As a Realtor How Do You Feel When Asked to Cut Your Commission?

real estate commission cutA mentor and friend, David Knox has built an International reputation as a top sales trainer and keynote speaker in the real estate industry.

As an authority on Pricing, Negotiating and Selling, he has presented more than 3,000 seminars over the last 25 years across the United States, Canada, Australia, New Zealand Ireland, the Netherlands and South Africa.

David agreed to do a guest post teaching us the best way to deal with the classic request for a cut commission. Pay close attention to his words of wisdom as they can keep thousands of dollars in your pocket and help you feel good about yourself while doing so.

What is your first reaction when you hear that question from a seller? Anxiety, fear, resentment? All very normal. Anxiety may come from lacking a good response. Fear may result from believing you must now cut your fee to get the listing. Resentment may be the result of taking the request as a personal affront to your value.

Perhaps the best response is to pause, take a breath and learn more about the request. Are the sellers just checking to see if you’ll cave in easily? Is it their natural response to ask, and then proceed anyway? Might they really not see your value? Or have they decided they must have a cut and will not list without it?

Often, agents feel they have only two extreme choices; decline the cut and lose the listing or make the cut and lose revenue. In some situations, they may be your only two options, and if so, you’re probably better off declining the business. Remember, you are making the choice to decline this low margin listing.

Couldn’t you cut only on this one who asked and charge the other client’s full fee? Well you could, but that lacks integrity and fairness. How do you explain to the full-fee client you discounted for others? How do you run a two-tiered, non-disclosed commission schedule? Well, the other clients won’t know. Ahh, but you’ll know, and that’s what really counts.

There are two ways to compete for business; value or price. If you compete on value, you actually must be better and have the ability to sell your additional value. To compete on price you may continually have to underbid the others who are playing the same game. Your profit margin will be smaller; you’ll need more units and have to work with difficult clients.

So let’s explore another option, getting your full fee AND the listing. Now that’s a challenge. But you must first accept the reality that some people know the price of everything and the value of nothing, and from those people you may not get the listing at your fee. You will have to let go. Base your commission philosophy on three principles; Strength, Value and Difference

STRENGTH

Strength is your internal belief system, your self esteem and the absolute commitment to only take listings at your full fee. It’s like deciding to travel with carry-on luggage only. When your roller bag is full, you’re done packing and leave on your trip. If you need more stuff, send it ahead or buy it there.

Here’s a test of strength. If a seller was ready to sign a listing agreement but at the last moment asked you not to divulge to a buyer the defective roof, would you take the listing with that condition? Absolutely not, you say. See, you have the strength to stand on principle and ethics. Now apply it to your fee structure as well.

Here’s an exercise that will develop this strength. Chose to decline a listing. On the next listing that the final condition is to cut your commission, say no. Politely, nicely pack up your papers and walk away.  Say to the seller; “Thank you for your offer. I must respect your position not to pay our fee so I hope you will respect my position not to cut. If I cannot be your first agent I hope I can be your last. Wish you success in the sale of your home and please feel free to call me anytime. Thank you.”

As you drive away you might be thinking you lost a good listing and wondering if was the right thing, but this is the only way you will know how you feel about standing firm. By the way, if the seller does list at the full fee, you’ll have to try this again on another listing.

VALUE

If you want to earn more money, you’ll have to deliver more value. Before your first meeting send a complete pre-listing package. Explain your process of market research. Describe how you will analyze the property and determine value through a complete Competitive Market Analysis.

On the first appointment dress up, arrive on time, establishing rapport then spend the time to interview the seller. Learn their motivation, situation and needs. Continue to listen and take notes before you tour the home or begin you’re listing presentation. Completely summarize their needs to their satisfaction. This process alone establishes you as a caring professional and erodes their intent to ask for a cut.

Continue with a thorough tour of the property. Dictate notes, measure rooms, take photos. Let them see how much work you put in to a proper marketing plan.

Whether the listing presentation will be on a second appointment or shortly after, be prepared with sample feature sheets, marketing materials and testimonials from satisfied clients.

During the listing presentation refer to their needs as expressed in the seller counseling interview. Describe your marketing services and show how they each benefit the seller. As you describe your key features, pause and ask the sellers how much the final sale price could be improved by having a particular service. Build value along the way and gain their agreement.

DIFFERENCE

After the presentation, ask for their feedback and feelings. After a positive response, ask for the listing and provide the paperwork to sign. If they ask for a reduction in fee, pause and ponder their request. Isolate the objection by asking; “Other than the fee, how do you feel about proceeding?” If there are other issues, resolve them first.

Ask why they want a reduction in fee. They will probably say they want to net more from the sale. Refer back to the list of key benefits they agreed will have positive impact on increasing the sale price, shortening the market time and reducing inconvenience.

Try to determine the amount of reduction they want. Once you have itemized the amount of fee cut, say 1% then you no longer need to discuss your entire fee…only the difference. You do not have to “sell” your entire fee.

Close by quantifying the difference in dollars, and then contrast it to all the key points of difference you bring to the transaction. “For only this small amount of difference, look at all the services you receive.

Hope this proves helpful to you and your business…

David S. Knox
david@davidknox.com
Telephone: 952-835-4477
www.davidknox.com

Read this through a few times and let it sink in… if you don’t have the strength within you and believe you can offer the value and the difference you won’t be able to convince your clients either.

You do have what it takes… beef up the value you offer and then give this new idea a try on your next listing presentation… then come back and leave a comment to let us know how it worked for you.

Strength and courage,

Wade

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Dear Real Estate Agent… Will You Cut Your Commission?