Using Retainer Fees in Fee-for-Services Real Estate.

If you're a for-sale-by-owner, wanting to contract with a fee-for-services professional for only the services you need, is there any benefit to using a retainer fee, perhaps as a motivator? And what about accessing fee-for-services professionals to reduce your risk as a for-sale-by-owner, even if you're successful at selling your own home?

Let's tackle the second question, first. Depending on the degree of risk you're trying to shed, the answer is possibly "yes", it may pay to use fee-for-service professionals at checkpoints throughout your FSBO transaction. Especially for troubleshooting the "meat-in-the-middle" I suggest you hire one or more professionals to double-check the paper work at various phases of the transaction.

This would include a real estate agent to check property information before presenting it to buyers, a real estate attorney to review the purchase and sales agreement before your final signature is obtained and perhaps a home inspector to do a pre-listing inspection. The latter is a great way to know the condition of the property before putting it on the market and help prevent a buyer from later uncovering problems (often when they obtain their own inspection) that might cause the transaction to fall apart. In many real estate markets today, home inspectors will give an all-inclusive fee that covers the pre-listing inspection plus another inspection once the buyer is found.

Now for fee retainers. A myriad of professions require their use---attorneys, CPAs, even orthodontists! But is it in the consumer's best interest to place a retainer with a fee-for-service professional? Yes, if the consumer is serious about establishing a firm working relationship with the professional, wants results prioritized on his behalf and is motivated to move to a timely solution. By placing a fee retainer with a professional, you not only show your good faith, but show your motivation in getting to results. As real estate professionals would tell you, a consumer without proper motivation is very difficult, if not impossible, to help.

Most professionals base their retainer fees on a multiple of their hourly rate, a percentage of their flat fee, or other similar formula. Retainers can be either refundable or non-refundable (often depending on what's permissible by the licensing law for real estate agents in the particular state.) Make sure that the fee-for-service agreement you sign specifies whether the retainer fee can be refunded; and if so, under what circumstances.

While saving the commission is the primary motivator in going it alone as a seller, it can be a time-consuming, laborious, even expensive process. Making it to and through the "meat-in-the-middle" should find you pleasantly on the uphill side of the sale. If you drown somewhere in between, know that there's help from unbundled, reinvented professionals in a variety of specialties and fee structures, prepared to throw you a FSBO lifeline.

Published: July 10, 2000

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Julie Garton-Good, DREI “The Frugal HomeOwner™” As a syndicated newspaper columnist, author and international speaker, Julie Garton-Good DREI, C-CREC™, is called “America’s Home Affordability Expert”, addressing more than 25,000 persons annually on topics of real estate industry trends and home affordability. She is the author of five real estate books and is the sole two-time recipient of the international "Real Estate Educator of the Year" award from the Real Estate Educators Association. In 1997, The National Association of Realtors® nominated Julie as one of the fifty most influential people in the real estate industry. She shared the list with only three other women.