What exactly IS Real Estate Consulting?

To best answer that question, it's helpful to understand what it's NOT.

• It's not limited service per se, although it can include it.
• It's not specifically flat fees or fee-for-service although it can include them.
• It's not about commissions although it absolutely can include them as an offering.
• Most importantly, true consulting is not a gimmick.
• And it's not simply a title that an agent puts on their business card because it sounds better.

It's a difference in approach: a true consultant is trained to consult WITH the client rather than sell TO them. The focus is on providing a thorough needs analysis and then offering responsible options in how those needs can be addressed. In addition, it is about offering quality, transparent choices, both in the types of services that you can offer and how those services can be paid for.

But isn't consulting the same thing as discounting?

It's actually very common for agents and brokers who don't understand what consulting is to dismiss it as discounting. But in fact, the consulting model is an antidote to discounting. To understand the difference it's important to look at how commissions work. Commissions are, by their design, built on a basic rule from Economics 101, that of "high risk equalling high reward". In other words, the agent and their broker take all the risk, BUT they receive a high reward if they're successful. In fact, the reason that commissions are an expensive way for consumers to pay for real estate services is that the lion's share of what the consumer is paying for is not the services they get but the risk mitigation.

Discounting is when an agent or brokerage agrees to continue to shoulder all the risks inherent in being paid on contingency, but settles for less reward. That lower reward means that they have no cushion to cover them when other transactions don't happen - the homes that don't sell, the buyers that don't buy. So, the only way that the agent can make this debilitating equation work is to cut the quantity and quality of the services that they provide, thus lessening their chances for a successful sale. That's why many of us look askance at discounters because they make our industry look bad. And, historically discounting doesn't work long term and it's a bad deal for our industry.

Consulting on the other hand, takes a very different approach: it offers transparent choices to the consumer in what services they can receive and how they can pay for them. A real estate consultant can lay out the cost of their various services and give the consumer a choice in paying for the services or time itself (the way we pay most service providers) or pay for the risk mitigation that a traditional commission provides. There's no right or wrong including the consumer choosing to pay by commission as long as they understand that if they want to pay by commission they will pay a premium to have that "insurance policy".

So consulting is not just about fee-for-service?

Certainly, practicing real estate consulting does entail offering fee options as well as an hourly rate that you can charge for your time, but the consulting model encompasses so much more that.

Consulting is a whole new approach to your business. It's having the "tools in your toolbox" to offer the consumer quality choices that pay you fairly for the expertise and years of experience that you bring to the table. It's knowing your value and having the confidence to walk away from clients who will sap your energy and not provide a good return on your investment. Consulting is about knowing what you are worth and settling for nothing less. What we teach in the ACRE® Program is not so much about setting up a fee schedule, as it is looking at your business AS a business and helping you articulate your value to the consumer.

But if you're paid a fee for the services you provide or paid by the hour, don't you make less money than by commission?

Actually, the experience of our ACRE® agents is the just the opposite. The consumer is looking for choice, not cheap. What we've found in talking with consumers is that the reason they went with discounters is because they've had no other choices. What the consumer seems to want more than anything is transparency. Most consumers have no problem paying for quality services if they could just understand what they are paying for. We need to look the consumer in they eye and tell them the truth - commissions are high - they have to be if you want the agent to shoulder all the risk. When consumers understand what their various options are, if they choose commissions, and many still do, they don't try to pull a commission-ectomy.

The other reason that you make more money, not less by offering options is that having different ways of charging for your services opens up whole new markets and streams of income that become available when you offer different ways to be compensated. You're no longer limited to just buyers and sellers. Just a few examples are homeowners, investors, relocation companies, loss mitigation departments of mortgage companies that are foreclosing on homes, and of course, for sale by owners. Some of these niches have needs that don't even involve buying or selling but they still need counsel and they're willing to pay for it, just like they pay for a CPA, financial planners or other services. Our industry has lost hundreds of thousands of dollars in unearned income over the years because we didn't offer some responsible choices that provide the consumer with badly needed expertise while paying us well for the time and years of experience that we bring to the table.

In Mollie's book, she talks about the real estate industry having an identity crisis and how the role of the agent has changed over the years. Can you elaborate a bit?

Forty years ago, the sales model, where the agent was charged with the task of simply selling a house and being paid a commission when they did so, made total sense. After all, forty years ago agents were not asked to represent or act as an advocate for clients. However, in the 80's and particularly in the 90's, while agents were still expected to be salespeople paid by commission, they were now being asked by their state and national associations to simultaneously wear a second hat, that of an objective advisor, a fiduciary, charged with putting the needs of their clients above all other interests, including and most especially their own.

Mollie believes that having to wear two hats is causing our industry to have an identity crisis - we don't know who we are - are we salespeople charged with moving product or are we consultants charged with providing objective counsel? The fact is that no matter how it's presented or dressed up, there is an inherent conflict of interest when a real estate professional is expected to act as a fiduciary when the amount of their compensation or whether they get paid at all is wholly dependent on the decision the consumer makes that the agent is advising them on.

In her book, Mollie calls this the elephant in the room. The real estate industry knows deep down that there's a conflict of interest, but no one wants to acknowledge it and certainly no one wants to talk about it. Now, this doesn't mean that most agents don't do the right thing - most agents do, but if you're constantly put into a position of choosing between ethics and eating, you can't be surprised if eating sometimes wins out. Most importantly, the consumer is not buying it - they just don't believe that agents can provide objective counsel when their being paid contingent on an outcome and since the industry has overwhelmingly not offered any alternatives to commissions, the consumer is more and more going elsewhere for help or going it alone.

Has the consumer's "going it alone" been helped along by the growth of technology?

It sure has, plus we have the constant hype in the media about what technology CAN do - without also taking into account what it CANNOT do. The fact is that the growth of technology has not lessened the agent's role but it has definitely changed the value proposition and it most certainly makes the old sales model less and less viable. What today's technology is doing is allowing the consumer to do many functionary tasks that previously could only be done by agents while at the same time, the Internet now gives the consumer access to reams of data, that was previously unavailable. What this means is that the MLS, as the sole place for property information is over. In today's world, as much as agents and their brokers dislike the thought, buyers and sellers, armed with information that they got WITHOUT going through an agent, will find each other more and more. The agent's traditional role of being the provider of information and being paid for their access is no longer relevant and as long as our industry continues to operate and depend on the old model whereby our value is that providing data, we will continue to fight an uphill battle for control of that data. And this is a battle, that in the age of the Internet that we will lose, in fact, we've lost it already.

However, there is a huge silver lining because what IS relevant is what is getting lost in all the hoopla and that is this: while the Internet can provide information and lots of it, what it can never do is make sense of it means. The real estate professional's value is no longer in gathering or providing data - technology can do that better, faster and cheaper than any human being. The professional's value today lies in taking the reams of data and making sense of what it means. It's not in providing information but in interpreting it. It's in the fiduciary: guiding, negotiating, and troubleshooting. It's providing judgment, experience, and expertise.

That's what the consulting model is all about and here's the good news, as a consultant it doesn't matter who has access to the data because the value lies not in the data itself but in the interpretation of that data. As a consultant we're no longer paid to provide information but to interpret it and that's something that technology can never do. The bottom line is that the growth of technology offers doom and gloom for our industry if we sit back and let our role be disinter-mediated. However, it offers great opportunities if we use its growth to concentrate on what only we, as professionals, can do.

How can this consulting model be a win-win for both the consumer and the agent?

The time is long overdue to provide consumers what they have wanted for years - responsible choices that provide quality services, real value for their dollar with complete transparency - in every transaction.

The benefit to the consumer of hiring a real estate consultant rather than a salesperson is that it allows them to harness the power of the Internet and use technology to do functionary tasks themselves if they choose to, while leaving the vital fiduciary role (pricing, negotiating, and troubleshooting the transaction) to a professional who does it for a living.

The consulting model also empowers the agent. It's an exciting future for those who embrace it because rather than being paid for our access, real estate professionals can be paid for their time, knowledge, and the expertise that can only come from years of experience.