Pay What You Want – Service Related Fee’s
By Charlie Perdios, Managing Director, Anthony Pepe
The aim was to encourage new valuations and win instructions on merit, not price.
In 2014 with stock levels at their lowest for a decade, we took a bold and, at the time, unprecedented, move. Unlike the knee-jerk reaction of most agents who discounted their fees, we decided to ask our vendors to pay us what they felt we were worth. We offered our services at between 1-2% telling vendors that although we thought we were worth 2% we were willing to allow them to pay us the same as other agents in the area which was typically 1%.
It was a risk we were prepared to take, given our reputation as the leading agent in the area. But it was still a risk.
The first vendor we offered this to insisted he only wanted to pay 1% because in his own words “the property would easily sell in the current market”. He eventually decided to pay 1.25% and told us:
“I chose Anthony Pepe because I felt that it if I didn’t get the service I wanted, I wouldn’t end up paying too much for it. In fact, I had no intention really of paying any more than 1%. As a developer, every penny counts. However, I received such exceptional service that I just wanted to say thank you by paying an extra 0.25% as a bonus for all their hard work.”
We were emboldened by this initial success and started spreading the word. Before long, other vendors followed suit, with an increasingly smaller percentage paying our minimum 1%, and more and more choosing to pay as high as 2%.
At the end of 2014 our average fee was 1.67% and to this day the average fee is still around the 1.7% mark. Admittedly one of our offices are so confident in our fees they hardly feel the need to use this initiative anymore. This is purely a result of a changing mindset within the office. Previous results have given everyone confidence and belief that they are now worth the higher fee.
NEW OFFICE LAUNCH – ZERO TO HERO
We decided to implement our previously successful “Pay what you want” initiative to coincide with our new Highbury office launch in early September 2015.
This time with a twist, we didn’t set a minimum fee of 1% like we had done previously, instead we promised targeted clients a true “pay zero unless we’re your hero” service. It simply meant our clients could pay us 0% or anything up to 2% depending on the service levels they received.
We called this campaign “ZERO OR HERO” and as far as we know this has never been used by another agency. It has proved very successful, filling our inventory with 20 new properties (worth over £18m) being signed up to the initiative within the first 30 days of trading. We conservatively estimate an average fee being achieved of 0.75%. This will generate a minimum of £135,000 extra sales income – a huge financial advantage over the flat 0% offer used by other agents.
With lower stock levels, agents discounting their fees heavily and the rise in popularity of online agents, maintaining fees are crucial to the ongoing success of the high street estate agent. I believe our service related fee’s have really given us an extra tool in our armory to deal with all of the above.