The Housing Chronicles Blog: Feasibility consultants sharply discounting fees

Wednesday, June 10, 2009

Feasibility consultants sharply discounting fees

I got a phone call yesterday from a friendly competitor of mine, and apparently the desperation that has afflicted much of the real estate world has now started to impact the world of real estate consultants -- those firms which are hired by builders, developers, lenders and municipalities to conduct (supposedly objective) research on the feasibility of proposed development projects.

This is interesting to me because the same companies which advised me to "never, ever" discount fees or risk making what we do a commodity item, have discounted so steeply that it seems they're doing whatever they can to simply keep the lights on and the rent paid on the commercial space they've rented. Not all, but certainly some.

One way I think they're making do these days is with what my business partners at Beacon Economics and HousingEcon and I call 'the data dump.' Rather than tie together various indices with a useful narrative and attempt to *accurately* forecast when sales or prices might stabilize, they think their clients -- much like a newborn baby in a crib looking at a shiny mobile -- will be so pleased with reams of data depicting tables and charts that they'll never bother to read whatever narrative was included, nor will they ask questions if the data doesn't support the conclusions. In other words, it's often simply a report for the file.

That's why now, more than ever, clients get what they pay for when selecting consultants of any type, whether it's an attorney, an accountant, a financial analysts or a market feasibility expert. After all, it's just not realistic to waltz into Target or WalMart and expect to get the same quality you might find at Nordstrom or Saks.

We saw that happened during the boom years, with the data dumps masquerading as genuine analysis -- global economic meltdown and unemployment of over 80% in the state's building industry. And let's try not to repeat that, shall we? It's more than just price alone.

1 comment:

Dyspeptic Skeptic said...

One must also recognise that at times the same item, made in China, appears on the shelves of both the upscale and downscale retailers. Then one must be an adequately knowledgable consumer to avoid paying upscale prices for downscale junk. Caveat Emptor is the rule for all "purchases". Many high-price professionals are purveyors of "junk". Shop by price alone, high or low, at your peril.