My philosophy of the Real Estate Business is considerably different than the conventional wisdom. The accepted practice of most, if not all, of the local real estate brokerages is to charge for their services based on a percentage of the transaction. The typical rate is 7.0% of the sales price of a property. The exception to this would be commercial and raw land transactions where the going rate is 10%. This is a grossly inequitable method to value one's services.

A typical scenario may go like this: A potential customer calls and asks a brokerage to sell their property. After the standard research involving comparable properties and selling prices, it is determined that the market value of the property is $250,000. The brokerage advises the client of this and enters into an exclusive listing arrangement whereby upon the sale and closing of the sale, the brokerage will receive $17,500. To earn this money, the brokerage agrees to provide several things.

1. To list the property in the local MLS, which accounts for about 80% of all transactions. 2. To advertise the property in the appropriate publications. 3. To Show the property to it's best advantage to all qualified buyers. 4. To prequalify said buyers (this is in fact more of a requirement of the brokerage so that agents are not wasting time with unqualified customers!). 5. To prepare all contracts, price negotiations, counteroffers, etc. 6. To take the sale to the closing table and aid in the consummation of the transaction.

Sounds like a lot to do for the money, doesn't it? Bear in mind that the listing brokerage will receive the earned commission regardless of who sells the property, even the actual ownermakes the sale In the event that a different brokerage is the procurring cause of the sale, the commission will be split evenly between the listing and selling brokerages. after the out of pocket expense incurred by the listing brokerage has been deducted.

Ok, now another customer calls and asks the same brokerage to sell their property. After the same procedure, it is determined that the second customer owns property with a market value of $600,000. Once again, an exclusive listing contract is implemented and the brokerage agrees to perform all the above listed services. The difference is that now these same services seem to be worth $42,000 instead of $17,500 as the first customer was charged.

The services rendered are exactly the same, the effort and expense incurred will essentially be the same, yet the charge has increased almost three hundred percent!! As a point in fact, less effort will be expended in the selling of the higher priced property since there will be far fewer showings to conduct due to the number of qualified buyers being significantly less.

My approach to real estate transactions is quite different. To wit: The first customer calls and asks about selling their property. My question is, what would you like for us to do?

You want us to do a complete market analysis and advise the value of your property? Ok, for this service we charge a fee of $300. You have no further obligation to us. You want us to list your property in the MLS? Ok, we charge $400 for this service. You have no further obligation to us.

You would like us to advertize your property and take advantage of our lower per line rates (since we are under annual contract with local publishers and are required to advertise a minimum, we enjoy much lower rates than what the general public is charged to advertise). Ok, We charge our cost plus 35% for this service. You have no further obligation to us.

You want us to show your property? Ok, we do not charge for this service since it may allow us to procure a sale. You have no obligation to us unless we actually procure a sale. In the event that we do find a buyer and procure the sale, you owe us 3% of the sales price. You incur this obligation only if we actually sell your property. In the event that we do make the sale, you incur no further expense.

You want to be able to sell the property yourself? This is fine and you have no obligation to us.

You want us to prepare contracts and take the sale to closing? Ok, we charge $500 for this sevice. You have no further obligation to us.

The point of this dissertation is to point out that a more equitable method of conducting real estate transactions is a Flat Fee For Service. A customer should only have to pay an agreed upon price for the services rendered. Why should the owner of an expensive property be charged so much more for the same service rendered as the owner of the less expensive property?

This marketing technique is very unpopular with competetive brokerages and we aren't real popular with them either. However, we feel that this is the way all real estate transactions will be conducted in the future and we also feel that it is a far more realistic and equitable way to conduct a real estate brokerage.