Real estate agents are always looking for ways to differentiate themselves from their competition. Some agents invest their own dollars to prepare and market properties, paying for services on behalf of their seller to ensure the house is ready for buyers to see prior to hitting the market.
One of the key value-added services is home staging. According to NAR’s 2019 Profile of Home Staging, “83 percent of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home.”
Sellers need to make sure their houses are show-ready, and throughout the years, home-staging industry members have seen a steady increase in the number of agents providing this as part of the marketing services to prepare and successfully sell a property.
Real estate agents hire a professional home stager to provide a staging consultation for the sellers where they receive detailed information on what to do room by room to prepare their house for sale. A consultation costs somewhere between $250-$500 around the country, and agents consider it part of their marketing strategy and pay for it on behalf of the seller.
But what happens if the property needs more than a consultation? Many houses need the addition of furniture and decor brought into empty rooms in a house or added to supplement homeowner’s items to fill the gaps and provide a more updated look for buyers.
Sellers may not have the available cash flow to pay for professional staging, so agents are offering to pay for the hands-on staging and inventory fees because they know the staging will help the house sell faster and at a better price. It is a win-win for the agent-seller team.
The challenge is that the market can be unpredictable. Agents are not in charge of the market and can’t guarantee a house will sell in a certain time frame, although they approach every listing with the strategy of getting the house under contract quickly.
There are external factors that impact the market including interest rates, the economy and other properties that are for sale. When agents offer to pay for staging services, they need to make sure to protect their commission and provide creative solutions to their sellers. So, here are seven tips to keep in mind when incorporating home staging into your listing process.
1. Get an estimate for the staging before you establish your commission
The staging should be an add-on service that’s covered by the commission. If you don’t get a price for the staging first and then agree to adjust your commission in order to secure a listing, you are now receiving less money for the sale.
Most agents who incorporate this strategy of paying for staging use staging as a way to validate being paid more than another agent who isn’t bringing staging to the table. Depending on what pricing you received from the stager, you would increase your commission percentage by 0.25 or 0.5 percent to pay for the initial staging. You could increase it by 1 percent or more if the house is luxury property.
In most markets, this small increase in commission earned will cover the initial staging investment. Contact your stager to get a price for staging the main rooms of the house, and use that as a guideline when negotiating your commission.
2. Do not pressure your stager for ‘the price’ to stage when they haven’t seen the property yet
You want to know what the costs will be so you can determine how you will structure your commission. However, a professional home stager usually needs to see the house to provide you with accurate pricing. This is ideally done in person, but it can also be done using photos.
Experienced stagers can give a price “range,” but it could still be inaccurate if they haven’t really seen the house. Some stagers provide pricing based on list price, square footage or number of rooms being staged. With this type of pricing, you need to ensure you’re getting the appropriate style, volume of furnishings and quality that’s in line with the type of property you’re listing.
When an agent guesses the cost or doesn’t get an accurate estimate, they risk their commission. Since they don’t own the staging business and don’t know how stagers price their services, they may misquote the price.
When the stager provides the estimate, the listing agent then ends up saying, “I’m paying for this, and I did not budget enough for the staging.” Getting the estimate up front before negotiating commission ensures agents don’t end up getting less than they deserve for selling the house.
3. Make sure to cap the amount you’re contributing toward the staging
If furniture and decor are provided, there can be an ongoing fee paid for inventory supply or rental. The items ideally need to stay in place until the house is under contract and they can be safely removed. This could be in a month — or several months after the initial staging.
When agents don’t cap the amount they’re contributing, the ongoing inventory use fee is added to the amount paid by the agent, which means you are making less and less commission.
At this point, since you’re not able to renegotiate your commission, the ongoing fees will come out of your earnings. This could add up to thousands of dollars, and when the seller is benefiting the most from the sale, they need to be the ones paying for the ongoing staging investment.
4. Share what (if anything) you’re willing to pay toward the staging, and put it in writing
What we recommend you share with the seller is, “I will contribute up to [insert dollar amount] toward the staging, and then any fees beyond that will be your responsibility.” If the seller is not able to pay up front, you can say, “I will cover the costs associated with the initial staging and will be reimbursed at the successful close.”
There is a risk involved as the client could decide to cancel the listing. Make sure to protect your money in the agreement sharing, “If for any reason the house is removed from active listing or other changes occur [you] will be paid in full for the staging investment paid on behalf of [client]”
When you are willing to pay a portion of the staging, ideally, have the seller pay up front and reimburse them at the successful close for what you want to contribute. “I will pay [dollar amount] towards the staging cost, and it will be paid to you at the successful close of the sale.”
That’s the ideal scenario, as you are not paying out of pocket for any of the staging services, and if anything happens to the client or sale, you are not risking leaving money behind.
If you just want to provide a consultation, you would share, “I will pay for the services of a professional staging consultation where you will receive detailed recommendations on what to do to prepare your house for sale. Any additional staging services would be paid by you.” Always make sure the terms are in writing in your contract and are clearly understood by the homeowners.
5. Do not quote pricing for the staging unless you received it from your stager
Your clients may ask you what the staging will cost. If you haven’t received proposals and pricing for staging, please don’t guess what you think it should be. You may end up setting false expectations for the sellers, and the pricing could be way off — either too low or too high.
There are other factors to consider with the staging, and it’s best to put the emphasis on the results they want versus the price. Lastly, let the stager negotiate any price adjustments, and be the one to explain the services and how they work.
One key point to share is that “the investment in staging is always less than a price reduction or a lower starting price.” And staging is a tax deduction (IRS Publication 523), whereas a price reduction or lower starting price is just a loss of equity.
6. Always quantify the value of any services you’re paying for on behalf of the seller
This helps them understand your commitment and contribution in helping them sell their property. When a person gets things for free, it’s human nature to not really assign any value to the service or item, and a nonchalant attitude seems to prevail.
Let sellers know you’re investing in the sale of their house. Give them the value, and reinforce your quality reputation and standards. This applies for staging and any other preparation services such as cleaning, carpet cleaning, window washing, landscape touch-up, photography and virtual tours. When there is no value, there is no appreciation or understanding of the benefits you’re providing versus what other agents are offering.
7. Be creative with options for staging and needed home improvements, and connect with companies that provide this service
There are companies that partner with IAHSP (International Association of Home Staging Professionals) members and will pay for any improvements needed for a property and require the house to be staged. They pay for all the services up front and get reimbursed with an added fee for loaning the funds.
They evaluate the property, make sure there’s enough equity or margin in the sale to cover all the closing costs, agent commissions and their fees, and provide all the financial resources for whatever work needs to be done prior to listing.
A professional stager who is a part of this program is vetted by them in advance and can share the names and contacts for the company. This option helps protect and preserve your and your sellers’ money as you are not having to put out anything up front for the prep and staging of the property.
If you decide to contribute a portion toward the staging, you can put that in your contract and have it paid at closing. One of the great aspects of this program is the companies providing the services to repair, remodel, improve and stage the house are paid when they do the work and do not have to wait for the house to close. You won’t have to ask anyone to wait to be paid, which can be a hardship for these affiliate companies.
Use these seven tips to help you protect your income while being seen as a Realtor who does more for your sellers than the average agent. Staging adds value to the sale — but it should not break your bank.
Jennie Norris is the chairwoman of the International Association of Home Staging Professionals. Connect with her on Facebook or Twitter.