By Lloyd R. Manning
About a year ago, REM publisher Heino Molls wrote a column about retainers –
that is, requiring an up-front fee from a prospective client before actually doing anything for him. Heino and several subsequent people who wrote letters to the editor would have you believe that this is something thats time has come.
However, this is not a new idea but one which, like the fabled Phoenix, rises from the ashes, popping up every once in a while only to get shot down or forgotten about. Although letters to the editor are fair game for rebuttal, old hacks like me must be extra careful about finding fault with what the publisher has to say. This is the guy who pays my exorbitant fee for writing this stuff and punching holes in his reflections is treading on sacred ground.
Black’s Law Dictionary defines a retainer as an act of employment; the client has said to have retained the attorney, or in this case a salesperson, and the agreement between them sets forth the nature of the services to be performed. When paying a retainer or an advance fee for services to be rendered, the client expects a high level of competency, timely performance and the attainment of a specific objective.
Although unquestionably there are many highly qualified and very professional salespeople who meet all of the requirements and are perhaps entitled to ask for a retainer, unfortunately they are not the majority. An upfront fee may be justifiable if marketing an investment property or a business where substantial pre-sale research and analysis is prerequisite. However, this criteria is somewhat reduced with most residential and smaller commercial properties. The public will seldom separate the proficient, professional sales rep from the multitude of comers and goers that many real estate brokers harbour.
The other problem is that the industry is rife with commission cutters with whom you must compete, sellers who think the commission structure is far too high now, the marginal producers who will never ask for a retainer and incompetent agents who are not entitled anyhow.
Get a retainer? Forget it! Tain’t gonna happen.
However, in view of skyrocketing costs you cannot continue indefinitely to spend time and give service to tire kickers. Since you have high selling expenses, even a marginal client could be a loser. It is far too easy to become a tour guide, particularly if you specialize in new homes. To avoid these pitfalls, you require a system to sort out those who will be profitable from the lookers and potential time wasters. This involves thoroughly reviewing the information that was used to identify the individual client in the first place and developing the skill to separate the probable winners from the sure losers. With difficult and very small properties where you could lose money even if the sale is made, this may involve adjusting the standard fees from what the industry usually charges to a more assured profitability margin.
When selling farms around the St. Paul, Alta. country several years ago, frequently on a warm summer day a prospect would say he had just driven up from somewhere to visit a friend, or something of the sort, and would like to see some farms while in the area. Too often I drove these tourists around for a look-see at the countryside. Then I got smart – handed them a few highlight sheets, a location map and a business card, and said, “If you see anything you like, give me a call.” Never heard from any of them again.
On the other hand, when it was in the middle of winter, – 30 F, and a fellow said he had just driven up from Southern Saskatchewan and wanted to see one of the farms I had advertised, he was given the royal tour. Usually, shoppers only are not that hard to pick out. I know it’s the time-worn pitch but too soon forgotten by so many agents who are so pleased to have a prospect, any prospect, that they forget about that pre-qualification bit. It is more profitable and far easier to focus on the right clients, the ones who are specific about their needs, wants and have the financial where-with-all rather than pleasure tripping and pitching everyone who walks through the door.
On day one it is necessary to develop a Realtor-client relationship that will be profitable. If it is obvious that it probably will not become so, divest yourself of this client. As sellers do not give away their properties, you cannot afford to give away your time and your talent and pay the expenses associated with showing your wares.
This can only be done by determining the client’s expectations and managing those expectations in light of what is reasonable. But before saying to a prospect, “no pay – no show,” you will want to ensure you are using an appropriate qualifying strategy. You are a provider of information. Where there are relevant gaps in the client’s knowledge, particularly as to the interplay between what they would like to have and what is reasonable, you must determine the best way to fill in those gaps. The pre-qualified and educated client will be less likely to waste your time or blame you if the relationship dissolves.
After you have done the hard work of assessing your present relationship with a prospective client, assessing the what and why of one who may be unprofitable and taking by the hand those who could be borderline, you will be able to more clearly assess the relativity of each input factor, after which you must decide whether to continue with or divest yourself of this person(s). However you play it, it’s a law of averages game. By divesting you could be doing your competitors a favour by sending new business their way or do damage to the potentially good client who may come to see you as service unfriendly.
Since you will never get a retainer, the game is to assess the potential profitability of each client and potential client and drop any who early in the game give all indication that you will never make a dollar on this person. But before dropping one, ensure that you have a sufficient number of prospects and clients, your qualification procedure is error free, and you can adequately and professionally tend to them all. Can you afford to squander even one who you may have misjudged, who does not respond to the usual stimuli, and who may not be aware of the entire value proposition?
Maybe yes, maybe no, sometimes, and all with qualifications.
