Posted by: Jack Harper | June 2, 2010

Part III – The New Value Proposition

Consumers are mostly capable of “going it alone” in residential real estate today. If not completely alone, rare is the seller or buyer who would not be able to market, locate, value-price, negotiate and close a sale with some amount of help from the myriad of service providers available to them today.

For example: We are about to sell a property on the other side of the country from where we live. The home is vacant and has tremendous potential value. It is located on a very desirable canal leading to Long Island’s Great South Bay. The home has a huge lot, tons of waterfront footage, new docks and bulkheads and is on the best side of the canal – water never rises over the bulkhead as we are on the high side of the canal. Homes in this area are very much in demand and the property should sell rather quickly.

Forget for a moment that I am a real estate professional with more than twenty five years experience. We are sellers, plain and simple. Now, we can easily market and sell this home with no assistance from a Realtor® . We can list the property on the MLS, on, and on more than one hundred websites. We can get a sign, lockbox (probably combination), send out postcards, and likely get several offers at a very good price. We can then hire an attorney to perform the closing, have all the documents prepared, make the correct disclosures and close the sale without having to pay a real estate broker for any of this work that we can do ourselves. But. . . we will not do this.


Right. We will not do this. We will engage the services of a real estate broker.

Now, I will tell you why we would do this. First, we absolutely need the local knowledge that a true professional can provide. In our case, we need to know how much value to add because of our location on the canal. How much more can we get because we are still inside the area that can join the beach club? Is there a value to add for a new bulkhead and docks? What are the negatives we might not know about. In short, true value can best be determined when all factors are applied to the area’s benchmark pricing.

Next, we will benefit from the local contacts that the professional will have. We might need services, repairs, inspections, staging and more to ensure that we will get the highest offers possible.

Risk reduction is a good thing. Having a professional who has a good Errors and Omissions policy always helps.

Local knowledge vis-a-vis regulations and ordinance changes can help us to meet any and all legal requirements and can keep us out of court by making sure we meet all disclosure regulations correctly. Yes, the title company might help, but I want someone with “skin in the game” making sure we all meet these requirements together.

We want to be certain that our selected agent is present at every showing. The information gained through this process will help us assess our pricing strategy, our marketing plan and our overall probability of success. Speaking of showings, it is not all that easy to sell a property across the country unless you have a lockbox that most area agents can also use for showings.

So you see, there are some very valid reasons for hiring a professional. If the property were here in town, it might change the equation, but try imagining that I am not in the business. I can tell you that we still would hire a professional broker. The question remains; at what price? Given that we have some very specific tasks that we want our agent to perform, and many that fall under the category of “full service” are not needed, we will not be content to hire a broker for a percentage of the eventual sales price. We will create an agreement that tells all of us exactly what the broker will and will not be responsible for. We will predetermine a price for these activities, and we will contract according to this plan. This is a true value proposition, is it not?

How about you? Are you willing to create a similar value proposition with your clients? Do you see yourself “laying it on the line” and only getting paid for the work you are called on to perform? This means no more percentage of sales price. This means you are required to give your clients full disclosure of your value – under a full transparency of your activities. You will no longer try to convince them that they need some vague interpretation of “full service” that will cost them some vague percentage of whatever price the property eventually sells for.

Are you ready for this? I hope so, because it is going to soon be the normal way of doing business in the real estate industry. In a future post, we will examine this future trend in more detail.


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