Key Differences Between Fee-Based vs. Commission-Based Real Estate Advisory Services
I have always found the topic of compensation very interesting, especially in the world of Real Estate. How a professional is compensated (fee or commission) will affect the way that professional will advise their clients. In a perfect world all professionals would be objective and unbiased. This unfortunately isn’t the case. Below are some key benefits of working with a fee-based advisor in real estate:
1. Unbiased advising
Fee-based advisors have no incentives to recommend options that maximize commissions, only clients’ best interests. This is because their compensation is not tied to a certain investment type or transaction. For example, they may advise you to hold onto your property or diversify your investments into stocks or bonds. Or, they may advise waiting to upgrade for more favorable capital gains treatment based on your long-term goals.
2. Learn about ALL possible options
Fee-based advisors review total financial situations and life goals to advise on real estate decisions from an overall perspective. What this means is that they are more likely to offer their investors more investment options rather than limiting it to those that they are selling. This is important because every investor has a different financial profile and should be treated that way. Each investor should be aware of the many options that they have. For example, investors should be advised on the pros and cons of 1031 Exchange options – e.g., Delaware Statutory Trusts (DSTs), NNN Commercial Properties, Real Property, etc. Unfortunately, real estate options aren’t as easily accessible like equities. So, choosing an advisor that will educate you on all of your options is very important.
3. Long-term relationships
Many clients engage fee-based advisors well before transactions to get strategic long-term advice. Most real estate transactions today are very reactive and rushed; but it’s important to remember that trusted relationships develop over years and your advisor should have your long-term goals in mind.
Advice is customized based on factors like the client’s age, assets, income, retirement needs, etc. Recommendations are tailored to each client’s unique situation and goals.
Fee-based advisors are very upfront about set fees for service, avoiding hidden commissions. Clients pay established rates like $X per hour or month.
With set fees, fee-based advisors’ incentives align with providing the best possible ongoing service to continue earning fees from the client. They are directly accountable.
In sum, fee-based real estate advisors offer unbiased guidance focused solely on serving clients’ best interests. By taking an educational, holistic, and long-term approach, fee-based advisors provide strategic value as trusted partners in navigating major real estate investment decisions.
SIFF Investment Services provides unbiased, fee-based real estate consulting to disrupt outdated real estate models. By supplying clients with objective, unbiased information, we shift the power to the real estate investor to make informed decisions. We are not realtors or agents. Our role is to educate and empower clients by objectively outlining all options. Our fee-only structure allows us to put client interests first. By taking an unbiased, consultative approach, SIFF aims to help clients prosper through wise real estate investments.
Call: 1 (415) 601-1051 | firstname.lastname@example.org