Negotiating Commission

We’ve all been there. Put on the spot, asked the hard question, with no escape route in sight. The dreaded questions many agents fear: “Will you reduce your commission?”

The good news is, if you’re prepared in adavnce, this is a very easy obstacle to overcome. Here are a few ways the pros handle it:

1. Show Your Experience – The majority of the time, when sellers are looking to avoid paying an agent’s commission, they’ll try to sell their home on their own. Remind sellers that by listing with an agent, they receive expert advice and experience to make sure they get the best results from their home sale. While other agents may have a lower rate, they’re likely trying to break into the market and may not be as qualified or knowledgeable as you. Let them know that, thanks to your experience, you’re able to evaluate a buyer’s ability to afford the property and negotiate in the seller’s best interest. Your job is to bring in buyers who are the best fit for the property. In addition to this, because you’re a full-time agent, you can more easily close a deal. Share your recent accomplishments with clients who question your commission rate to remind them of why they hired you. For example, you could tell them how many homes you sold in the past month. You could also show them a comparable home you just sold to give them an idea of everything you do.

2. Remind Them What You Offer – Some clients may be unaware about why you have a commission fee and may believe it’s more like a tip. Let them know that they’re paying for all of the work you do behind the scenes, such as advertising the listing, creating social media buzz, conducting pricing research, compiling the best pictures, etc. If they don’t seem to be getting the message, you can say something like, “I would love to work with you, but in order to do so, I need to cover my expenses. With your home, I can do so at X percent.” You can also show them statistics that prove agents get better prices, so the commission they pay is worth it in the end. Agents know how to competitively price a home to pique the interest of buyers. Not only this, but as an experienced real estate professional, you have the ability to put a listing in front of multiple buyers’ agents whose job it is to find homes for their clients. Without you, sellers are left trying to piece together the right information from the internet, which likely will not be as accurate.

3. Tell Them It’s Not Up to You – If you’re working within a brokerage, it’s very likely that you don’t have the option or the authority to negotiate your commission rate. Especially if you’re new to the area or to real estate in general, let your client know that you’ll discuss it with your broker and get back to them. Then, take it up with your team. Another option is to let sellers know that, if you lower your rate, the buyer’s agent could be forced to lower theirs, as well. As a result, it’s likely that fewer agents will want to show the property. If fewer people see the home, it’s very possible that they won’t receive the offers they’re hoping for. Sometimes clients don’t realize that you’re not the only one affected by lowering your commission rate.

4. When There’s a Little Wiggle Room – While most agents will avoid reducing their commission rates, there may be some times that a lower rate is actually more beneficial. If the home is a luxury property or higher-priced, agents are often more willing to take a smaller commission to make a big sale. In addition to this, if the buyer and seller are very close to an agreement and lowering your commission could seal the deal, it may be worth it to reduce your rate. Finally, if an agent makes a mistake on the listing or during the negotiations, it could be worth reducing the rate to try to keep the transaction positive.

5. Create Commission Concession Agreements – (Last Resort Option) As a requirement for the seller to receive a concession they agree in writing to sign a buyer agreement with you at the same time they are signing their listing agreement at a slightly lower commission rate. Another requirement for the seller is the agree in writing to refer a friend, family member or co-worker that is buying or selling to you in the next twelve months. The third requirement would be of the seller is leaving town and relocating to another city they agree in writing that the agent they buy with will pay you a 25 – 30% referral to you when they buy in their next location. This is a great business option to give a little and recover a little on the other end in markets where you literally have to make a commission or not get the listing and business period. Why walk from the listing and win the war but end up really losing the battle?

Do you want practice on this? Let me know and I’ll role play with you and you’ll benefit from getting better at this essential skill.

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