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It’s no secret that the vast majority of new agents struggle during their first year. With so much competition, the need to connect with leads and a commission-only pay structure, it can be difficult to break through and book that first transaction.
Then, when you finally do land a potential client, they want to see if you are willing to cut your commission. Navigating this topic can seem quite daunting, but in reality, it’s fairly easy.
Once you understand your value and that of the client you’re working with, figuring a resolution becomes more clear. Here are four tips for newbies being asked to cut their commission.
1. Understand their reasoning
To be effective in what you’re doing, you must understand what is being asked of you in the first place. You simply can’t learn how things have come to be without asking the question of “why.”
Apply this theory to your clients — why do they want you to cut your commission? Allow them to explain to you why they feel it’s necessary to do so. It’s a way to allow them continued control of the conversation, as you get to the root cause of the situation.
Maybe there’s an alternate agent willing to work for less, or financially, it would help them with closing expenses. In figuring out how you want to approach the situation, understanding what the proposed commission cut is truly about is necessary to know. Don’t be afraid to ask why. As a professional, you deserve to know the truth.
2. Understand the client relationship
One way to make the discussion easier is to define your relationship with the client. If this is a one-time transaction in which you don’t plan on working together again, standing firm in the decision to request your full value of compensation may make sense.
However, if this client plans on working with you on future deals, haggling over one commission (or potentially others down the road) may not be in your best interest. As the saying goes, you’ve got to choose your battles.
That said, it’s important to let your client know that cutting your commission is not something you normally do or plan on doing for them in the future. It’s not being rude; it’s establishing ground rules and an understanding that you are a professional who deserves to be paid what your time and expertise is worth.
3. Understand the art of creative negotiation
As a real estate professional, you should be all about making it work — from the agreed upon price to the terms of escrow and the closing date. This also applies to how you represent your client and what their expectations are of you.
Consider a tiered strategy for your commission based on time committed. I’m not one to get easily offended, and I understand that clients are sometimes going to push back and question the commission.
In certain circumstances, it makes sense, especially when you have a savvy seller who understands the market and how quickly inventory may be moving in their area. Instead of digging your heels in, try and assess how much time you’re truly going to need to commit to this transaction. What are the average days on market for the neighborhood?
If a majority of the homes are going in the first week, then your marketing budget probably won’t be stretched to the max. However, if it’s the opposite, and properties are on market for months on end, there’s going to be more time involved and costs.
Offering a tiered strategy — in which the commission starts at a lower rate early on and gradually moves up to the full value based on how long the property is for sale — shows your willingness to be flexible, fair and savvy in negotiating with your clients. All traits that they’ll most likely respect and appreciate.
4. Understand the big picture
As I mentioned earlier, you’ve got to get out of your own way. As a newbie, it’s easy to get caught up in commission talk (been there, done that) to the point where you completely miss the bigger picture.
This client knows somebody who knows somebody who knows somebody — catch my drift? By being a team player and having flexibility on a transaction, your client not only would be willing to work with you again but also refer you business and ultimately help you build your sphere of influence.
In the end, most of us have been asked to reduce our commission for one reason or another. Understanding what’s really at stake and what you want the end game to be will help guide you in making the right call when it comes to cutting your commission.
Anthony West is a real estate agent, the founder of The Luxury Life KC at Moffitt Realty, and an entrepreneur in Kansas City.