As an active real estate agent, you know how competitive this market is. There’s a lot of pressure to reduce your commissions when you list a property. What strategies can you use? How can you defend your listing fees and beat your competition if they discount their commissions?

Here are 2 strategies. More to follow in a couple of weeks.

Commissions are Negotiable

Did you ever wonder why most agents charge 6% in commissions?

I could not find a specific reason. Supposedly, 6% was a guideline proposed by NAR in the 1950’s. And it stuck.

6% is an arbitrary number. It’s completely unrelated to the level of service you provide. This number does not consider your experience as an agent or the amount of work you put into marketing the listing.

Real estate commissions are purely based on the sales price of a house.

Is 6% (or 3% per side) the right fee to charge? Selling a $50,000 home takes just as much effort as listing a $500,000 mansion. But you only earn $1,500 per side vs. $15,000. Many sellers are wondering if that’s fair. And more agents and brokerages have decided to charge less in recent years.

We are in a free market!

​Commissions should be negotiable – up or down.

As a coach I want to help you get the most money for the services you provide. So, here are some strategies to defend your fees.

The Psychology of Large Numbers

You know what’s really good about today’s typical commission arrangement. Paying 3% sounds much less than paying $15,000. It’s the exact reason why many sellers never question your commissions or how much you get paid.

You can use the same approach to defend your commissions.

When a seller asks you for a 1% discount they refer to 1% of the purchase price. 1% sounds like nothing. For you, the listing agent, 1% is really one third (33%) of your income. That’s a lot.

Seller Strategies

Ask your seller these questions and there’s a good chance you will keep your 3% or at least negotiate a smaller discount:

  • If your employer suggests you take a 33% salary cut, would you accept that?
  • When you hire a plumber or electrician, did you ever ask them to cut their quoted price by 33%?
  • Did you ever negotiate fees with your doctor, your lender, your attorney and ask for a 33% discount?

Sellers do not realize how much a 1% commission reduction means for your bottom line. You need to talk about real dollars.

Let’s say you are selling a $300,000 property. The full 3% commission would be $9,000. The seller asks you for a 1% discount. This would mean $3,000 less in commissions for you, but the seller does not realize that.

If you counter with a specific dollar value, like $1,250, you have a good chance of getting the listing.

The seller will be satisfied, because you agreed to a discount, and $1,250 sounds much larger than 1%.

The Experienced Negotiator Approach

When you use this approach, you tell the seller that negotiation is the most critical skill when listing their home. If they hire you for a higher fee instead of a discount broker, the seller will net more money at closing.

How can you convince the seller that you are the most experienced negotiator?

Ask these questions …

  • If the discount agent can’t even negotiate the fee for her services, how comfortable are you with her negotiating the highest sales price for your house?
  • Discount agents compete on price, because they can’t show any value. That’s how they will promote your property. Do you really want to compete as the lowest priced listing?

Don’t give in when the seller asks for a discount!

They may just be testing your negotiation skills. The seller will respect you for standing your ground, and trust that you will fiercely negotiate on their behalf when they get an offer on their listing. I will share 3 more strategies in a couple of weeks. In the meantime, try these tips, and let me know how they work for you.