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Prove the Value of Your Commission in Any Market

Prove the Value of Your Commission in Any Market

In some areas of the country, real estate is moving very quickly. Unfortunately, with a strong seller’s market, there’s a lot of competition among Realtors® for listings. As a result, many Realtors® feel a lot of pressure to cut commissions in order to win business.

Of course, your commission is your livelihood, and once you cut it for one customer other will find out and expect the same. So how do you keep from cutting your commission in a seller’s market – or any market?

The simple answer is to show clearly how your commission is used to benefit the homeowner. Also, don’t be afraid to remind them that commissions are your only income, and you deserve to be paid for your work like they do.

Here are some steps you can take to prove the value of your real estate commission in any market.

Have a Premium Marketing Plan

The first step is to show clearly what you will do for the seller as a full-service agent. Having a premium marketing plan ready to go and detailed for the client is vital.

When sellers see your real estate service as generic and able to be done by anyone, they tend to expect mediocre performance and focus heavily on price. Instead, set out a clear plan of action that makes it obvious that you are not “just another agent” and really have unique value to offer.

Here are some of the key components of a premium real estate marketing plan:

  • Print marketing – using a series of postcards to draw interest in their property. We recommend a series that includes “coming soon”, “just listed”, “open house”, and “just sold” to maximize exposure. Be sure to indicate the importance of professional photography here as well.
  • Online marketing – beyond just listing the home on the MLS, what will you do for the listing online? Ideas include Facebook ads, featuring the home on your website, and creating professional walkthrough videos. Focus on your unique use of technology especially online.
  • Reach with other Realtors®. Most buyers have buyer’s agents – how are you able to reach out to them? Are you part of a real estate network that you can advertise the listing to? Does your brokerage have a national or international presence that can be leveraged? Do you have access to overseas real estate agents? Professional publications or magazines?
  • Personal Touch. Will you do door-to-door in a specific neighborhood for their listing? A specific number of calls? The personal touch is one of the things that will really set you apart from discount automated brokerages.

Have a Commission Defense Script

Because sellers are often used to being offered a discount, it’s very likely to come up during a listing presentation. In fact, many online home-selling resources “help” homeowners “avoid being taken advantage of” with premium commissions.

As a result, you need a clear non-threatening script ready for when sellers ask you for a discount. The script should match your style and personality. Here are some ideas:

  • Ask, “Mr./Mrs. Jones, don’t you think it’s best to have a strong negotiator on your side when you sell your home?” When they say yes, say, “So if an agent can’t even stand firm on their own livelihood, why would you trust them to maximize the sale your home? Besides, the commission helps pay for…” and then highlight the marketing plan.
  • Say, “Mr/Mrs. Jones, this is my specific marketing plan that will help ensure you receive the best price for you home in the least amount of time. If you’d like a lower commission, perhaps I could find a junior associate or less experienced agent for you who is willing to work for less money.”
  • Talk about the results you get for them and compare your service to other specialties. “If your doctor is operating on you or prescribing you medication, are you going to go with the one who works for very little, or the one with the best results? Why not do the same with the biggest investment you own?”

Break Down Where the Commission Goes

Unfortunately, many sellers don’t realize how the commission process in real estate works. They think that the Realtor® nets the full 6% of the home’s selling price, leading many to believe that real estate agents are overpaid. Here’s a way to help educate them.

First, tell the seller that you charge 3%. Then, ask, “How much do you want to pay the agent who brings an offer? It can be 2%, 3%, 4%, or more. The more it is, the more likely other agents are to bring their buyers here.” Perhaps they say, “3%.”

Then, talk about your three percent. One agent came up with this creative explanation:

“Just so that you understand what happens to the 3 percent that you will be paying me,” he takes three business cards and continues as he removes the first card, saying, “Every agent has to pay their broker part of the commission.” He takes the first card and puts it aside.

He then picks up the second card. “This amount goes to the marketing of your property,” which includes such services as professional photos; video; Web marketing; social media marketing; newspaper ads the agent pays for; brochures; gasoline; and all the other expenses entailed in marketing a home.

He then puts that card aside, picks up the last card and says, “This is how much I get paid.”

He then tears the card in half and says, “But I have to pay taxes, so this is how much I keep.”

He then asks a very important question: “So if another agent offers to lower their commission, where do you think the money comes from? Three percent goes to the other agent, 1 percent goes to their brokerage, and the government keeps 50 percent of what they earn. They’re not going to take food out of their children’s mouths, so the only place where this money can come from is by cutting into the 1 percent that I use to market your home.”

With these three approaches in your arsenal, you’ll be well prepared to explain your value, defend your commission, and educate the seller on how that commission is used. This will prepare you to defend and protect your commission – and your livelihood – in any market.

How do you answer questions about your commission? Share in the comments!