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The Broker Profit Model for Transaction Management (As featured in May 2003 SureClose Newsletter)
By Mark Cira, SureClose CEO

Over the last 2 years we’ve helped many broker owners deploy web-based transaction management, moving them from paper-based filing to “Digital File Management”, or “DFM”. Invariably, a primary question before getting started is, “How much does it cost and can I make money from it?” My answer is always the same: It won’t cost you anything and, yes, you can put a pile of money directly into your bottom line.

Structuring your New Broker Service for Profit

Unless you structure your new service (offering web-based file management) properly, you can indeed get buried in cost. For example, many brokers start out envisioning a NEW EMPLOYEE providing full “Transaction Coordination” services. This means doing the agents’ job for them, including coordinating inspections and chasing paper, with agents doing little to nothing to accommodate a complete and compliant file at closing. Be forewarned, while you may offer full “Transaction Coordination” as an optional “add-on” later, it’s a quagmire and you’ll have to charge at least $250 per file to break even, since - when responsible for actually doing the agent’s job - one coordinator can smoothly handle up to only 25-30 closing files monthly.

My suggestion? Stay away from full transaction coordination at least until you’ve successfully implemented the more profitable, streamlined service offering we’ll call your “Digital File Management” service. The key element here is that we’re talking about a service that you, as a broker, are already providing in the paper world. Today, you employ staff to assemble and create a broker file, receive & review the documents for compliance, and provide a status checklist of outstanding items to your agents. By simply moving your existing service into the web-based digital world, you’re armed with a compelling new value proposition to your agents and consumers alike. Best of all, by moving your existing process to the web, and re-packaging it a bit, you can introduce a new service fee without adding staff, or even sharing staff across multiple locations.

Let’s take a look at the process, or workflow, involved with your repackaged compliance tracking service:

Step	Before – PaperFULL Process	After – PaperLESS Process
Agents Turn in New Files	Agents submit new listing and sales files “in person” in the office in hard copy form, possibly with “New File” form or coversheet. Files are turned into your “Office Admin” (“OA”) and this staff role must exist in EACH OFFICE, an expensive redundancy. Also, because the agent won’t have convenient access to your office file, they use your copy machine to create their own “shadow” file for their own easy access.	Agents submit same package, but simply fax it in from home or anywhere. Moments later, the whole package shows up – already digitized – in your OA’s online inbox. There is no separate scanning step, and agents don’t need to come in to turn in paperwork…in fact you’d rather they don’t! Since this OA can be located ANYWHERE, it’s now easy to begin sharing this staff role across multiple office locations.
OA Creates New File	OA grabs a paper folder to create a new listing or sale file and puts in the docs, and likely fills out a FILE TRACKING sheet with key details. Again, this often takes place in each office location. At this point, nobody has access to the file or documents without going to the physical filing cabinet	OA creates new online file, or forwards the online Listing file into a new sale file without re-keying. The OA quickly reviews the online docs, ideally doing the compliance review right on the spot (see below if broker/manager must perform this step), and “files” the documents into the new file. The agent, clients, and vendors are instantly notified and have login access to the file any document they need, or to communicate with the team.
Document Compliance Review	Within a few days of starting the new file, and again a few days before closing, your Broker/Manager pulls the files, or they are walked over to the B/M, and they spend time looking over the docs and updating the status sheet. Then the file gets manually passed back the OA, who makes a copy of the ITEMS OUTSTANDING CHECKLIST and puts it in the agents’ mail box. Throughout this process, nobody else has access to the file, and the manager doesn’t have the latest documents because they’re in the agent’s desk or car!	If the OA cannot perform the document compliance review step (above), then the B/M simply logs in and sees list of files it’s time to review, and reviews each document online, marking items as complete or outstanding. In real time, agents are updated of completed and outstanding items. The OA never had to “pass the file” and any document faxed in by the agent is instantly available for the broker to review. At any moment the agent can review their file by logging in, as can the OA and other authorized parties. As part of this, THE AGENT NO LONGER NEEDS TO MAINTAIN THEIR OWN FILE OR COME TO THE OFFICE TO SEE THE OFFICE FILE.
Client Updates & Communications	Agents constantly play phone tag with customers to try and keep them informed, or often leave clients feeling largely “in the dark”.	Clients can update themselves online, and agents and clients conveniently communicate online, with all communications and other notes logged right on the central, single copy of the file.
Agent File Close Out	At closing, the agent must go to the office and pull the office file and study their checklist of missing items, and spend time arranging the office file in the right order and assuring it is complete. Finally, they make duplicate copies and turn in the office file while normally keeping their own file also in some form. More time, more copies, more redundancy.	Agents login to review the real time list of outstanding items throughout the process, and just fax in missing items. If they have a question, they simply message their OA or B/M right off the file, with all communications recorded on the file.
Post Closing File Access	Agents (or the broker) must go to the office, or to the storage facility, to pull documents, or their notes. Past files are completely out of reach without expensive effort. Broker pays storage and retrieval costs, and risks losing files and documents. Often, clients want access to a past home warranty or inspection report and this starts the wild goose chase process.	At closing, a complete “Archive” digital copy of the file is extracted from the online system and stored on the brokers computer or CD. The agent is also provided a complete “Archive” copy by email or on CD, and the consumers receive the same.

It’s hard to even conceive of all places and ways the “After” process above will save the broker, agent and clients time, inconvenience and cost. But chances are, you’ve bought into this already or you wouldn’t be reading this. The main point of the above, though, is that this is a function you are ALREADY PROVIDING, but by handling it more efficiently through Digital File Management, you’re providing a tremendous new value to your agents and their consumers. So, how do you charge for it?

First, to charge for this service, let’s define the service in “bullet point” benefits to pitch to your agents (and consumers):

• Digital File Management: Office will put each of the agent’s listing and sale files, and all their documents online (there is no more “hard copy” broker file, only the online one).
• Freedom to Work Anywhere: Agent enjoys anytime/anywhere access to their files without need to come to office, and can submit their files without coming to office.
• Client Web Sites: Agent can offer each buyer and seller login access to their file.
• Easier Communication: Agents get ability to communicate with clients, vendors and entire office team with a few clicks.
• Agent Branded Transaction Center: Each agent gets own branded transaction center wrapped into his or her own existing web site. Thus clients login via agents’ web sites, making them the hero. Users may also login via company site.
• Listing & Buyer Advantage: Agents get compelling listing and buyer presentation tools to differentiate themselves from competitors by offering better service and looking like a total pro - without lifting a finger.
• Permanent Digital Archive: Agents get permanent copy of their file emailed to them or provided on CD. Clients get the same.

Again, the only things new you’re required to do to deliver this new service is give up the paper process and use the web-based system to more efficiently do what you’re already doing. In making the digital transformation, you can now charge a fee for your digital file management services. Here’s some pricing formulas that prove effective:

• Agent Paid: Charge $35 - $100 per closing for the above service (it must be mandatory on ALL FILES as you must give up your old paper process to profit).
• Consumer Paid: Charge $100-$200 for as a “Document Compliance Fee” or “Digital File Storage Fee” which the consumer authorizes at the time of listing or offer. Often, brokers will give half of this fee to the agent for selling it, and thus make a profit at both the broker and agent levels while improving service and reducing costs.

Now let’s look at some sample scenarios to run the numbers:

• Digital Realty (“DR”) Closes 100 Sales Per Month
• DR implements a $150 “Document Compliance Fee” or “Processing Fee” paid by the consumer, and let’s the agents keep $75 of it.
• Thus, DR grosses $75 per file, and pays about $20 in file storage cost to SureClose.
• DR nets $55 x 100, or $5500 per month, adding $66,000 per year to DR’s bottom line

Perhaps you just want to break even while recognizing some “soft cost” savings on staffing (via sharing staff across branches), copies, fax and phone charges, etc. That’s fine also. Simply charge $35 for the above service, and you’re more than covered. Or if you’ve already put some kind of a processing fee in place, just structure this service as a new additional service. At $35, it’s a steal.

Thus, you can see you don’t have to reinvent your company, or go into hock, to implement digital file management (or “transaction management”) and do so at a profit. Nor do you need to get into complicated and risky schemes to extract money from your affiliates. This service offers strong value and you can charge for it.

As for the more comprehensive, full “Transaction Coordination” service, once you’ve got the above “Basic” service implemented as a mandatory service on all files (it’s simply your new office filing cabinet and process), it’s an easy hop to offer an optional full TC service that captures a portion of your transactions, all running on top of the same central file, documents and centralized file management system.

For more information on implementing digital file management and transaction management in your company, or for questions on this article, please just email or call.

Sincerely,

Mark Cira
CEO, SureClose
mcira@SureClose.com
760-930-9510 x117

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