To be honest, until now, I hadn't even heard of SP even though it apparently has created quite a ruckus among the real estate community. So I decided to take a look at their website and find out more about the services they offer and how it is supposed to work for buyers and participating agents. While I am not providing a link to their site, you can find it very easily if you decide to do your own research.
What it is Not
Pretty quickly, I realized that there could be misconceptions by consumers as well as real estate agents. Consumers are lured into the service with the prospect of "getting" a rebate from the commission.
However, consumers who choose to utilize this service need to realize that this is not going to be "free" money!
On the other hand, I've seen many comments from agents thinking they would have to work for free and not get compensated.
How it Works
On the surface, it all looks quite straight forward: buyers pick and choose what services they want from a menu - Find a Home, Get Advice, Buy a Home - each of these with sub menus such as "search", "tour", "price/CMA", "consult", "offer", "meet in person".
Buyers will pay for each service they require along the way and at the end of the process, i.e. at closing, they will - where allowed - receive the buyers' commission rebated to them on the settlement statement.
Buyers who end up not buying will pay for services that they have received up to that point without a rebate at the end. This also means, the agents who provided services will receive compensation.
All about the Money?
Tasks are assigned a price range and an average price for the service. These prices are set by participating agents, not SP. And these prices can vary quite a bit depending on location and agent, for example, the fee for "showing a home" can range from $10-$150 per home.
Ever had a buyer who wanted to see 20 or more homes before deciding to buy elsewhere or not at all? I am thinking it could get quite expensive for such buyers to go with a "fee for service" agent even at the "average" rate of $40.
What if you are an out of state buyer and require additional photos, a video tour, etc? Available at additional fees of course!
What about all those real estate questions buyers have about the buying process?
Traditional full service REALTORS® are available to their customers throughout the process for phone and in person consultations to discuss any issues and questions that should arise.
But in the fee for service model, speaking to an agent in person could cost the customer from $20 to $300 per consulting session.
How about doing further research on a property such as reviewing property records, tax records, permits or Clerk of Court filings?
All of these are routine tasks that a full service REALTOR® will include free of charge only with the expectation of getting paid at closing.
Ever had a buyer who made multiple offers before finally getting one accepted? The average price per offer according to SP would be $100... again, make three different offers and pay the bill of $300. Add to that a quick CMA before each offer at an average of $75 each!
Of course, preparing an offer is just the beginning! SP's "schedule of fees" doesn't address offer negotiations, counteroffers, setting up inspections, negotiations of repairs after inspections, staying in contact with title company, lender, etc.
Maybe these services are included in the general "meet the teams/closing agent" fee that could range from $500-$1750 or more?
Then there are additional services that fall under the category of "meet in person".
- You want an agent to attend the inspections? $100
- You want a final walk through before closing? $100
- You like someone to attend the closing with you or for you? $50-$100
Did I mention, the company requires a valid credit card on file from the consumer?
Consumers will have to keep track of the fees they pay themselves.
Depending on the sales price of a home, maybe all these individual fees will accumulate to a smaller bill than the promised commission rebate and consumers may walk away with a bit of "cash back" in their pocket.
But what happens if it's a lower priced property and the fees are beginning to exceed the rebate? Would buyers be required to pay the additional amount to make up the difference between commission paid and fees for services?
Furthermore, it would be possible for consumers to pick and choose which agent they want to select for individual tasks. They may do this to "shop" for the "best" price for a particular service and don't mind giving up consistency and personalized service along the way.
While looking at the carrot of a rebate dangling in front of their eyes, it may be easy for buyers to forget that by working with a full service REALTOR® they do not pay any fees for services because in the end their REALTOR® gets paid a commission at closing.
On the other hand, some agents might feel it worthwhile joining this program and "specialize" by only offering certain services such as showing homes or preparing CMAs.
While looking through some of the agent profiles on the site I've noticed that this is exactly what is happening.
Can anyone fault them for that? Haven't we all shown countless homes and prepared countless CMAS that didn't lead to anything and that we wish we would have been paid for?
Knowledge is Power
- Do I think SP is for me? Probably not.
- Should I be afraid? I don't think so.
- Will this company prevail? Time will tell. It's not quite the same as offering "just" an online database like the big Z or T real estate search sites.
- Did I stir up conversation? I hope so.
There is a lot more to read and learn on the SP site. I encourage you to find out for yourself. Find out about their fee structure, what information is required from buyers to access services, how they pay agents, their suggestions about how to handle commissions that are below the promised rebate, their terms of service, check out the profiles and experience level of the agents that are currently on their site.
After all, only if we know what is offered and what we are up against, can we adapt and build strategies to stay competitive and successful!
Silvia Dukes PA, REALTOR, CRS, CIPS, SRES, Florida Waterfront and Country Club Living
Real Estate Agent / Spring Hill, FL
Tropic Shores Realty
Mobile (352) 584-7441