Estate Cafe has identify 10 mega-trends which suggest this long overdue reform is headed for a tipping point. If you'd like the executive summary, we can email you a 90 second video clip.
About a month ago, we teamed up with another fee-for-service pioneer in New Hampshire to offer real estate services on an hourly fee on a house hunt spanning two states, Massachusetts and NH. We look forward to making referrals to other innovators who offer consumers the option to compensate them on an hourly basis and recommend that they consider joining the National Association of Real Estate Consultants (NAREC.com). That organization was started by real estate educator / award winning journalist Julie Garton-Good in 2000. The Real Estate Cafe was honored to be quoted in her book, Real Estate A La Carte: Selecting the Services You Need, Paying What They're Worth. The title of the book captures our business model and could be a guide for others looking to offer or hire real estate services on a "pay-as-you-go" hourly basis. (Special thanks to BohPhoto for "Will work for Bananas" Flickr photo.)