Compensation model leaves clients to decide on agent pay

by Olivia D'Orazio29 Apr 2015
Tired of seeing his clients resent agents for their high earnings, one Toronto broker is putting his income firmly in their hands.
Fraser Beach is adopting a pay-what-you-want compensation model as an answer to clients resentment of ‘standard’ commissions at a time when detached houses are “selling themselves.”

“What I’m really trying to do is develop a hybrid that uses the best parts of both private sale and traditional real estate brokerage and let the people pick and choose, to some degree,” he tells REP.
Under this model, which Beach calls “XFee,” clients are responsible for any showing and advertising of the property beyond listings it on the MLS.

“The more traditional things, of course, are the representation of the seller at negotiation, the administration aspects that are required by regulation and agency are done by the brokerage,” Beach explains. “The transaction is managed by the brokerage, but the things the agent spends a lot of time at are done by the seller.”
After a successful transaction – during which sellers are contractually obligated to offer a 2.5 per cent commission to the co-operating broker – clients pay what they believe is fair for the service that Beach has offered.
“It’s always possible (that someone offers very little compensation), but it comes down to, you have to put your money where your mouth is,” he says. “If someone thinks (my service) is only worth $10, then you have to accept that.”
Still, Beach concedes that the model isn’t likely to catch on.
“It’s not a sound economic principle to do what I’m doing,” he says. “I fully understand that. But I think it’s an interesting social experiment.”

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