Sale! Sale! Sale
Everyone deals with this question on a fairly regular basis. "Will you reduce your commission? I do not like people getting into my back pocket but it is a reality and of course everything is negotiable. Here are some questions I ask of potential sellers. 
•1) Would reduce your salary for the job you perform? This is what you are asking a Realtor to do and they also have to pay for all of their expenses, taxes and give a portion their commission to their broker.
•2) Selling your home is not just putting a sign in the yard, a listing in MLS and an ad in the paper. Do you realize that selling your home can be very stressful even in the best of situations? Do you know all the legal requirements in your state, the legal issues of proper disclosures and protocol?
•3) What services and marketing are you willing to forego for a reduction in commission?
•4) Do you understand the role of title companies, which lenders close on time, inspectors, appraisers and the many other people who will be involved in the sale of your home?
•5) Do you know that current statistics show that homes fail to sell, sell for less and take longer to sell with MLS Entry Only or limited service brokers?
•6) Do you have a marketing plan? What part of mine (marketing to agents, print ads, brochures, marketing to the public, online marketing, do you know about any of the online services and web sires beyond MLS and Realtor sites, and do you have your own website?
•7) Do you know anything about Active Rain?
That is a start and it is best to NOT belabor the point and instead concentrate on all the positives and what you will provide to EARN that commission. I do understand a seller's reluctance and somewhat distrustful attitude because there are plenty of people in real estate industry who do not perform up to professional standards. On the other hand there are many full time professionals who work diligently every day to earn every dollar for their services along with many satisfied customers who are glad they employed a real estate agent to help them with what (for most) is the single most important investment of their lives.
There was a recent program on 60 Minutes that dealt with discounting and commission cutting Realtors that sparked a huge number of emails and responses.
My favorite was from an anonymous Realtor:
"You can sell your home yourself, sell your car yourself, sell your body yourself; but will you fetch the best price?Also, are you going to want to deal with all of the associated hassles? Probably not. I've seen people attempt to sell their own homes and most of them I have converted into clients. They are gung-ho about the prospect of saving big bucks on real estate agent services, until they realize - and I know that some of you will have a hard time believing this - how hard real estate agents really work, especially in this market. They also realize how much money we pay in advertising when they attempt to list their homes for sale in the newspaper. Sure, we can make big bucks, but we also have huge expenses. And, I'm not only talking about the fancy cars we have to buy and maintain to impress you. No, it's the dues, the advertising, the desk fees, the insurance, the gas, etc., etc., etc. And, the hours, don't get me started. We take calls during movies, family birthday parties and weddings. Heck, an agent returned my call yesterday in between the funeral service and the burial! We work hard for our clients. Sure, there are some agents who are just in it for the money, but most of them are now in traditional jobs with guaranteed incomes. They went back to the "real world" after they realized that representing buyers/sellers is hard work and expensive.
Sell your own home. I don't care anymore than Nordstrom cares that you shop at Wal-Mart.
-Hard Working Realtor
In the end you may have to just let it go and move on to clientele that have a better grasp of business and a realistic attitude. It will save you a lot of time and unnecessary stress!
I look forward to other feedback and suggestions and thanks! Russell
I think you are earning your money for sure. Given today's climate, you can't blame them for asking though. Everything is negotiable.
You have to be ready to prove that you are worth every cent, and you do! Some of your peers are creating ideas in your clients mind's.
Russell:
Here, Here on your advice. I also would like to discuss the commission reductions that occur when working with a short sale. That is when you really have to be strong and I mean strong. The other day a lender after working on this offer to be accepted said that they would only paid XXX amount of dollars and I in turn said do you know what a lis pendens is? I then contacted my attorney and you know what with less then 24 hour I received my full commission and so did the other agent.
Some people only look at the price....now what you get, that is the real value (or not!).
Folks can ask if I will reduce our fee. Then I can say no.
It's like performing your own surgery. . to save a few bucks
Russell, after a listing interview if they feel that they can do better themselves then I say good luck and make sure I leave them plenty of contact information. I even give them a tiny tip or two on what they need to do. Then I just leave on a pleasent note file the information away and wait. More then half the time they try for a few months (if that) and then they call.
I am more disturbed with the discount process. There is a large discount service in our area which changed its procedure due to a dealing with me. They allowed the seller to negotiate the deal, the disclosure was flawed to say the least, the sellers built the home and tried to hide items during inspection. We terminated the deal with the discount listing service and the seller filed for the earnest money. The list company dropped the client, they no longer would speak to us (after a talk with the company owner), and they no longer allow the seller to negotiate...
Selling or purchasing a property is a major financial task. It is best to let a professional handle the marketing of a property. It my not be worth it in the end to save a few dollars.
good post...very tough in today's market..I used to take listings but now I am working with buyers..sellers here are competing with bank repos and short sales..
We get alot of they said when talking to sellers. They want a sign and a MLS or do they want the home sold? I have my own ideas on that.
People always want to get something for nothing or at a great discount. You get what you pay for is what I say!
The discount brokerages and the brokerages who will put a for sale sign on a client's property, and charge only $795 have arrived here as well. The clients, however, get what they pay for, and they soon realize it. I have been known myself to give a client in need, a break; and I think sometimes we have to do what we have to do, but those should be exceptions.
Here, though, in a bad market, sellers are willing to pay more, to have their house sold quickly, not less.
Sylvie, Michael, Gary Lorarine, Larry, Fernando, Laura and everyone else,
I agree that in bad market, sellers are tempted to try and save money but it is also imperative to have a full time and committed agent on their side to get the home sold! We are all dealing with this and it helps when we can talk about it and share ideas.
Thank's for your comments!
I think that selling a home yourself is "Penny wise and Pound foolish" but in this economy especially, people are doing what they think they can to save money. After trying to do a FSBO transaction, many of them realize they need our help and that they have actually wasted more money trying to do it themselves than if they simply listed with an agent to begin with. Hopefully these folks will spread the word.
Thankfully, as a Short Sale Specialist, most lenders require agent representation in a Short Sale... it eliminates the FSBO option for homeowners looking to sell using a Short Sale solution.
It is amazing but there is a company in our town that offers to list for 1% but then they add a list of services that increas the price the seller has to pay. many times it is as much or more that agents listing within a more traditional model!
People read on the internet or in the paper that they can pressure the agent to lower the commission and unfortunately there are plenty of agents who do not have as much business that will take the listing just to get buyer calls from a sign in the yard!
What are some pther ways to deal with agents that take a listing bu discounting the commission. It seems they jsut put a sign in the yard and the home in MLS and go away most of the time. i have also seen situations wher the buyers agent is instructed to present all offers directly to the seller?!?!?!
What are some pther ways to deal with agents that take a listing bu discounting the commission. It seems they jsut put a sign in the yard and the home in MLS and go away most of the time. i have also seen situations wher the buyers agent is instructed to present all offers directly to the seller?!?!?!
Russell,
Great post and thanks to all the people who replied, this is an issue we all have to deal with on different levels and I am glad we can share helpful information with each other.
Active Rain is such a phenomenal site to do business
In the Debbie Reed Team, we have a listing packet in which we include samples of all the marketing we do for our clients--post cards, tear sheets from print publications, copies of web pages, etc.--as well as tons of information about how our team works and what we do for the clients. It is either organized in a good quality folder or bound with a plastic spiral binding. If we can, we put a photo of the house on the cover and hand it to the potential client at the first meeting. We leave the commission and pricing conversations until the very end of the listing presentation. This does not stop some sellers from asking for a discounted commission, but I think showing all we do to earn that commission in a well organized, professional, visual manner makes it harder for them to go to someone else when we say, "No," because by that point they want our representation.
Dianne,
I also use a spiral bound presentation and have a lot of impressive materials as well as personal statistics to help in my listing package. You sound like you have a very professional team and that is what it takes these days to set yourself apart from a rather L A R G E crowd of competing agents (who think all they have to do is charge less for less work) as well as prove that we are worth every dime of our commission.
Thank you for your comment!
Russell
I was lucky in the beginning of my career to meet a great agent who gave me one sheet of paper that broke down the items and services that were included in the agreement. It had the number of hours worked on each item and the hourly fee of other professions that did the same thing. Such as a doctor charging for intitial consultation-$100.00 compared to our free listing presentation. Add it up and at 20 bucks an hour, (low by professional standards) you will come up with thousands of dollars. Make your presentation, then say no.
People wonder about it, though. So, the first thing I always do is reassure them that their question is valid. It deserves to be addressed. Ever notice how some sellers sort of squirm when they ask the question? And those who don't are thinking about it. It makes them feel uncomfortable, for the most part. I make them feel that it's OK to ask.
And then I tell them no.
Realtors are either professionals as they aspire to be or they are not. Go ask your surgeon, CPA, or attorney to cut their fee... they won't. Losers do because they have no choice. Personnly I agree wiht Lenn. The answer is "No"...next question?
It's only because many agents ARE willing to discount that the question comes up. After laying out my marketing plan and showing the difference I bring to the table it doesn't often come up but when it does I just tell them no, I'm sorry but I put much time and money into marketing my clients homes. If they want someone who will do it cheaper they will give up much of what I bring to the table.
I seldom lose out on a listing.
Home Realty Group, Elizabeth, Jim and Kathy:
Thanks for adding further insights and ideas to this discussion! I think this is one of the best ways we can use this site to help each other!
I NEVER reduce my commission unless it is a repreat client. Why? Because if they can bargain me down at the outset, what kind of negotiator have I just demonstrated myself to be? Nope - I drive a hard bargain. I am a full service agent and full service is exactly what they will get. There are 7000 other brokers out there who can give them cut-rate if that's what they want.
Nice post buster!
Jennifer, We are certainly cut from the same cloth on this issue and I like that you use "buster" I think it was Dear Abby who used the same expression and I believe John Prine wrote a song about it!
Have a great week - Russell
Russell, After 32 years I can tell you there are people out there that don't deserve to earn a penny, but they pull in suckers regularly. People "buy" listings also by overpricing the home knowing the seller will have to reduce the price
Karen,
You are so right and it is a shame that we have so many on the industry that engage in this sort of behavior. Unfortunately the public perception of realtors is often not that positive and so we have to really prove we are worth the fees. Thanks for adding to this discussion and have a great week!
- Russell
Russell-
As an agent who specializes in leasing upscale properties, I am also confronted the same challenges every day. It is imperative that we keep a level of professionalism to compete against agents that just cut commissions and do little for what they charge. The public also needs to understand how much work a dedicated agent does so that we are not painted with the same broad brush. Thanks you for posting this article!
Scott,
I am glad you are beginning to dive in here at active rain. It's an incredible site and I have just started to scratch the surface.
Thanks for your comment -Russell
I use this one frequently:
•3) What services and marketing are you willing to forego for a reduction in commission?
Then I give them a list of the marketing I do, and if they are willing to cut something, I will reduce as well. It makes them think, and it's RARE (but does happen) that someone takes me up on it!
Erica That's an excellent way of having them actually see what they are paying for in termas of every service available. Thanks for contributing!
Rusell,
You summed it up at the end... We can make all the points in the world and bring up every rational point which is all true. But if the seller is irrational and wants the filet mignon at the hamburger price, sometimes it is best just to walk away with a smile and wish them luck. Often times, they will come back anyway. And if they do not that is fine too ! There are too many other filet mignons to prepare !
I also wrote about Discounted Pricing for a Full Service Agent - let me know what you think !
Philadelphia Real Estate
Russell - Thanks for getting this out there. We deal with it every week and I particularly like your point about:
"On the other hand there are many full time professionals who work diligently every day to earn every dollar for their services along with many satisfied customers who are glad they employed a real estate agent to help them with what (for most) is the single most important investment of their lives."
I appreciate you concentrating on the positive side and just let the negative be self evident!
Christopher & Stephanie
You are so right and I appreciate your comments, now I am going to check out your blog on:
Discounted Pricing for a Full Service Agent
Thanks again, Russell
Good post. Everyone in this business has to face this question on a regular basis and I am glad you put this out there! Thank you!
Anne
I am glad you are back and thanks for commenting, I hope you get more involved here because active rain an amazing site
Russell, I am new here and got on at the suggestion of one of our mutual friends in the Title Business. This something completely different and I think it is going to be a good resource for realtors. This is a very good article about an issue that confronts us all and I deal with it quite a bit. Thanks you, I am going to look at some of your other articles and then see what else is available.
Hi there new person!
Who sent you my way? This is really a geat site so you should sign up and get started!
Thanks again for your comment and I hope to see you here soon!
Russell
Discounting is another fad but it may be here to stay. The only way to deal with it is to give professional service and prove to sellers that you are worth it!
I would like to add another post. We may have to change our thinking a little bit. This and pretty much all conversations that have to do with commissions presuppose that there is a "standard" commission. Clearly that is antitrust. So my question is this, at what rate is the commission "discount" If it presented by a large portion of the real estate market or companies offering services such as FSBO, then it is the norm and an argument could be made that we as Realtors charge for "Premium" Services. An example is getting gas, we used to pay a premium to have it pumped for us, now we pump and still pay a higher price. Just think about the possibilities if you let the owner think that he will have to pay more after his home doesn't sell. Instead of the commission being center now, it will be a price that he will look at in the future.
Karen and Home Realty - Thanks for commenting. I agree that this is a challenge for all realtors.
You make an excellent point about "Standard" commissions. I am in the school of thought that commissions are negotiable and that nothing is ever "Standard" and I appreciate your analogy regarding the price of gas. Your best point centers around the real cost of what happens when the home does not sell and that's the rub. An agent who is doing little is only looking at providing a minimal service to the seller ends up costing that seller even more in terms of money and of course the loss of time, opportunity costs and just the incredible stress of having a home on the market for so long without selling!
Your comments are yet another reason that I have come to enjoy the dialogue here on active rain!
Hi Russell
I got on this morning to learn more and look at my profile. I am looking forward to learning more about this site and while exploring I decided to check your blog and wanted to comment.
This is an issue that affects all realtors and ther is no "set in stone" rate for services however, agents and sellers who focus only of the commission are missing the point entirely. Thanks you for putting this topic out for discussion!
Hi there and and welcome to activerain, next time you visit, remember to log in (I still forget at time to do it too)
Thank you for commenting, if you scroll up you will also see some other great ideas and suggestions!
I have dealt with this isue over the last two years and I can tell you that people get what they pay for!
I usually tell the person that my brokerage is a full service company and charges 6% but I will do it for 5% if I represent both the seller and purchaser, this shows that I am willing to give some and it makes them feel better
David - Thanks for the comment. I have always thought it was a good idea to have some negotiation room with clients and I am willing to take some off for repeat customers or those people who consistently send m e referral business!
Hi Russell
I dropped by to take a look at your blog and wanted vto comment on this one. It is so true these days and with many people in pre-foreclosure or worse the pressure to cut commissions is greater than ever. When the pressure is on, it is important to look at more than commission and work with an agent who can deliver results!
Thanks for introducing me to active rain -Amber
Performance is the better judge of service. Many of these passive marketring companies are falling on very hard times. Their gimmicks is to get money up front.
I am a fan of the line a "Discounted fee provides you with a discounted service" and then I show them all the things that differentiate me between my cheaper competition. Personally I don't know how long the discounters can be around for. The business model does not work in this current real estate environment.
AmberI appreciate your comment and agree that when the market is worse as now many people look for ways to cut losses in real estate but nickle and dimeing an agent does not help matters!
Jim Very true, performance and integrity cannot be discounted!
Billie like the idea of taking the time to sit down with clients and show them what they get for their money and feel like many people (agents and clients) don't take enough time to make this effort.
Thank you to all for dropping by and adding helpful suggestions!
I just read another good post about this in the Realtors group and remembered that you had written this on the subject as well. Good information about an issue affecting realtors everywhere!
Hey Russell,
For everything you do, you might want to consider RAISING your prices! One of my clients takes listings at 7%.
And to that point -- helpusell files for BK again -- you need a professional realtor to sell your house at the right price the fastest.
Not Yet LicensedThere are rare occasions when I charge 7 - 7 1/2 %. When the situation calls for extra help or circumstances warrant. I also have several clients who know that they can be "demanding" and are happy to pay in that range. Of course there is no set commission structure but it goes without saying that we always get what we pay for! OK, I said it!
Scott You are absolutely right. It takes a person with both professional skills and a professional attitude! I just have a question...What is BK?
Mattie I missed seeing your comment up there! !Thare are so many great suggestions here at active rain andI will look at that post you mentioned Thanks!
Price and value are not the same thing which is a very old quote. One approach I take is to explain that my fee is also based on the years of experience that they benefit from. Experience is irreplaceable in a tough situation or to know how to avoid tough situations.
Also, if you do have a comprehensive marketing plan then present it as a package rather than a laundry list of items. A marketing system more specifically.
Alexander Old quote or not, it is still extremely relevant today! I also like your comments about the power of experience. I am not saying that ALL new agents suffer because if they have guidance and support of other professionals in a good environment, then they BENEFIT frmm that experience!
Amber I hope you bookmarked the site and really you should join, it's such a great resource for exchanging information and ideas!
BK = bankruptcy.
Everyone is always in my pocket. I will not reduce my commission in this buyer's market. Listings are such a financial burden. I can't believe that some agents are still offering a 1% reduction if they bring the buyer to their seller. Buyer's are valuable and you should be paid your full commission.
Also, I do try not to defend my commission too much during the listing appointment. Once you defend you leave a door open for objections.
Not Yet Licensed Even if you wait to get licensed you should go ahead and sign up here and start blogging! You have some great insights and always contribute constructive remarks! Thanks!
Edie I feel the same way sometimes and try to put out so much good information and reasoning when at at appointment that many times they only ask in a half hearted manner and most drop it when I politely explain the reasons why I will not discount! You are correct when you say the cost of listing for a longer period of time is exorbitant!
I hear agents in the office talking about this more these days and with homes staying on the market longer and longer, it becomes a very expensive proposition. I think we have managed to miss a lot of the trouble the rest of the country is receiving but the issue is always there and agents have to prove that they are worth the money they charge!
Mattie Yes, you are right and thanks for making a comment. We do have to prove that we are worth the price our clients pay and in this market (not as much in Austin) but certainly in many other parts of the country, it is vitally important that sellers get the best representation from a Realtor who is committed to professional service!
Great posts, and very valid points. Many discounters are now falling on hard times because they provided passive marketing in really hot markets. Since many are not proactive in the sales effort other than placing the listing in the MLS, and not providing real guidance to their sellers word has already gotten out. The question is do we drink the Kool-Aid from the lemonaide stand or do we go to a more trusted source?
I am a new realtor and I have lost about 6 listings because I would not cut my commission, but so be it, I provide a service to my customer, that I think I should get paid top dollar for. I explain it to them that you are cutting into the person who is going to be showing and selling your homes pay check, thus reducing the changes of a sale. See my web site www.mcmurraysbesthomes.com for a intetactive feature for both buyers and seller that explains the whole process.
Jim I agree that discounter's are probably suffering form this market too but I also think they are always going to be around in some form or another. People are always trying to save a buck even though it is often penny wise and pound foolish!
Pat I applaud you willingness to stand your ground and you will find that your time is better spent working with people who have realistic expectations and understand what you are really doing to market the home!
Hi Russell, i thought I would get on and see what you were up to! I already commented on this but we were talking at the office and believe that there will always be those around who will cut prices and service because there will always be people around trying to save money. It's amazing that they don't bother to understand that it costs them money down the line!
Allysoun It's as important as ever these days because people really need to get value and professional service from Realtors and as many have already commented. You get what you pay for!
Hi, I wanted to check back in to let you know that this is a good subject for the "Lunch & Learn" sessions. It's an exce;;ent discussion topic!
MattieThank you again. As the market gets worse on other parts of the country, this will be an issue that affects affects everywhere! Though, no matter what the market, there are always people who want to "save some money" and also agents who are willing to provide that option!
Hi Russell, I have been scrolling through some of your posts and thought this one was excellent. The market is in a downturn in many parts of our country and the situation looks might it may get worse before it gets any better. People need to realize that it is more important than ever to get the best possible service an agent has to offer. Cutting corners and trying to save a few dollars will be much more costly in the long run!
Michelle I forgot about this one. You know, it is more important than ever for sellers to have the best representation possible because we both now that the discounters usually do not provide much in the way of real service! Thanks for commenting!
Russell,
Good points. I like the difference between shopping at Nordstrom or shopping at Wal-Mart.
Hi there, I just talked to Allysoun, who was just at the office and now I am here! I was looking for one of your earlier posts to send to a client and this is the one!. I am going to send the link. Is this also posted on your outside blog? You should send an email to all of your SOI and include the goodlife blog link! Thanks!!!
I know I have commented on this post previously but wanted to add that as the situation becomes more dire for many of the sellers in every market, It is even more important to choose a Realtor WISELY. One who will truly represent them and not just a cost cutter who gives little service for the fee that is charged!
RosalindaThanks, The Realtor who responded used Nordstrom's as his example and in Texas we sort of like Neiman Marcus! (same difference)
Mattie Feel free to send this link to any of the clients you like. I will take your suggestion and send the link to my outside blog to everyone in my SOI too! Thanks!
Anne Thanks for commenting again, as you say it IS more important than ever that our clients get the best possible service for the money they have to spend!
Russell, This is the article that I wanted to send to the folks we talked about. You observations are on the money and you have managed to convey some very good points without being preachy having an "attitude" Thanks and again, I appreciate you letting me share the information!
Allysoun Thanks for checking in and you re always welcome to send any of my blog posts to clients or other agents!
Selling a home is not cheap!
Tony, you are so right and it's up to us to show the public that we earn every penny of our hard earned pay!