Fee-for-Service Options

Fee-for-service approaches, have become increasingly popular among consumers and real estate pros. Rather than working on commission, you charge a flat fee for a package of services or bill by the hour for your time. Michael Lee of Seminars Unlimited in Castro Valley, Calif., who has been offering the fee alternative for about 10 years, discusses the pros and cons of this approach.

How do you package your services?

Lee: You can establish several levels of service. A bare minimum package could include a CMA, a For Sale sign, a listing in the MLS, and an advertising plan. A second level could include all of the above plus a marketing plan, which includes a broker tour, flyers, newspaper ads, and Internet advertising, doing a broker tour, getting the flyers out, placing newspaper ads, and advertising the house on the Internet. Or sellers could buy just one service, such as a consultation on pricing or on staging the house and getting it ready for sale.

How do you determine price for each service or group of services?

Lee: Start by listing the services you currently provide and the approximate amount of time each takes. Next, determine an hourly rate for your services. Ask yourself what you want to net. Take that total amount, and divide by the number of hours you work each week. Just as an example, say you want to gross $100,000 and you want to work 40 hours per week. Divide that gross by number of weeks in the year (50) and divide that ($2,000 per week) by 40 (hours per week). That gives you $50 per hour. Many mechanics charge more than $50 per hour, so don’t undervalue what you think you’re worth.

I divide my time into 1/10ths of hours. If an activity takes me 18 minutes to accomplish, I multiply that time by my hourly rate. You also need to remember to add in any out-of-pocket expenses for each activity as well as general overhead costs, such as phones, office rent, insurance, and mileage.

Do you find that having a fee-for-services option helps you obtain more listings?

Lee: I sense that consumers are angry that many real estate sales professionals don’t offer a choice of payment options. At the listing appointment, once I offer choices, it really blows away the competition because everyone else is still saying X percent commission or nothing. Just by offering options, I give myself two to three times more chances to get in the door.

How has this strategy affected your income?

Lee: Because I get more listings, my income has gone way up. Now, I can choose to work less or work more and know how much money I’ll be making. I have an option, rather than being on that treadmill of working constantly because you don’t know where your next dollar is coming from.

Do most of your clients now chose the fee-for-services options?

Lee: Some clients love it, but a lot still opt for commission. They figure that if the house doesn’t sell and they’re paying by the hour, they’ve paid me for my time, but the house remains unsold.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.