Don't sell yourself short on real estate commission
Offer premium services as an alternative to discounting
By Bernice Ross, Monday, October 24, 2011.
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.)
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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Submitted by Thomas J. Lucier on October 24, 2011 - 2:47pm.
I have no qualms about paying a top-notch professional Realtor a six percent sales commission just as long as my property sells within forty-five days on market and I get my full asking price. I'm willing to pay top dollar as long as I receive worry-free, unmatched world class customer service.
Plus, I'm willing to add sales incentives to the listing agreement to help motivate other Realtors to show my property to their buyers. However, if the property, for whatever reason, fails to sell, I have the right to terminate the listing agreement without recourse and any future financial obligations to the original listing Realtor or broker. Fair enough, Bernice?
Submitted by Bernice Ross on October 24, 2011 - 4:41pm.
Bernice Ross, CEO of www.RealEstateCoach.com, home of this year's number #1 selling book at NAR--Real Estate Dough--Your Recipe for Real Estate Success
Thomas--fair enough provided you price the house realistically, you have staged it so it looks it's best, you have taken care of any leaky faucets, dead landscaping, and anything else that would detract from the sale, and you provide easy access for buyer showings. It's a two way street--when agents and sellers work together everyone wins.
Submitted by Thomas J. Lucier on October 24, 2011 - 5:51pm.
You're absolutely correct, Bernice selling property through a broker is a collaborative effort.First and foremost, the property's sale price must be supported by both current comparable sales data and a property appraisal report written by a reputable appraiser. The property must be in mint condition with no deferred maintenance. And the seller must be willing to keep the property spotlessly clean and agree to have it shown on short notice. Sadly, most sellers are clueless about the sales process and want a sale handed to them on a silver platter, for a three percent sales commission, with no effort on their part. Yikes!
Submitted by Robert A. Hulme on October 24, 2011 - 5:52pm.
Providing value is the key. I have never had a problem getting 6% once the client learns what I have to offer compared to my competition.
Robert A. Hulme
Principal Broker
Home Buyer Realty Utah, LLC
www.HomeSellingUtah.com
www.ProvoRealEstate.net
www.UtahCountyHomes4Sale.com
Submitted by Keli DiRisio on October 25, 2011 - 4:48am.
I think this is a timely article and you discuss what we need to do/offer as agent. But I'll be honest - as a sales agent I am becoming more and more disheartened–not by clients who want a break on commission, but by other agents who are effectively driving us all out of business by just not doing their job. I can't tell you how many homes I have shown (from $200K to $600K) where the selling agent is not there, no lights are on and I can't find half of the light switches! There have been questions that I or my potential buyers have with no one to ask. No brochures are left and it certainly isn't staged. So many sellers are asking, "Why should I hire someone and pay them X% when I am the one staging, turning on lights, leaving the door unlocked. I am doing all the work!" I have heard that from more than one person. Since when did our job become left to the homeowner? And these are all homes that were still occupied. So that agent is trusting us to walk through and not touch or steal (not that we would)? I feel that this practice is allowing many homeowners to feel they can ask for a reduced rate and these agents are offering no more than the "discount package" agencies.
Submitted by Thomas J. Lucier on October 25, 2011 - 10:42am.
You're absolutely right Keli, not only is your hard work being undermined and sabotaged by the numerous "Bad Realtors," who make up eighty percent of the NAR's membership. This kind of unprofessional behavior, does nothing but further erode the real estate buying and selling public's trust and perception of Realtors, as a group. Hang in there Keli, my upcoming book, How To Avoid Being Screwed By Bad Realtors, will be available for purchase on December 1, 2011. And professional realtors such as yourself, will be in demand by the readers of my book.
Cheers,
Tom Lucier
An Honest, Competent, Knowledgeable Realtor's Best Friend and a Bad Realtors Worst Enemy
Submitted by Cliff Keith on October 26, 2011 - 5:05pm.
Kelli,
Great post and very timely too, for me. I was dealing with cutting commissions just this morning. Thank you for the ammunitions and logic for rebuttal.
It's a crying shame Realtors are viewed by the public-at- large as being one step above a used car salesperson. I guess we have ourselves to blame. I have met a few Realtors I would NOT trust with my finished popcycle stick.
One the other hand, I have met more Realtors who are, professional, well qualified, and experienced real estate agents and brokers I would trust them to be alone with my clients.
I am looking forward to part 2.
Cliff Keith
Today Sotheby's
http://www.sfbayhomes.com
cliff@sfbayhomes.com
Submitted by Keli DiRisio on October 27, 2011 - 6:01am.
And the other trend I've noticed is when a buyer's agent calls me to see one of my listings and then tell me they can't make it so their clients will be coming alone and do I mind helping them? I tell them I would rather that they be present to help out their clients. What is going on with agents that they think this is OK as well? So I am working for my client to sell the house, and now I'm doing the buyer's agent's job too? Do I get the full commission since I sold the home?
Submitted by tony khatemi on October 29, 2011 - 5:20pm.
I have taken as much as 1 percent hit on a standard listing (5%) commission. But in Shortsale, I never gave the owner the opportunity to negotiate a better commission rate. Ultimately the LENDER would decide if the commission was fair or not.
I agree with this post that the only reason why a homeowner would want to negotiate or think they have the right to negotiate is because the agent has not demonstrated that they have a effective marketing plan.
I prefer to walk away rather than take a cut on commission. It is tough but with al the work that goes into selling a property, forget it. WHY TAKE A HIT? In California though is pretty tough and there are way too many agents who will take a cut. Green agents (lack of experience) go for any old listing regardless just to get a listing. At least this seem to be the way it works in California.
Tony K.
http://digitalpaperexchange.com
Submitted by Charlene on December 6, 2011 - 5:11am.
It really is disheartening for an agent to know that the client doesn’t see his value. To avoid the client from asking you to cut your commission, you should present an effective marketing plan to the client beforehand and make sure he understands that you are an agent offering the best service to achieve the highest possible price for his property. To make a good sale, there should be good teamwork between the agent and the client.