Editor’s note: This is Part 1 of a three-part series.

After five years of the rockiest market in our lifetimes, the real estate market finally seems to be improving. Along with an improving market, guess what’s back on the front burner again? Commission cutting. Are you up for the challenge?

If you entered the real estate industry in 2007 or later, you probably had little trouble persuading your sellers to list at a full commission. The reason was simple: There was so much inventory that properties with low commissions had few showings.

Back in 2000, when the Internet was just beginning to be explored as a means of conducting real estate, the big fear was that agents would be “disintermediated.” In other words, new technologies would allow buyers and sellers to conduct the entire buying and selling process online without an agent — and “real estate agents (would) go the route of travel agents.”

Twelve years later, this still hasn’t happened. Nevertheless, as the market starts to improve, the latest technologies are giving birth to the next generation of commission-cutters.

Inman News recently reported on a new company that would allow buyers and sellers to create their contracts and negotiate their offers online. The company uses the new forms technology that auto-populates contracts. The broker-owners review the contract, and from that point, the escrow and title company handles the rest of the process. The company charges a flat fee for the services. Sellers decide whether they want to pay an additional 2-3 percent commission to the buyer’s agent.

(Editor’s note: A month after launching, San Francisco-based Reesio dropped its flat-fee service for for-sale-by-owner sellers to focus on serving real estate agents).

This “innovative” model is just the latest version of the more traditional limited-service models from companies such as Help-U-Sell (founded in 1976) and the Assist-2-Sell (founded in the late 1980s.) Both of these models have weathered the latest downturn and should see an upturn in their businesses as the market improves. The reason is simple: Approximately 15 percent of the population makes their decision on which company to hire based exclusively on price/commission. These brokerages have tailored their businesses to serve this market niche.

In contrast, approximately 5 percent of all clients will settle for nothing but the very best and will willingly pay a full commission. The other 80 percent of sellers are up for grabs. The question is how do you articulate your value proposition where this 80 percent will be persuaded that you are the best agent to represent them on their sale?

The No. 1 issue: value vs. price

When a seller asks an agent to reduce the commission it’s usually due to the fact that the agent has failed to fully articulate the value the agent brings to the deal. This often results because agents are perceived as all being alike. The best analogy is that all agents are viewed as potatoes. If they’re all the same, why not get the cheapest price?

An important way to illustrate your value is by showing the sellers how your marketing plan helps them obtain the highest possible price for their property in the shortest amount of time. In other words, your commission defense begins with showing the seller how you will help them to net more than your competitors who charge lower commissions.

Maximum exposure equals maximum price

Most sellers believe that maximum market exposure results in maximum price. The three steps outlined below will help you provide your sellers with the maximum exposure that results in the maximum price for their listing:

1. Market internationally
If you live in an area where people from other countries relocate, make sure that your listings are translated into those languages using a site such as Immobel.com or Proxio.com. If your listing is located in an area where another language is the dominant language and there is a local paper in that language, consider advertising there. The goal is to reach those buyers who might not be looking in more traditional channels.

2. Target market by lifestyle
If your listing is located near a major hospital, you may want to target market to nurses and doctors who work at that hospital. If the listing is near a major high-tech company, you may want to target market to engineers and other support people who serve that industry.

3. Take advantage of search patterns
Oodle, a company that powers many of the online real estate searches, says that people search for real estate using three search terms: city, state and ZIP code. To make sure your listings obtain maximum exposure, be sure to use these three factors in all of your advertising.

To put this process on steroids, an even better approach is to set up a single-property website that uses the property address as the URL. When you include the ZIP code, the probability of the right buyers seeing it goes up substantially.

Need more help defending your commission? If so, don’t miss Part 2.

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