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Justifying Your Commission


Posted: July 24, 2018 by Frank Dolski, Associate Broker

Back in the days before the internet sites like Zillow®, Trulia® and Realtor.com, folks who wanted to sell their homes relied solely on real estate agents to guide them through the listing process simply because they couldn’t access market information themselves. Now, we have Zestimates® inundating people with data about their homes’ values based somewhat on proximal sales data, but mostly using geographical radius data rather than empirical data (such as the specific neighborhood, upgrades, premium lots, etc.)  Getting Sellers to agree on a reasonable listing price is difficult enough, but now you have to justify your commission rate for the service you’ll provide.  

Because of the recent shift in thinking that with the help of the internet, homes will sell themselves, or the recent popularity of flat-rate brokers, some people assume that hiring an agent is a waste of their money. So, how do you convince a Seller of your value?

  1. Explain the Split.  If your Sellers believe that the 5/6% commission coming out of their profits is all going straight into your pocket, of course they will think that number sounds like a lot of money. By gently explaining how the disbursement gets divided between the two brokers, that your split is a percentage of that amount and that you still have to pay your own taxes, insurance and expenses such as photography, advertising, licensing fees, etc., you can show them what you are actually earning on a sale.

  2. Negotiate for Yourself.  If you can negotiate what you believe to be a fair commission for your services with your clients, they are more likely to trust that you will be able to negotiate on their behalf to get more money in the sale for them. Remind them that with a flat-rate broker, the agent has nothing to gain by negotiating a higher sale price because their business model is based on volumes and they just want to sell quickly and move on to the next sale. And, if the discount broker does not offer an attractive commission for the Buyer’s agent, it may not get much traffic and sit on the market longer than it would have. Some agents may consider it a “high risk” sale without having a reputable, full-service Seller’s Agent on the other end.

  3. Highlight Your Premiums.  Remind your Sellers that not all agents are the same.  For a lower commission rate, another agent may only offer them “limited” or “discount” level service.  This is applicable to some flat-rate brokerages that may not even list your home in the MLS, which is where most affiliated agents look for new listings and reliable property information. This can translate to not reaching the largest possible Buyer pool, missing contract deadlines, photos/brochures/signs that are unappealing, and the list goes on. In some cases, homeowners are expected to do their own marketing, showings, Open Houses and staging to avoid paying a standard commission rate. Often, the sellers are emotionally attached to their homes, which can be to their detriment when they hear people criticizing their home and furnishings. If you still can’t convince your Sellers, be prepared with a sample list of all the daily emails and phone calls, documents required, vehicle miles, marketing and other tasks that you do for a single transaction.

  4. You’re the Expert.  By presenting a professional CMA and describing the current market conditions to your clients, you are showing them that there is a difference when an agent is experienced, educated and following real estate trends.  When an agent isn’t prepared with this type of information, it may be because he or she has another “day job” and won’t be able to put the full effort into your transaction. Or, even worse, that the agent has too many clients to give you his or her best service.

  5. Run the Numbers.  Despite your attempts to convince a Seller of your value as an agent, there will still be those who want to pay the absolute minimum. Fifteen percent of people will choose the lowest price agent, even if that means sacrificing the level of service or basically being a For-Sale-By-Owner when the flat-rate broker is only handling the paperwork.  Other Sellers may choose to go it alone so you’ll have to warn them that homes sold by agents fetch on average 27% more money than FSBOs according to the NAR’s Profile of Home Buyers and Sellers, which far exceeds any agent’s commission.

In the end, if you can’t reach a commission rate that you’re both happy with, it is always an option to refer them to another agency that may be willing to offer a reduced rate and, appropriately, reduced service.

If you are considering buying or selling your home, please contact me today to get the process started.  I will provide you with a FREE, no-obligation Comparative Market Analysis to determine your home's market value.  I would love the opportunity to show you how I go Above and Beyond the Sale for my clients.

Frank Dolski, Associate Broker and Relocation Specialist
Coldwell Banker Hearthside, Realtors
Office: 215.794.1070
Mobile: 215.803.3237
Email: f.dolski@cbhearthside.com
Web: https://fdolski.cbhre.com

   

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