Don’t sell yourself short on real estate commission

Offer premium services as an alternative to discounting

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Editor’s note: This is the first part of a two-part series.

You have a client who will be buying a house from you and will also list his house with you once he closes on the new property. Your client is from another part of the world where price is always negotiated. He asks you to cut your commission on his listing — what do you do?

When I wrote "Waging War on Real Estate’s Discounters," I outlined numerous strategies as well as 83 scripts for overcoming the commission objection on listing appointments. Commissions haven’t been as much of an issue as they were five years ago in the strong sellers’ market.

Nevertheless, a number of agents are now reporting that an increasing number of sellers are pushing them once again to cut their commissions.

As a rule of thumb, when someone asks you to lower your commission on a listing appointment, it means that you haven’t demonstrated your value or that they are part of the 15 percent of all sellers who care only about price.

(Five percent of sellers want premium service and the remaining 80 percent normally can be persuaded to list at a full commission when shown how it benefits them to do so.)

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The root of the problem is that most consumers view real estate agents as a commodity. In other words, if all tomatoes are alike, why not buy the cheapest?

An excellent way to distinguish your services from competitors is to create a Premium Marketing Plan that outlines what all agents do, what your firm does, and what you do specifically to help the seller obtain the highest possible price for their property in the shortest amount of time.

The strategy is to take the initiative and to outline the premium services that you will provide prior to discussing the price. When the sellers ask you to lower your commission, you can respond by saying:

"This is my ‘Premium Marketing Plan,’ which will provide maximum exposure to the marketplace that results in the highest possible price for you in the shortest amount of time. If you would like to lower the commission, I’ll be happy to refer you to an agent who provides limited service."

Notice that I didn’t use the word "discount" because "discounts" are perceived as a positive. Everyone likes receiving a discount but virtually no one wants "limited service."

But what about the client who is doing more than one transaction with you — is it reasonable to perhaps give him a break, especially since negotiating the price is a core part of his culture? This was the question that was posed by one of our private coaching clients. Byron Van Arsdale came up with a unique approach to address the problem.

Rather than relying on a script such as, "If I can’t even negotiate a full commission for myself, how effective do you think I will be in helping you negotiate the highest possible price for your property?" he took an entirely different approach.

1. Play the client’s game

If you’re dealing with someone who wants to negotiate your commission and this is part of their culture, then beat them to the punch by negotiating with them about what they will do to make sure their property sells.

As the listing agent you control the marketing of the property. The seller controls the price, the access, the condition, and the accessibility for showings. Each of these is a point to be negotiated. Before you ever consider lowering your commission, the seller must meet your requirements.

Those requirements include:

  • the property is listed where it will sell and where it will appraise based upon closed comparable sales;
  • the seller must stage the property so it shows to its best advantage;
  • all the repairs you ask the seller to make are addressed prior to listing the property; and
  • the property is easy to show.

If the seller fails to meet any of these criteria, then there’s no point in discussing your commission — you don’t want the listing, especially when you’re not going to receive a full commission.

2. What are your standards?

How do you feel when someone doesn’t see your value? Usually it’s pretty disheartening. In the case described above, the agent wasn’t feeling that the seller valued her or the work that she does.

If she feels this way before she lists the property, there is a high probability that this feeling will only grow as she works with this person. Furthermore, he had already made several representations to her that weren’t correct.

Her sense of discomfort was actually much more than the issue about the commission — it was a sense that she couldn’t trust this person.

Ultimately, only you can decide the right course of action in any commission situation. Before you cave on your commission, however, make sure that you have offered a unique Premium Marketing Plan; that you have obtained commitments from the sellers about what they will do in terms of price, accessibility, and making necessary repairs; and that the integrity of these sellers is in alignment with your integrity.

Are you being hammered by clients going online to find a buyer’s agent based upon the offer of a reduced commission?

If so, watch for Part 2 of this series to find out how to counteract online price cutters.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, "Real Estate Dough: Your Recipe for Real Estate Success." Hear Bernice’s five-minute daily real estate show, just named "new and notable" by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.

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