Paying your real estate agent by-the-hour – will it work?
Although I have been doing hourly real estate consulting for nearly half of my 30 years in the business, there are not many fee-based real estate consultants out there. Many may say they do by-the-hour consultation, but few really understand what that means.
Recently, a couple interested in purchasing a Northern California home listed in the Multiple Listing Service (MLS) sent an email to a salesperson who works for a large real estate company. They asked if she would consider helping them as buyers for this property on an hourly basis in lieu of the commission. In other words, the buyers would pay the agent directly for the hours she worked for them and the agent would rebate her commission to the buyers.
The agent said no, explaining “how hard she works” for her clients and, therefore, how she is worth a commission. She was right to refuse, but for the wrong reason.
By definition, given that the property in question was listed, the salesperson representing that buyer must be an agent (not an hourly consultant who does not have an agency relationship with the buyers), even if paid by-the-hour. In California, the risk and potential liability exceeds what a prudent agent would find acceptable for the relatively small (hourly) fee received.
I give more detailed explanations on this topic in my newspaper articles, “Consultant or Agent,” and “Understanding Agency.” The shorter version is this: An agent has a higher duty to protect the client than does an hourly real estate consultant who is not functioning as an agent. If something in the transaction goes wrong, the agent has significantly greater liability and is vulnerable to being sued. This is much less likely for a licensee who is working solely as a real estate consultant on an hourly basis.
The need is there; I have done hourly rate real estate with four different parties in the past month or so: two buyers and two sellers. The problem is that few who could use the service know it exists. Even if they do, they don’t know where to find a competent Realtor who can help them on an hourly basis. If you are considering hiring a consultant, try your favorite search engine for “hourly real estate,” “hourly based real estate” and other, similar phrases.
There is growing evidence that Realtors in other areas have added hourly real estate consulting to their arsenal.
- According to a recent press release and information on its Web site, a Seattle real estate firm offers its clients a choice between the traditional commission system and a pay-by-the-hour proposition.
- A North Carolina broker contacted me for advice and feedback on his plan to add a menu of hourly services to the traditional brokerage arrangement.
- A Portland, OR firm advertises a real estate by-the-hour option.
WARNING: Whether you are looking for a traditional agent or a real estate licensee who works on an hourly basis, the key is always competence, caring and professionalism. Make sure to only hire someone who has substantial experience and knowledge and will use that to help you do what is best for you.