Koenig & Strey made considerable waves on March 21 when it announced that it would implement a new fee-based system for buyers and renters starting April 2, a first for a major Chicago-area brokerage.
Reaction to the story was swift, and many agents commented on our initial story in support of the measure. Two big questions, though, will be on many agents’ minds, as the April 2 date approaches – how successful will the new system be, and will it spread to other brokerages?
First, a refresher on the system’s tenets: all buyers working with a Koenig & Strey Real Living agent will be required to sign a buyer-agent agreement form and pay a $250 commission, plus 2.5 percent of the purchase price on the home they ultimately buy. Though the Koenig agent has the option to charge a retainer fee as well, it is ultimately up to the agent whether or not to pursue that option.
Joe Stacy, the managing broker at Koenig’s Schaumburg office who is also one of the area’s top producing agent, took part in an early “beta” testing of the fees, and he said in an interview with Chicago Agent that he found nothing but success in his initial experiences.
Stacy presented the new system to five homebuyers, four of whom were new clients and two who were first-time homebuyers, in an extensive 90-minute consultation, where he explained how the new system would function and what it would provide the buyers. All five signed on, and Stacy said they undoubtedly felt more comfortable with the process, based on how he explained it as a new customer-centric system geared toward service, not a fee-based system created to generate additional revenue for the brokerage, as negative portraits have described it.
“It’s not about the $250 fee,” Stacy said. “It’s about the whole process.”
Once the clients understood the added level of service and commitment they would be provided under the new system, Stacy said, they were more than willing to sign on, regardless of the fee that accompanied the service. Plus, he said, the fee is not even that egregious.
“It’s only $250 we’re talking about here,” Stacy said.
But Thaddeus Wong, the co-owner of @properties, had a different perspective on the new system.
Wong said that he was not surprised when Koenig & Strey announced the program because, as a result of its sale to the Warren Buffett-owned HomeServices, its operations have reportedly been in need of additional revenue. What did surprise Wong, though, was the mandatory nature of the system, which he sees as heavy-handed and inapplicable to the world of real estate.
“As much as I believe in a buyer-agent agreement, you can’t force everyone to use it,” Wong said.
The problem, Wong said, is that every agent operates in a different manner; in a sense, each is his or her own entrepreneur, operating independently under the umbrella of a brokerage. So for every 100 agents, there will be 100 different methods of operation, and not every agent will be able to incorporate a fee-based system with their clientele of buyers – and that can generate problems, in Wong’s view.
He presented a hypothetical: what if an agent’s best client, who has used the agent’s services on numerous occasions and brought untold revenues to the brokerage, scoffs at the mandatory fee, and does not want to sign a contract with the agent? If the agent brings that conflict to the managing broker – a conflict that did not exist, prior to the creation of the new system – will the managing broker tell them “no,” that the buyer must sign the contract?
Rather than make the fee mandatory, Wong said firms should instead encourage agents to pursue buyer contracts, and highlight the benefits and enhancements such an agreement can bring to the buyer-agent relationship. @properties, in fact, is planning such a system. Called “Getting What You’re Worth Two,” it will be based on the original “Getting What You’re Worth” platform, a seller-based system that operates in very much the same way as how Stacy described Koenig’s system, where the training and service are the main takeaways, not the fee associated with the agreement. Wong said the majority of @properties’ agents have taken part the original program.
Ultimately, it will take some time to judge the success of Koenig’s program, but Stacy is convinced the company has broken new ground in Chicago real estate.
“I have to believe this is going to be (the norm),” Stacy said, who added that he had recently spoken with an Arizona-based agent who said he would “never even think” of committing to a buyer transaction without an agreement (such forms are commonplace in Arizona, as well as in many other places in the U.S.).
What Koenig essentially did, Stacy said, is something many brokerages have considered doing on many occasions, but nobody had stepped up and taken the initiative and had instead waited for another firm to act. And now that one has acted, he sees many other firms quickly following suit.