Flat Fee Luxury Real Estate Advisory
Flat Fee Luxury Real Estate Advisory
Unnecessary intermediaries not only drive up transaction costs, but they also bring with them a minefield of conflicts of interest.
Batterymarch Insider
Batterymarch Group LLC is an independent real estate advisory firm specializing in the downtown Boston market. More about our services here. “The Batterymarch Insider” is a brief snapshot of our current market thinking. These are our opinions, so take them with a grain of salt. As always, our “terms of use” apply. We encourage you to subscribe.
Flat Fee Luxury Real Estate Advisory is Here Now
The traditional real estate brokerage model isn’t exactly dead, but it has clearly entered the zombie stage. Mistreated consumers have had enough, and since the industry operates with political and regulatory immunity thanks to intense lobbying, they took the fight to the courthouse – and won.
In the wake of the recent bombshell anti-trust litigation, incumbent brokers and their sales agents are desperately trying to cling to their high-cost antiquated model while the courts, plaintiff attorneys, and the Department of Justice figure out the new ground rules. In the interim it will be business as usual, but as we see it, the traditional model is on death’s doorstep.
We believe that the future of residential real estate brokerage is going to mirror the changes that took place in retail brokerage on Wall Street. In a nutshell, stockbrokers, who generated their income by buying and selling securities on behalf of customers (i.e., transaction-based compensation) were replaced with fee-based advisory services.
The current real estate brokerage model is ridiculously expensive, inefficient, and antiquated. More importantly, the traditional model does not align the interests between brokers/agents and consumers. There’s a better way.
The Batterymarch Flat Fee Advisory Service
We’re rolling out our flat fee buyer advisory service.
- We decline offers of compensation from sellers or third parties. We only accept compensation directly from our clients.
- We negotiate and settle transactions based on the net price of the property (net of all sales commissions).
- Commissions that customarily get paid to a buyer’s broker don’t get paid to us, but rather they get passed on as a discount to our clients.
- Our advisory service includes:
o Onsite visit of the targeted property
o Fairness opinion of value
o Due diligence
o Preparation of offer to purchase – advice in the negotiation process
o Inspection report review
We’re a Fiduciary Advisor – Not a Sales Organization
Buyers of real estate want to know two primary things. First, is the property okay, i.e., is there something that they’re overlooking (location, condition, etc.). Second, is the valuation reasonable. They shouldn’t have to pay 5%-6% of the property value in exchange for conflicted advice. Home buyers need to have an actual fiduciary in their corner.
We don’t profess to be all things to all people and our service isn’t for everyone. If you’re looking for the highest caliber un-conflicted advice for a reasonable fee, reach out to us.
Redefining the Buying Process
Eliminating Unnecessary Intermediaries
Real estate brokers adhere to something called “the procuring cause of the sale” rule. The way that works is that the sales agent who brings the buyer across the “threshold” is generally the one who is entitled to collect the commission offered by the seller. This is the primary reason why sales agents chaperone buyers from house to house. We don’t accept compensation from sellers, so this rule doesn’t apply to us.
These antiquated compensation rules force traditional sales agents to become de facto tour guides, spending endless hours coordinating schedules and attending property showings. It’s horribly inefficient and drives transaction costs through the roof.
The technology is in place for buyers to conduct their search independently. Dragging an agent along bogs down the process. Additionally, chances are that the sales agent will steer you to properties that offer them the highest compensation, or to their in-house listings.
We can discuss the nuances and pros and cons of individual properties, neighborhoods, buildings, etc. without spending countless hours on tour. When a client identifies a property that they are interested in buying, that’s when we visit the property with the client.
Sales agents that cling to the old, high-cost way of doing business are unnecessary intermediaries. Keep in mind that when you’re dealing with sales agents, you’re dealing with the gig economy. It’s no different than catching an uber ride, some are meaningfully better than others.
Declining Third Party Compensation
In the wake of the industry’s massive anti-trust defeat, traditional brokers and their sales agents are desperately trying to hold on to the long-standing practice of sellers compensating the buyer’s broker. We expect that third-party offers of compensation to buyer’s brokers will survive in some form.
We decline all offers of compensation from third parties and pass that savings along to our clients. It’s our belief that when a counterparty to a transaction is compensating your salesperson, a conflict of interest exists. By default, these salespeople are not fiduciaries.
Who Really Pays the Commission?
Realtors will have buyers believe that the seller pays the commission. This is utter nonsense. The party writing the check (the buyer) is the source of funds that pays real estate commissions. In essence, buyers have traditionally been forced to pay all the commissions (both the sellers and the buyers).
Real estate brokers and their agents desperately want to maintain the status quo. Burying the commission into the transaction price deliberately makes the process opaque. Brokers convince both the seller and the buyer that “the other guy is paying the commission.”
We insist on full disclosure of fee arrangements in advance of negotiations. With full transparency, we can accurately negotiate the property value – NOT the value of the property plus the broker’s commission.
Fairness Opinion of Value
The goal of our fairness opinion of value is for our clients to go into transactions with their eyes wide open. Buyers tend to look at properties through rose colored lenses; emotions get in the way of better judgement. We look at properties through an objective lens and highlight things that buyers may not be thinking about.
We’re valuation experts in the downtown Boston luxury corridor. It’s not uncommon in our market for properties to sell at 30% or more below the original asking price. Traditional sales agents look the other way when it comes to valuation - they negotiate around price, not value.
It’s important to understand that our fairness opinions are not “appraisals.” We’re not licensed appraisers and if you’re getting a mortgage your lender will require a formal bank appraisal. While bank appraisals have improved in the wake of the Great Financial Crisis, we’d be reluctant to rely on them.
Due-Diligence
Massachusetts is a buyer beware state. Sellers and their brokers are under no obligation to disclose known defects with a property. Compounding the problem is that most due diligence happens after the offer to purchase is signed. It’s a totally backwards process and that’s the way realtors like it.
Brokers and their sales agents get you financially and emotionally committed, then they let you figure out what you’ve gotten yourself into. We attempt to do as much due diligence as possible before offers are submitted.
Property Inspections
Property inspections are a necessary evil. Real estate brokers are required to give buyers a copy of the Massachusetts Home Inspectors Consumer Fact Sheet because at one time unscrupulous brokers were in bed with unscrupulous inspectors.
The system is better now, but while inspectors would never admit it, they know that if they scare buyers during the inspection process, and deals fall apart, they’ll eventually be blackballed.
We take these reports with a grain of salt as we’ve seen too many cases of inspectors missing or downplaying major issues. Buyers and their advisor need to be fully engaged during the inspection – the seller’s agent will be. It’s not a time to be measuring for new drapes.
Premium Service at a Reasonable Price
Unnecessary intermediaries not only drive-up transaction costs, but they also bring with them a minefield of conflicts of interest. It’s unrealistic for buyers to navigate these conflicts without the guidance of a trusted advisor.
Our fee structure reflects the fact that advising a buyer on a $7 million property isn’t much different than advising on a $3 million property. We’re well compensated, and our clients don’t need to take out a thirty-year mortgage to cover our fee. We offer a premium service at a reasonable price without conflicts. Our fees are 100% billed to our clients and payable at closing.
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About Batterymarch Group LLC – Batterymarch Group is an independent full service real estate brokerage and advisory firm focused on the downtown Boston high-end residential market. We represent both sellers and buyers with a sharp focus on valuation. We also offer sub-advisory and owner’s representation services to financial institutions, family offices, and trustees.
About Andrew Haigney – A 25-year Wall Street veteran, Andrew held senior positions at leading global investment banking institutions where he routinely valued and negotiated complex securities transactions on behalf of institutional clients. Andrew has been an outspoken advocate of a universal fiduciary standard. In founding Batterymarch Group, Andrew brings that same discipline and passion to real estate brokerage.