Real Estate Commission Reform — that was the name of the program I created back in 2011 that would disrupt the way real estate agents charge their seller clients. However, it turned out to be an epic fail.

  • Contrary to what several companies in the real estate industry want you to believe, the general public is not seeking a change to the traditional commission structure.
  • Consumers feel there is a catch when you offer full service at a discounted price.
  • When alternative brokerages fail, it reinforces the fact that the traditional real estate model is the best path for growth and success within the industry.

Real Estate Commission Reform — that was the name of the program I created back in 2011 that would disrupt the way real estate agents charge their seller clients. However, it turned out to be an epic fail.

A brilliant idea

I was offering full-service representation complete with a home staging consultation, interactive floorplans, a custom website, professional photos and everything else you get with a full-service agent for $4,500 or 3 percent, whichever was less (this did not include the additional 3 percent that would be offered to the buyer’s broker).

I was putting a cap on the total commission I charged to list a home. If your home sold for $500,000, as your listing agent, I would receive $4,500. A $200,000 sale would still pay me $4,500, but a $100,000 sale would only pay me 3 percent, which is $3,000.

My sales pitch was simple. “I do the same amount of work for a $150,000 home that I do for a $300,000 home. So why should you, Mr. and Mrs. Seller, be forced to pay more simply because you’ve worked hard enough in your lives to afford a nicer home?”

Whether most agents want to admit it, we don’t vary the listing and marketing process much for homes that sell in the middle of the market. For total dumps, we reduce our services (no open houses or 3-D tours), and for luxury listings, we spend more money to reach high-end buyers.

But for the 80 percent of homes that sell in the middle, we tend to offer the same set of services across the board.

The pitch

Real Estate Commission Reform (RECR) was modeled after the stereotypical political ad.

I shot a series of videos in multiple locations explaining why change is needed in real estate, how great my systems were for selling homes and how improvements in technology have made it easier for an agent to handle more business at one time, which is why I could afford to charge less.

RECR-Logo-Final

I put about $10,000 into branding a custom website and beautifully produced DVDs with a trifold case (not sure what I was thinking; I guess DVDs were more popular back then).

I mail blasted expireds and FSBOs with my message. Then, I sat next to my phone and expected to get crazy busy.

But nothing happened.

I started sending out additional follow-up letters and posting my video links to local websites and on social media, but I still saw little interest.

After a couple of weeks, I finally was able to generate a few listing appointments through sheer effort and persistence. I knew that as soon as I shared RECR in person, the seller would instantly see the benefit and list with me on the spot.

A listing appointment

I remember my first RECR listing appointment like it was yesterday. We toured his $750,000 house, and I asked insightful questions; we talked about the Bengals, and I acted like I wasn’t bothered by the owner’s dog humping my leg — the usual.

We talked through the market, my impressive sales statistics and my strategy to sell his home. Things were moving along great. Then I ended my presentation with a bombshell — my compensation was only $4,500.

His response, “So what’s the catch?”

This line was the same line I got on the next three appointments. Things got awkward each time I revealed the significant savings they would receive.

Confusion and distrust

Instead of creating excitement, I created confusion. Every seller felt the need to do additional research on me and my brokerage because, in his or her mind, there was a catch.

I was working with a real estate coach who asked me a critical question that made me completely rethink my strategy.

He said, “There are plenty of agents charging a full 6 percent commission rate and plenty of sellers happy to pay it. Why not just be a better agent and charge more?”

At first, I argued. I had already invested a lot of time, money and brainpower into RECR, and it seemed like too good of an idea not to work.

Success at last

But I decided to take his advice, and I removed all mention of RECR and the $4,500 commission rate from my listing presentation. My next listing appointment followed the same flow as before.

The owners and I talked through the market, my impressive sales statistics and my strategy to sell their home. But when they asked about my commission rate, I told them 6 percent. I signed the listing that day.

New companies are popping up all the time with attractive pricing and marketing strategies that threaten the traditional way agents do business.

And though most of these companies can’t even show real traction in their local market, the real estate establishment is quick to pounce and tear them apart for being different.

But we need these companies to try to do new things — and, more importantly, to fail. It reinforces the idea that the traditional way of representing a buyer or seller through a transaction is what the general public wants and is willing to pay for.

I tried to disrupt an industry that had no real interest in being disrupted and learned my lesson. Sometimes it’s better to outperform the competition rather than be different.

Brett Keppler is the owner of TREO Realtors and the CEO of Nekst, a task management application for real estate agents.

Email Brett Keppler.

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