Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column publishes every Wednesday.
There’s commission compression. There’s the DOJ/NAR lawsuit and proposed settlement. Then there are the “discount brokerages.” Throw in the sometimes dreaded and often maligned tech companies and “disrupters,” and it seems like someone is always out to carve a slice of the real estate commission pie.
One of the first lessons my broker gave me back in 2004 was how to handle commission objections. It seems like those crazy consumers are always challenging how much real estate agents make and wondering why they pay so much to buy or sell a home.
Take a scroll through any real estate Facebook group, and it won’t take long before you find someone complaining about being asked to reduce their commission or wondering how to have the conversation with a client that will help them protect their paycheck.
Last week, Carl Medford penned a great piece, Defend your commission! 3 steps for showing sellers you’re worth it. It’s all about your value proposition — what you bring to the transaction — and what differentiates you from the agent sea of sameness.
If you don’t understand and can’t effectively communicate your unique value proposition, you need to get busy. Commission objections have been around forever, and they’re likely to increase in today’s world of consumer knowledge and behavior.
Just search Inman News for “commission objection” and you will find a lifetime of reading. Bernice Ross wrote this over nine years ago, and it still holds true.
You can learn from how others handle objections. You can also learn from what not to do. As I’ve perused the conversations about dealing with commission objections over the years, the same things tend to pop up over and over. They tend to be the easy things to say. On the surface, they feel like solid arguments. Upon deeper consideration, they are really best left unsaid.
1. ‘My services to buyers are free!’
Yeah, yeah, the seller pays the commission, not the buyer. Let’s leave aside the fact that the buyer is the one bringing the checkbook to closing. Or the fact that the seller pays the commission from their proceeds — the proceeds the buyer is paying.
Let’s not ignore the fact that both the buyer and the seller feel like they are paying (because they are). Don’t like letting feelings come into play? Fine, but one thing you best not ignore, whether you like it or not, is the proclamation that “buyer services are free” is going away as soon as the DOJ/NAR lawsuit settlement is finalized in early 2021:
“While NAR has long encouraged buyers’ agents to explain how they expect to be paid, typically through offers of cooperative compensation from sellers’ agents, there will be a rule that more specifically states that buyers’ agents cannot represent that their services are free to clients.” (My emphasis. Source, the National Association of Realtors.)
It’s time to retire, “My services to buyers are free!” You’re going to need a new line.
2. ‘My broker and the IRS get a lot of that money!’
This is probably the phrase that’s repeated most often. Guess what? The consumer doesn’t care. You know who else pays taxes? The person you’re talking to, trying to justify your commission. While they can relate to the pain, you’ll get no sympathy from your fellow taxpayer.
Some folks even like to add that from that hefty commission comes things like marketing expenses, gasoline, their clothes and their haircuts. Again, the consumer doesn’t care. Sure, their employer likely covers marketing expenses, but it’s highly doubtful they reimburse them for gas, shirts and haircuts.
I’ll tell you something they really don’t want to hear — “sometimes deals don’t close, even though they cost me money.” So, high commissions cover that lost income. Yes, it sucks when a transaction falls apart through no fault of your own, but telling a consumer they’re paying for those failed results will get you even less sympathy than crying about the IRS.
3. ‘Sure, if you put me on the title’
This is just ridiculous. I’ve seen countless comments like, “You want a third of my commission? Fine, as long as I get a third of your house!”
Not only is it absurd, it shows you have terrible math skills. A third of your commission is likely around one percent of the price of their home, not 33 percent. Highlighting poor math ability isn’t something that’s likely to gain favor of consumers involved in a real estate transaction.
4. Blame your broker
Take the easy way out — blame your broker. “It’s my broker’s commission (truth), and they won’t let me discount it.” (Maybe true. Maybe not.) When I ran a brokerage, I encouraged my agents to “blame me” if they got into a sticky situation, and of course I had their back. Hopefully, your broker has yours too. Most do, some do not.
Before tossing this line out, you best know exactly where they stand on commission rebates. They may not be standing where you think they are. And I certainly wouldn’t put it past some of today’s empowered consumers to pick up the phone and call your broker.
5. ‘It’s the MLS’s fault. Or Zillow’s. Or Redfin’s. Or NAR’s. Or …’
More excuses, more passing the blame. Fact: neither the MLS, Zillow, Redfin, NAR or anyone else outside the possible exception of your broker sets your commission rate.
Specious arguments don’t sit well with anyone. Today’s consumer is way more knowledgeable than many like to admit. The internet is full of information. Sure, some of that info is bad, but some of it is spot on. If you’re going into a commission battle with a well-armed consumer, leave the blame behind, and focus on that value proposition.
6. ‘No one asks their doctor or lawyer for a discount’
This one seems to be surfacing more and more often in commission-cutting discussions. First, you’re not performing brain surgery, saving lives or keeping people out of jail. Yes, your job is important. Yes, you’re helping someone through what is likely one of the largest financial transactions they will make. But you shouldn’t be comparing yourself to doctors or lawyers — or any other profession for that matter. You’ve got a pretty unique role; use that to your advantage.
Also, if you insist on using this line, be prepared for what to do if you throw it out on someone like me. I have asked doctors and lawyers for discounts, and I’ve received them. I am not alone.
7. ‘Commission rebates are illegal!’
“I’d be more than happy to give you a commission rebate, but that’s illegal, so I can’t.” That was in a conversation I saw yesterday. The point was made by an agent located in California — where real estate commission rebates are perfectly legal.
Using Google, it took me five seconds to verify that, straight from the California Association of Realtors. You don’t think the consumer requesting a rebate can verify it just as easily? Really?
Sadly, I suspect the agent proposing this solution really does think commission rebates are illegal in California. Their client probably knows it’s legal; that their agent doesn’t know the real estate law in their own state is appalling.
This argument comes up all the time. Despite the fact that commission rebates are legal in 40 of the 50 states. That’s 80 percent of the country where commission rebates are legal (it’s an even higher percentage based on population.)
Unless you are licensed in Alabama, Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon or Tennessee, you simply can’t claim that commission rebates are illegal. They are legal in all other states. Stating otherwise just displays your ignorance of real estate law, and that’s really the last thing you should want to display to a client.
So, I just spent almost 1,300 words telling you how not to handle a commission cut/rebate objection. Here’s a far more succinct statement, recently left in a Facebook Group:
“If y’all think the consumer cares about what you pay your broker, or the MLS, or that you pay taxes (they pay taxes too) you don’t understand the consumer mindset.
For those saying commission rebates are illegal, you should be aware they are perfectly legal in 40 states, including the original poster’s state — and quite likely your state. Demonstrate your value, and the value of your knowledge and experience.
Blaming the broker, the IRS, or the deals that never close, claiming something is illegal when it’s not — that won’t work with a consumer that has access to Google. And given the DOJ’s lawsuit and the proposed settlement, you need to get used to — very swiftly — not saying “the seller pays me, my services are free.”
Being asked to cut your commission is no fun. There are good ways to handle it, and there are bad ways. Be good. You’ve got a difficult job, and you deserve every dime you get.
Jay Thompson is a real estate veteran and retiree living in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. “Retired but not dead,” Jay speaks around the world on many things real estate.