Agent

If you want this deal, cut your commission

Advice from agents on how to deal with this proposition

Takeaways:

  • Everyone’s cut is less if you accept less commission.
  • How to explain to the seller that updates make the home more valuable.
  • The first step is to explain the most recent comparable sales to the seller and have them choose a price.

When sellers overprice their property and receive an offer that is exactly where the agent predicted, many will then insist that you cut your commission to make the deal. What can you do to counter their demand?

The conundrum

In a recent Facebook post, a listing agent asked for advice on how to handle a difficult seller. The seller’s house was 30 years old and had never been updated.

The seller insisted that his house was worth what completely updated houses were worth. During the first month, they had only one showing. In contrast, the updated properties were selling right away at or close to full price.

The seller finally received an offer that was 10 percent less than list price. The seller told his agent: “I will accept the buyer’s offer — provided that you cut your commission.”

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The reason? “It’s the principle of it. I’m doing all the giving and shouldn’t have to give any more.”

How would you have handled this objection?

Avert commission-cut requests from the get-go

First, to minimize requests to cut your commission, make it clear to your sellers, “It is your house, and it is your decision.” Avoid making statements such as, “When we list your property” or “When we sell your property.” Instead, “It’s your house, it’s your mortgage, and it’s your decision.”

Everyone suffers from commission cuts

Norm Biller, of Re/Max Elite Realty in Lexington, Kentucky, had this to say about handling this seller’s objection:

“The listing agent’s commission is 10 percent less than it would have been if the house had sold for 10 percent more. The listing agent is already sharing in the loss of anticipated income.

“In fact, everyone who receives part of that commission is sharing in the pain. Your broker receives less. Your business receives less to pay overhead. Uncle Sam receives less. The co-op broker receives less … (Besides), if there was any possible way to sell your house for more, don’t you think I’d do it? We’re on the same side here.”

Asking the tough questions and just saying no

Wally Drake, of Drake Properties in Temecula, California, recommended a different approach:

“Mr. Seller, a lot of agents representing potential buyers have told me that their buyers have asked them this question: ‘Why do you (the seller) believe that your home is worth more than similar homes around you when those other homeowners spent money to update those homes and you haven’t?’

“Now comes the hard part. You have to sit there with all the uncomfortableness that is hanging in the air and shut up. I’ve done it, and you can cut the tension with a knife. Sometimes it works.”

A variation on this approach is just to say “no.” The key is that once you say “no,” avoid justifying. Remember the adage: The first one who speaks loses.

Get sellers to choose their own comps

The best strategy, though, for handling pricing and commission issues is to address them during your listing presentation.

Dan Head, of Nothnagle Realtors in Rochester, New York, handles this situation by asking his sellers to choose their own comparable sales.

The first step is to show the sellers exterior and interior pictures of the most recent comparable sales. Next, he asks them to select the home that most resembles their home.

Once they make their selection, he shares the price per square foot at which the property sold. He then multiplies that number by the square footage in the seller’s property.

This gives the seller what to expect for their selling price. It’s pretty tough for them to argue about the price when they’re the ones who selected it.

Put comps on the pricing line

A variation on this approach is to create a pricing line and to post the comparable sales on the line. The comparable sales typically fall into three separate groupings.

The top tier includes those properties in good locations and top condition. The second tier includes those properties with “amenities similar to other homes in the area.” (This is a nice way of saying the home is average.) The bottom tier includes those properties that are in poor condition or a below average location.

To close the sellers on the correct price, here’s what to say:

“Mr. and Mrs. Seller, as you can see from this chart, the homes in this area sell from $124 to $176 per square foot. The homes that are selling at over $160 per square foot are either new or have been completely remodeled.

“The second category includes homes that have not been updated but are in good condition like your home is. The third category includes homes either in poor condition or located in less desirable locations.

“You now have an important decision to make. To be competitive in the top category, you will have to upgrade your kitchen with new countertops, cabinets and appliances, plus replace the carpet.

“If you don’t want to do the upgrades, then you will have to adjust the price accordingly.”

The end of the story

Ultimately, the listing agent did sell the property. The buyer’s agent persuaded the buyers to increase their offering price by $500. By standing firm, neither agent had to cut their commission to make the deal. That’s a significant point to remember the next time a seller asks you to cut your commission.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at RealEstateCoach.com/AgentTraining and RealEstateCoach.com/newagent.

Email Bernice Ross.