When I first got involved in real estate in 2010, like 80% of people calling themselves “real estate agents”, I was just a commercial agent working for a licensed broker – so I was not in position to set the fee levels. Then a few months later, I got my own license and decided to work for buyers. To carve out a bit of a competitive advantage, I set my basic fee 30% lower than the listing agents’ typical fee, at 3.5%. And I left it at that. That was 14 years ago.
Thinking out of the box
A few months back, I started to get enquiries from past customers (for whom I had found a house), who wanted help to sell their properties. So I looked into how much I could charge them for that new (to me) service.
I started by listing all the things that need to be done to sell a property: signing up the mandat de vente (2 hours), preparing the listing with pictures and description (4 hours), arranging diagnostics and surveys (1 hour), organising property visits (10 hours), setting up the transaction with a notaire (2 hours), overseeing the compromis (2 hours) and closing (2 hours), and aftersales interactions (4 hours). Total: 25 hours. If you multiply that by 100€, the whole process should cost 2,500€ (ex VAT) to the customer, so 3,000€ all inclusive. Whatever the size and the sales value of the property. But it doesn’t.
Why?
You see, a 3,000€ fee is what you’ll pay the listing agent if you sell a 50,000€ house (there are not many of those around in France), because the fee is actually 6% (5% + VAT) of the net price. If you sell a 750,000€ property, this 6% fee is 45,000€. 15 times 3,000€.
The main reason is that listing agents only manage to sell 1 in 10 properties they list. Just 10%. (That’s because of the law, and the market structure – and it has all sorts of other consequences, which I will cover in another column). Hence the pricing structure: the fee you pay has to make up for all the other fees that the listing agent never gets.
Did you know that?
The public has long known that – or rather has long had the sentiment that “fees are too high.” The industry is working hard to ensure that people don’t really understand what’s happening, and very few agents dare to rock the boat. In the end, that state of affairs explains why most real estate agents have a poor reputation.
A new business model
But anyway, back to me. So I decided to change my business model.
As a listing agent, I will now charge a 790€ monthly service fee covering all consultancy bits of the selling process, with options for pictures and marketing, and a 1.5% (including VAT) success fee when (if) I sell the property – so that I have some skin in the game. In the end, the cost to the seller of the house is divided by 3 or 4. And I get a decent pay for the time I spend. As a buyer’s agent, I will also charge a monthly fee – and I will only charge a transaction fee if I obtain a discount for my customer, by keeping 50% of it. Again, skin in the game, I get paid fairly, and the customer benefits.
I hope I can make a small difference
In France, 30% of transactions are done privately between a seller and a buyer with the assistance of a notaire (that’s the law). That’s over 300,000 transactions a year and most transactions are seamless. But things are often a bit more complicated for foreign buyers or sellers, because the system is different and everything is in French. I know I can make a difference, and I want to get paid decently and fairly for the work I do. I am not looking to change the system; I’m too old for that. Just tweak it.
What do you think?
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