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10 Lame Excuses to Cut Your Commission (And Why That Makes You a Lousy Salesperson)

Is a real estate commission just a slush fund to benefit clients? Some people think so.

There it sits, a whole lot of money, and everyone pretty much knows how much.

They know how badly you want to get the deal closed. They know this money only comes to you once the deal is closed. Can they resist asking demanding blackmailing negotiating for some of your money?

Sometimes, they can't.

But instead of negotiating with the client, how often do you negotiate with yourself when you are asked to CUT your commission?

What was going on in your mind the last time you cut your commission? Did you use one of these excuses to give some of your commission away?

This is going to be a really easy deal that won't require very much of my time.
This guy says he will be sending me his cousin Larry next month.
I feel sorry for these folks, they have been through so much.
This is a really impressive client to have so I need to make sure he goes with me.
He says he'll go elsewhere if I refuse to cut my commission.
The deal will fall apart if I don't kick in some commission to pay for ____________. (fill in the blank)
I need this deal to impress the guy who referred him to me.
They're family!
I've already had a good month, this is just the icing
It's easier to just not fight it and give in.

In all of the cases above, you are negotiating with YOURSELF, not your client.

You are probably not winning at these negotiations very often. In this market, where opportunities to make money are few and far between, do we adopt the attitude that SOME commission is better than the risk of losing all of the commission?

Do we operate from FEAR? Or from CONFIDENCE?

Is it just too easy for you, the commissioned salesperson, to give away money that you don't even yet have?

Or do we see these demands for what they really are in most cases: A sort of test administered by the client that quickly morphs into an irrational fear on our part?

When in this position, I like to remember this saying which I learned in the car business:

A LOUSY SALESPERSON CUTS THEIR COMMISSION.

Once you cut your commission the client automatically assumes you were OVERCHARGING him the first time.

If you devalue your service by cutting the commission, so will your client. You have lost some of their respect right along with some of your money.

And I remain convinced that a large percentage of people do not expect you to cut your commission.

Maybe they just want to know this: Are you a lousy salesperson? Or one who believes you are worth every penny of the commission?

Written by Janet Guilbault, Mortgage Banker/Broker based out of the San Francisco Bay Area

Posted by Janet Guilbault California Mortgage Banker on 06/21/2009 06:53 AM

Comments (118)

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118 Comments on 10 Lame Excuses to Cut Your Commission (And Why That Makes You a Lousy Salesperson)

JUN

2009

Never used any of those. Although I have to ask what's up with family members expecting a discount? They're usually more work than any other type of client. You gotta love em.

I agree about the need of not cutting down the prices, otherwise clients will devaluate the consulting services.

seo expert

I think sometimes family members do deserve a break. If you have to charge full price to family then....................

Janet,

Good post. I have always been opposed to cutting my commission. In fact, I have often raised my commission for clients - since I felt that they were getting the best. I have convinced many of them that they will get more response from the other agents ( I always split equally) and more money on my side gives me more resources for marketing. If a client is too demanding about commissions, open houses, etc. in the first place, I feel that they will be too demanding and too much trouble throughout the transaction. I walk away and refer them to another agent.

As a broker, my opinion has been reinforced. Most of the problem clients for my agents are ones who have already received a lowered commission. I tell my agents and real estate students that if a client gets a lowered commission, they also think that the quality of the agent isn't as good and they became more picky and difficult.

Janet, I'm with you, I think I'm worth every penny no matter what side of the transaction I'm working. I recently had a buyer tell me "this will be an easy commission for you" because I showed him two houses and he is currently under contract on one of them. It seems people are under the impression that our job stops at putting a sign in the yard or opening the door for them to see the house.

SEO Expert, you are not an seo expert if you think that's helping at all to put a link like THAT in a lame pseudo remark that needs to be deleted from the thread.

Secondly, I know an agent who has a saying "Oatmeal is better than no meal" and I've always thought it strange to devalue what you do from the get go....it's a funny saying, but certainly not a mantra to live by.

Great post Janet! Been there Brian. Not all money is good money and definitely not easy...

I agree with most of these, there are places I will cut....when I cannot get a cent more on a short sale because of bank policy that does not budge and some time in the very very end when all other options have been explored and it will not close any other way. ( and trust me I look everywhere else first!, then I do it with out being asked by the client and tell them later what I have done)

Brian: I plead guilty to giving family discounts. Then you suddenly realize it is only one sided: they are still just a regular client, with regular demands, and somehow you feel obligated to go above and beyond because they are family.

And then, like most times when you discount, you are mad at yourself for doing it.

Russ..then what? you are a bad person for not giving a family discount?

Please elaborate.

Gary C: Then you agree with me? I find that whenever I stand up to someone that demands a commission cut, they usually breathe a sigh of relief because they feel like this:

If she believes she is worth it, then so do I.

Anna: I respect you for trying to work things out. There is a very fine line between negotiating to save the deal, and caving in. You seem to walk that line well.

Have you ever been mad at yourself for cutting a commission?

"Oatmeal is better than no meal"

Never heard this, LOL. This is a keeper.

After living in Texas, I just knew this might have originated there.

I love Texans. And to prove it, my son was born in Dallas.

Amber: I will admit that I was very mad at myself when one of my family members got a 4 percent something mortgage and got it pretty much for free.

Janet, we recently lost a listing because we wouldn't cut our commission. Do I feel bad about it? Not at all. They will get what they paid for. Very little marketing. Great post and points.

Sharon

Sharon: I think if you adopt the mantra that I am worth it, you will lose some deals.

But I think by not cutting commissions along the way, you will come out ahead, and feel better as you move though your professional life.

U definately get what you pay for.

JUN

2009

I've never reduced a fee to get a contract to settlement and have trained agents to stick to the BA Agreement fee.

We've never lost a contract because we wouldn't make a contribution to the buyer's or seller's costs.

It's usually the listing agent that asks. I don't care what they do with their fee.

By the time we get to settlement, I've already done the work to earn my fee. If an agent reduces their fee when asked, they don't get the time invested in the sale back.

The only time these things come up is when someone has made a mistake in estimating closing costs for a buyer or seller. If the work is done properly in the beginning, these requests wouldn't happen. Last minute surprises are simply a sign of poor preparation.

Interesting post.

Negotiation in essence means to give and take. If I give some of my commission, I expect something from the seller in return i.e. willingness to reduced services which pretty quickly demonstrates how counterproductive a reduced commission really is.

Great blog Janet....and the famous...only in their heads..."I don't have any business and this is the only way to get it." We are very full service...sometimes more than we should be....moving, plumbing, landscaping, etc. and proud of it....not so much means not so much service...and that isn't what anyone needs or expects. Blog on !

Janet, I tell the client, "Look if I cave in on my commission, then would you like me to also cave in when I am negotiating the sale price of your house?" I didn't think so...

Hi Janet your post is timely mainly because some Agents do feel it is necessary at this time to lower their commission at the start. This is pure nonsense. You would'nt ask a doctor to lower his office visit or a dentist to offer you lower prices for dentures. Oh no, not acceptable. The economy might be sluggish and all the other systems might have gone awry, but lets face it, we do work hard in a profession that is replete with all kinds of setbacks. If a client does not wish to cooperate, I just politely convey that they will no longer need my services and leave without having any regrets. As one agent put it, the service will be diminished by less marketing and less care.

A couple of months ago I had a listing agent ask tell me: "If we both reduce our commissions we can make this work."

Of course my response was "What part of my job didn't I do?"

He stuttered, backstepped and quickly realized I was not going to agree to it. The buyers still got their home, without a price increase btw, and my brokerage still got paid the agreed upon amount.

The bottom line though is when thing are tough.... and business is needed..sticking to your guns about commission, when a client could easily go somewhere else.. becomes tougher.... I suppose

When ever I've been asked to lower my professional fee by the listing agent is - the answer is NO. Why would I? I know I've lost listings because I wouldn't also. Someday buyers and sellers will see that it's not the fee being charged - it's what their agent will do and net for them that they should be asking.

I posted this reply elsewhere on AR the other day:

People pay us for a skill and our brains. So use your brains and plan for this argument. This week I was faced with this question twice. I put on my best presentation, and was with 2 clients who were NOT in hardship cases. They were NOT losing their houses. They in fact both had winter homes in FLORIDA! They were very wealthy, and both wanted to just "get me down" in commission. The one had hired an agent last year, told me how horrible the agent was and what they did/didn't do... and they over priced the house and never did anything besides put a sign in the yard. So this year she wants me to list it for less (amen!) and to take a commission cut because she felt the "full price" realtor last year didn't work hard enough. I told her everything I'd do, and reminded her I only get paid if the house sells, but felt through the whole interview she was punishing me for HER poor choice last year and I chose to walk rather than cut her a break. Know when to stand firm, know when to bend a bit, and know when to just walk.

And yes, sometimes I bend. I have cut deals and contributed to closings for HARDSHIP cases. I have paid for termite remediations and bought home warranties for a buyer to help smooth the deal and make it GO. We are business people. Look at your business and decide when it is in your own best interest to buy a $450 home warranty when you're selling a $250,000 house. I'll do it. It's my choice.

I lost a very nice listing this week, strictly on commission. I have yet to see how much the cut was, but it came from a top producer. I have nice listings now without a cut, and I will have other nice listings in the future, and not take a cut. The first cut is the open door to more cuts. It is a slippery slope. I wholeheartedly agree with you on the point about "overcharging them in the first place" - I'm not. I know what I'm offering and what it takes to produce it.

In fact, I'm already reduced from what I was charging years ago. And I give a break to multiple transactions. I negotiate at the beginning, not at the end.

Also - if an agent is so quick to give away their own money, how quickly will they give away the client's money?

Is it really the best way to do business?

Although this is an interesting post, I take issue and probably always will with the "commission" way of doing business. First, why should anyone "know" what we make? It's really no one's business. There's not supposed to be a "set" commission but we all know there's an acceptable range, and once someone in your area discounts that rate everyone goes into a tirade.

Why don't we stop thinking of ourselves as "sales persons"? Why don't we start thinking of ourselves as independent contractors, instead. We provide a much needed service. We provide years of experience and work very darn hard for what we earn. It also costs a lot of money to stay in this business and be successful. That's why the IRS considers us "independent contractors".

Why don't we start charging our clients by the hour? Attorneys do it. Plumbers do it. Electricians do it. Ever had a service call? In our listings agreements, a client should pay for our services even if the deal does not close. A client would do their homework before haphazardly choicing a Realtor. In reality that's how many decide. And, it would certainly cutdown on people who jump from Realtor to Realtor because they didn't like the CMA that was afforded them, only to find another agent or two and then lower the price anyway after you've spend lots of money on their listing.

When do we start respecting each other and say enough is enough. I am all for the "ACRE" mantality, mostly.

There are those that would say, why would I pay $350/hour when I pay $50/hour. Simple. It will be your results and how much expertise you have that will win them over. My attorney charges $350/hour. I can depend on getting the best possible service and the right answers. I could also go to the other attorney charging less but in the end I would spend more money or not get the best possible solution. Who would you pick?

In the building industry, you always get at least 3 bids. You never take the lowest bidder. And, often if you want something done right you stay toward the top. The cream of the crop. Same here.

My time and knowledge is valuable. After only being in this side of the business for a little 2 years, I thought maybe I'd start to become jaded. Why not be like the others? Why not just fit right into the theory that I deserve this flat rate commission. I have no idea if we will ever stop being compared to "used car salesman" or "furniture salesman" if we don't get away from this "commission" business. We are not like the used car salesman or the furniture salesman. Yes, they work hard and they know their stuff but they also work for someone else.

The sales person works for another. They get their social security paid, they don't have to buy their own insurances, they don't have to maintain a vehicle, they don't have to advertise their own product. And, the list goes on and on. Why don't we break out of the mold and start getting what we deserve? Start charging what we are worth, and demand the respect we deserve!

I've closed on deals that took me what seemed to be forever to close, "short sale", for instance, and ones that took very little effort at all. And, I can tell you in every case, it took much more time and expertise to negotiate & close a $100,000 sale than a million dollar sale. The entire commission system is backward. Our commission, if that's the only system we use, should be higher for lower priced home. People who can afford a million dollar home often look at it, plunk down a sizeable EMD and the close in short order. I don't have to tell you what we do for the lower end.

Okay, I know I won't win here. I know the system is not going to change. I just think it's not the best way to do business.

It never fails. The WORST, hardest, most time-consuming cases are always those with reduced comission. I've been doing this for four decades, and I can't think of any exceptions to that. When will I learn?

Interesting post today for sure. Thanks for getting it out to AR members

Patricia Aulson/portsmouth nh real estate

I agree with Gail above, and I can tell you I have several structures in my office, not just x% or nothing. I will work for a flat fee, consulting type structure, if I am guaranteed a check.

I have builders, for example, who want my services for MLS entry but DON't want to use my standard forms (they have their own forms), they want to negotiate with the buyers themselves and deal with color choices, picking out the extras, etc. So I charge them a certain number to do all their marketing and bring the other agents/buyers in, then release them to the seller to handle.

I, too, think we should consider us more CONSULTANTS/ADVISORS than salespeople.

Great post. In my office 95% of the time we don't negotiate our commissions. However, there are cases, when the seller will not pay more then a certain amount no matter what and its a very attractive well priced property. You can stand on your head. It does not matter. So you move on or take the listing at a reduced commission.

I like the line: "Once you cut your commission the client automatically assumes you were OVERCHARGING him the first time."

What would the agent tell their other sellers, should any of the other sellers find out?

First of all - I totally agree with everything in your post! I refuse to negotiate my commission. Like another commentor said "What part of my job didn't I do?". Then I got to Gail's comment and she got me really riled up with the whole charge by the hour thing. Right on!

Janet, I think you summed it ALL up in this post by this statement, "it just too easy for you, the commissioned salesperson, to give away money that you don't even yet have?

1.No deal seems easy right now. 2. Larry is just being released from prison. 3. What about my needs? 4. I'm not so bad myself! 5. Don't let the door hit your butt on the way out. 6. There is no deal yet to fall apart. 7. I did a heck of a job for the guy that referred me. 8. Family! Double the commission, they are the biggest pains! 9. The month could be even better. 10. I would rather not fight so I am going to Cabo, drink tequila on the beach, and read a trash novel.

Janet, great post and we deserve that vacation. However if I cut my commission I can't afford to go.

Very interesting topic & you have gotten some great comments here also. i feel very strongly about this topic as well & feel I work very hard for the $ I charge a client. I like the answer above "What part of my job haven't I done?" Stick to you guns!

I firmly believe that there are as many ways to charge for your services as there are clients. When someone asks me to cut my commission I simply tell them that I am worth what I charge and I do not "compete" with other business models. Cutting commission does not work for me so if I lose a potential client I am not being arrogant I am honoring my business model, pure and simple!

The sellers that are the most concerned about commission are always the ones who give you a hard time with just about everything. Sometimes we just have to walk away.

Good morning Rainers and Happy Father's Day.

Lenn: You run a tight ship and I think the name of it is NO NONSENSE. Personally, I would never dream of asking you to lower your commission.

Which all goes to show, an attitude from the beginning that says, "You will be getting your money's worth when you hire me" is one way to combat people even ASKING.

You know how they say you won't get robbed if you walk down the street with an air of confidence......?

I have to agree with Russ. I think it's more than okay to offer a discount to family and friends (at your option, not at the family or friend's insistence)...

it's not that you're a bad person if you don't discount.. but it's a nice perk to be able to offer to your family and good friends, and keeping in mind that they're your first line of marketing.

I always tell them that this is a special rate, for family (or close friends)... please do not tell anybody else that I offered you this price... I'm only discounting because it's YOU! That makes them feel special, and taken care of. I'm still being well-paid for taking care of my friends and family... and they feel that I'm not out to make the largest profit off of them. (and they're right).

Silvia: That is an excellent approach. Most people who ask you to reduce your commission are not thinking in terms of reduced services. They just want a better deal.

At least in your approach you would be negotiating with client, not just caving in to demands.

Sally and David: I think clients sometimes do not think the commission has any realtionship to the service you are performing. Maybe because it is paid in a lump sum instead of rendered for specific services?

Kevin: That is an excellent response....they could be actually testing how you do in the negotiations.

Ann: You wrote:

You would'nt ask a doctor to lower his office visit or a dentist to offer you lower prices for dentures.

I think in this economy, people are asking dentists and doctors to give them a break. I am slightly embarassed to admit that we asked our dentist to have mercy on us and reduce his fee and he did.

I am in agreement with your point, however. I also think if you miss a few deals because you will not lower your fee, you will make up for this in the long run.

The car business was so totally ruthless that I had no choice but to simply tell my clients this,

"If you expect me to handle your auto lease, then you will need to pay me. If you want to go with someone cheaper, I understand. But they are not going to be better than me."

Some left. Some left and came back. But many of them smiled and were relieved that I was that confident that I deserved their money.

Readers: I am going to be on a radio show a little later this morning. I will be unable to answer all of the comments, but will be back later to respond to you. I would like to respond to GAIL's long and thoughtful comment with disagrees with the whole commission structure:

Gail, I agree with you. There would be a whole different perception if selling agents had to convince buyers to pay for their services.

They would do more research. They would not switch agents. They would be aware of the services they were buying.

But it would be much harder to get paid and much harder to get buyers.

Is the industry ready for this switch? I don't think so.

Not only don't reduce your commission but charge more for those difficult "clients" or difficult "properties"....

so true!

Just EXACTLY what I needed to read this morning! When I was new in the business, I did tend to reduce my commission..... I've gotten much better with experience and therefore in confidence, but still find myself slipping back every once in awhile.... It IS all about confidence -believing in ourselves - and being able to convey that to our clients/customers. Love the quotes! I wrote alot (if not all?) of them down.

I have a question though. A little over a year ago I was listing quite a few REO properties and the Asset companies almost rape the listing agents... Because of that and because some started giving a "bonus" to the selling agent (how insulting) and because they were some of THE MOST DIFFICULT people to work with, I started to stand up for myself and got black-listed (darn....). My question is, why? Why do the REO companies/banks (hmmm may have already answered my own question) think it's ok to offer this to hard working agents and WHY DO WE LET THEM? My thought is most likely because these are "banks" and they want us gone anyway, but I wish all the REO agents would stand up and refuse to be treated this way. Any thoughts?

Also, KIND of in-line with the above statement; do you all ever think it is ok to reduce if you are getting multiple listings at once? Investor selling all his rentals? Government agency selling a block of homes? Family of a departed one liquidating their real property???

Janet: Thanks as always for the post. It took me about a year to figure out how to run and define my business. Once I did that, I haven't looked back. Have I offered to cut my commission since then? Yes. We're all human. Did it do any good? No. The latest time I offered to match a Good Faith Estimate from another lender. Did I get the deal? No, I never heard from the borrower. Lesson learned once again for now! Thanks again!

Great Post ..... lots of good info and rules to operate under.

Bill C

(connectrealty.com #2114 Earn 5% of every referred agents deal)

[In all of the cases above, you are negotiating with YOURSELF, not your client.]

Absolutely.

Answers to questions 1 - 10. NO

There's a place in my listing presentation says "Quality representation , professional marketing and our wealth of resources are not offered at a discount." with the fees my office charges and for what.

I just tell them up front that the fee is what it is. I am okay if they say no. They usually don't.

Janet - Thought provoking post and some great discussion. I think that negotiation is now more important than ever in this type of market. You have to be a great negotiator to excel in this market, whether it be with your sellers, other agents, your buyers and even yourself !!

Hi Janet~ The only time I negotiate commission is at the time I list a property. I can't understand why buyers or their agents think that they can negotiate it with the sale. It is NOT negotiable at the time of an offer or contract, or sale! I earn every penny of my commission and it is a rarity that I cut it, and IF I do, it is MY IDEA, not the buyers or the sellers!

I do not cut commission. If its an easy deal it just helps with the tough ones that took way to much out of you. It all evens up in the end. Why should I take less home to feed my family with? Why should less me my reward for a mission accomplished?

Guilty also of giving family discounts.

I sold a home for a cousin who was such a pain in the a** AFTER the contract had been negotiated, I almost asked another associate to finish the transaction for me.

I recently offered to take a reduced commission when representing a Buyer -- multiple offers came in and my Buyer couldn't make her offer more attractive. I figured losing half a percent was easier than showing her another 40 homes. But, that was MY idea and my Buyer was never aware of that negotiation. I still feel okay about it.

A LOUSY SALESPERSON CUTS THEIR COMMISSION

Amen to that. . in remember that we have now Franchised companies that the only thing of value being offered to the public is just that. . cut their commissions. . .from buyers and sellers!

it's worth repeating

A LOUSY SALESPERSON CUTS THEIR COMMISSION

Those who lower commissions left and right soon may not even be in business. Our 2 cents.

Janet, I am always willing to negotiatye my commission........UPWARD!. And that's usually my response when asked. I work in the bvery low end of the market and don't make very much per closing as it is. I don't have room to negotiate downward. I have however charged some people less. but it was because I wanted to NOT because I was expected to. There's a big difference.

And I don't give family discounts because i don;t work with family members. I much prefer to refer them to someone else and then be available to answer questions.

Janet,

I'm glad you posted this. I was about to start my new membership with a blog about commissions myself. As Rehab investors, which I don't see many of in Active Rain yet, I can tell you one thing I have learned from one of my agents is not only do full commissions get my properties sold but MORE commission gets it sold faster!! You get what you pay for and for my business to be a success, it takes MONEY to get superior marketing for the rehabbed properties and MONEY to get the Selling Agents to get their buyers into my properties. When my Top Producing California agent first told me why he charges 8%, his line was "I invest a lot in my business and I get results". And he got those results for us. Twice.

Don't reduce your commissions, in fact, charge more. You all have to eat too and your business will be better off for it.

Hi Janet, I really liked your list of excuses- and yes, they are lame. I also agree that many times the customer really doesn't expect you to contribute ! Well done.

Once you cut your commission the client automatically assumes you were OVERCHARGING him the first time.

If you devalue your service by cutting the commission, so will your client. You have lost some of their respect right along with some of your money.

These are two of the best lines I've ever heard for NOT discounting your commission. Thanks. I'll probably be reciting these this week at the office. You are worth what you think you're worth.

This topic has been floating along on the rain for a few weeks. Different bloggers, different tales. It's the same with business people who are on a fee for service vs. commissions. A CPA wouldn't lower their fee, nor does my mechanic! I've seen sloppy work from sloppy agents -- recently I've noticed a listing that is tri-level with only the main and upper floors included in the sq. ft. There IS a lower level (hence the TRI-LEVEL of the property), but there is no lower level sq. ft. The data fields in our MLS tallies automatically, and if there's a ZERO in the lower level, then nothing will be added up for TOTAL sq. ft. of the property. The home is less sq. ft. then my clients want -- but I'm still getting them to go out to tour next week, because I realized the mistake of the listing agent. The home is probably bigger then it seems (on paper). This property might be missing out on a lot of buyer traffic too! And wouldn't you know it? It's an outfit who charges a fee for the listing to get into the MLS and does nothing more! I'm sure they don't even provide a copy of the RMLS listing print out to the seller! Sloppy is as sloppy does!

Roger: I have to recite these lines to myself. I cannot fall into the trap of feeling insulted or feeling fearful I will lose.

I always love making things work out, and used to think I was just a great negotiater for being able to save the day when things went wrong. I used to think I was a good saleperson for "winning" the deal.

Then I realized I was not negotiating. I was just giving away the farm and buying solutions with my own commission.

It reminds me of asking someone at a garage sale to give you a price on the toaster. They say "five bucks". Then before you have a chance to answer they say, "What about four bucks?"

Geez...they just negotiated with themself.

Tom O: If you are a new member to ActiveRain, then welcome and thanks for the comment.

Your attitude is one that I share. I had to learn the hard way. After several remodeling jobs, I realized that those family memebers that were being paid a discounted price were the worst workers.

I now tell this to family members: I refuse to let you work for a discounted price. In fact, let me pay you more so that I can be sure you know I am serious and want you to do a good job.

It is easy to think EVERYONE just wants the lowest price. That is not true.

What cosumers are really hungry for is a confident savvy professional that will use their expertise to get the job done right.

And they will pay more to get it.

Bryant: You don't work with family members? Whoa. That is probably a good thing.

I love that you negotiate up. "For you, I charge 7%. For everyone else, 6%"

That'll teach to mess with you. LOL

I'll chime in with those who do/would cut friends and family a break. I can't imagine not doing it - they'd do it for me in a heartbeat - my Dad's a doctor, do you REALLY think he'd charge me for an office visit if I were sick? If he were an accountant, would he charge me full price to do my taxes? I'll "cut" my commission all day long for special people and not think twice about it, even if they are a PITA. Funny thing is, my friends rarely ask for a break and seem (pleasantly) surprised when I offer it. Ah well.

Theoretically, I will throw some money in the kitty to hold a deal together (not to buy a listing, though - at least not these days) and not feel bad about it. But I have learned (finally) that in most cases, it's not necessary. If the buyer or seller don't want this deal badly enough to figure out a way to reach agreement without my financial contribution, it'll probably crash at some point anyway.

However, I will absolutely throw money at a deal if I screwed up, or if the other agent screwed up and won't take responsibility for it.

If you cant prove your worth in the first consultation, you will have problems with this throught the entire process.

Commission discussion should be part of your listing presentation, show them all of the things you and your company do to get their property sold and closed. Evidence presentations will help with this problem.

Getting a sale through in our current environment with lenders is a challenge, the sellers should be made aware of the complete process and what you must do to sell their home.

Establish in your OWN mind what YOU are worth...charge it...stand behind it...and NEVER defend, but rather EARN your professional service fee!!!

Jeani

The inconsistencies in real estate have produced this behavior. If it was more clear to the consumer exactly what each person's role is/was, we would not have to ever cut the commission that we agree to in writing with our client to begin with.

- Rhonda

Wow. Great post!

I'm with Joe: Family! Double the commission, they are the biggest pains! Not only that, you have to deal with them FOREVER and if the they're unhappy with your services you'll NEVER hear the end of it (not from them, of course, but through the family gossip grapevine!). In my world, family is highly over-rated, but I know there are folks fortunate enough to not experience my family dynamics! LOL! Those posts about absolutely giving family discounts have valid points, too. I guess it all depends on the family!

Hey Janet! You know, creating value in our services..is sometimes VERY hard to do...it seems harder for some than others...

Most people are just afraid that they will turn people off...

What IS acceptable sometimes is for the Realtors to kick in when a customer is short MONEY to close..I dont think this is done enough actually... It doesnt devalue the REALTORS value...and does help the borrower! I used to see this happen ALOT about 10 years ago..but havent now for some time

The take away close is a challenge for many...I have gotten to the point where I just say...'Here is what it is"...customers are not happy...but what can we do!!????

Thanks, and another feature...Wow...Did Karen Ann Sponsor you?? LOL

D

The really galling part is when people who are older and better off financially still want me to subsidize them.

I am worth every penny. EVERY penny.

Jennifer said "However, I will absolutely throw money at a deal if I screwed up, or if the other agent screwed up and won't take responsibility for it."

Thank you, Jennifer, for such a refreshingly honest response...although I hope you don't have to reduce your commission for another agent's screw-up too, too often.

I am not a realtor, but I have worked with several over the years to market our properties and I have a lot of respect for the work they/you do to get a deal closed...well, I should say that I have respect for the "good" ones we've worked with. Nothing has made me more livid than when the agent truly messed up and cost us hundreds if not THOUSANDS of dollars (yes thousands, due to a listing error advertising central AC when there was no central AC), and yet wouldn't budge on their commission.

To all agents I have a question: how would you feel about something like this being negotiated: if we (the seller/owner) procure the buyer through our own marketing, we negotiate the terms, we coordinate the contracts, would you reduce your commission by 50%?

The scenario that our investment company is running into more and more these days is that WE are finding our buyers ourselves through our own marketing. We're even contemplating NOT listing our properties as we're seeing a decline in the effectiveness of having it MLS listed (which we'd never thought we'd see that day!). But we're never on the prowl to reduce our exposure, but think it's only fair to be rewarded/compensated for finding the buyer. It makes it real tough paying out a full commission when we've done most of the work to get the deal closed.

Just wanting to get a feel for if agents think this is a fair proposal to negotiate on the front end.

I find that sometimes people ask if you'll cut your commission just because someone told them they should not because they really expect it.

Shannon - Yep. I'd do it, on a trial basis. As long as there were mutual trust and respect between us, and I truly felt that you were doing more than my retail sellers do. I don't know if 50% is the right number - it would really depend on the market. But when I worked only with investors in the 90's, I was happy to work with them on my fee. It assured their loyalty and it helped them be more profitable which meant they could buy more houses (thru me!).

Christine - I agree - it's like going to a car dealership and not negotiating. You'd feel like a total schmuck and would always wonder if you should have at least asked!

This year we have had more people asking (or telling) us to take less and we have more listings not had because of not bending over backwards. For some it is really hard to see the value, no matter what you throw at them the just think about how much you will be making and how much they could be saving - which in most instances doesn't work anyway. One seller decided to go FSBO after interviewing us and did so for about a month and pulled their house of the market. No showings, not nothing, yet still not willing to accept what we or an agent could do for them. On the other hand a buyer was trying to negotiate (or take) our commission as I guess we need to not make anything. We told the buyer to go find another agent. This is a sore subject with me as well especially as more of it is going around. One more thing. I agree that currently it's happening in other industries as well whether it's dentist, mechanic etc. When times are tough you got to try I guess. ~Rita

I had not thought of it in those terms, and I have never used your list. That being said, as a relatively new agent, I have cut my commission to get business in certain areas. I will not do that any longer. Thanks for the inspiration!

I will admit that I negotiate my commission a bit. I sell a lot of houses. I am a good sales person, and honest unlike the bandwagon people pretending never to cut commission.

Very interesting post and comments. I've done it once or twice when I first started my career in real estate, however, I did find those clients to be the most problematic. Needless to say, it is no longer one of my business practices.

In my market, it's quite common to cut commissions up front during listing negotiations. It seems that many of our top agents are giving discounts to just about anyone, and often our clients will phone around to see who's cheapest. When top selling agents are discounting it makes it tough for us newer agents, with less experience to charge full price.

We are also trying to get a fee for service program started- it's tough though, not everyone wants to do it, so those that do may will have a hard time of it.

What I've been doing to get full (or almost full) commission on my listings, apart of course from telling clients of the full services I will provide, is tell the sellers that they are competing with other sellers who are paying full commissions. It's more likely that an agent will show a property that is not discounted over one that is- especially in my area where there are many properties available.

Jannet,

8 out of 10 make you better than most!

But, if you've ever lost a deal over a little bit of commission you/ve failed yourself, your client and your family!

If your foolish enough to reprensent family, don't compound it by accepting even a single dollar!

Bill

A comment to Shannon's question.

As a regular R. E. agency I would not work under those circumstances. But, in Missouri we have what is called a Transaction Brokerage. They do not represent either side of the transaction and are hired to do the paper work. They will generally do that on a reduced fee basis. I am not comfortable NOT representing one of the parties so do not do transaction brokerage. I do not know if you have some thing like that to work with in Baltimore. If they do not have, it might be something to look in to starting to do just that.

Ed Westerman, Broker

Country Lifestyle Realty, L.L.C.

Serving the Missouri Ozarks for 35 years.

there are certainly a lot of layers to this onion! a couple of years ago i tried a little experiment and offered 2.5% rather than 3% to the cooperating agents (with prices well over $500,000 in this trade area the dollars are still there at 2.5%) the agents were not the least disturbed by the "missing" .5% and to a man they all reported that the commissions were secondary to their clients needs. the 2.5 % co-op commissin was the norm here for a very long time and the banks are finding it to be their limit as well, the new edict for 6% notwithstanding.

denise sproul (#77 above) reports that many of the top agents in town are willing to work for negotiated commissions...that's because they know that their business is a marathon and have learned that working with their clients to craft a structure that meets the needs of both parties is a wise idea. we'd all like to get a full 3 or 6% on every deal but the facts sometimes dictate that we all put some skin in the game to see the deal through.

it is a bit disturbing to see the tone here of a cartel. i'll say it out loud...i can work an $850,000 file for way less than 3% on my side and do more, and earn more, than the same agent who is on a 2/3's split. it is not the sellers problem if one agent has a less efficieint business plan than another. the true costs to run my brokerage have gone down every year for the last twenty years. MLS...cheaper. computers...cheaper. marketing...cheaper, and better. photography...cheaper, and better. technology...way cheaper and far far better. the clients are better informed than ever before, more willing to do the legwork, and can easily check every statement we make. i love it that they are doing a lot of the work i used to have to wrestle with them to do. this is a great business.

presuming we are talking about a non short sale, and a sale that will generate more than a few gross thousands in commissions, it's entirely sensible for any client to ask where the commission dollars go and to move to minimize them. they negotiated the price of the home they are selling, why is anyone surprised that they would try to save a few thousand on commissions? to have a fixed commission structure is silly. one size does not fit all, and blanket statements about commission rates makes us look like hacks.

The only problem with a flexible and changing commision structure for different clients at the same time are when the higher paying client talks with the lower paying client...and of course that never happens.

I am not sure a "cartel" is the word that should be used here. Don't you find it odd that groceries, gas, dentists, doctors, cars, rents, cell phone plans, fast food, sit down food, etc. etc. are all priced almost the same and yet no one says they are a "cartel".

Most job wages are based off of what other get paid for like work, etc. So it happens across almost all venues.

I am not sure that people commenting here about commissions makes them "look like hacks" or "cartels" anymore than that someone who finds everything "cheaper" is a cheapskate.

Mike McCann Broker

I wrote: To all agents I have a question: how would you feel about something like this being negotiated: if we (the seller/owner) procure the buyer through our own marketing, we negotiate the terms, we coordinate the contracts, would you reduce your commission by 50%?

Ed, you wrote: As a regular R. E. agency I would not work under those circumstances.

Ed, why not? Is there an arrangement that would make it worth your while? I sincerely am curious and anxious to find out if what I am asking is unfair or unreasonable. I'm all about being fair and rewarding results with compensation. I think that for the most part in most circumstance, agents earn their commission...in fact, many times I think agents are UNDER paid for the work they put in to closing a deal. So I hope my question doesn't come across as a cheapskate stepping over the dollars to get to the pennies.

Perhaps more details on my specific scenario would make a difference:

Our property is listed. Got about 3 or 4 showings, two of which involved our listing agent showing the property.
Our agent has been slow to get a sign up, slow to follow up (usually does not do without our prompting) and very slow to update our listing with photos and yes, this was a bit irritating, especially since we've done couple other listings with her previously. (I know, shame on us for sticking with her)
We received one very low-ball offer that our agent had to counter and was ultimately turned down.
We do a lot of marketing ourselves as our agent strictly relies on the MLS exposure and whatever Coldwell Banker does to promote properties.
Our buyer came from our advertisement on Craig's List. Buyer did not have an agent, but got an agent to help coordinate the deal as they were moving cross state lines to get our property.
We transacted a rent-to-own deal--two separate contracts: REntal agreement & Option Agreement. Neither agent is familiar or experienced with this type of deal, but that was okay, because we've done it for years. Used our contracts, negotiated the terms, etc. etc.
I guess I kind of feel like the buyer's agent got a "freebie". But I would never deny a buyer or try to influence them not to get an agent if that is their desire.
And our listing agent has done work on this listing, too, so I'm not wanting to cut her out completely by any means.
Just trying to figure out what's fair and reasonable. The way I see it, if it weren't for our marketing dollars and time spent increasing our exposure (which is considerable), neither of these agents would be getting a commission at all! Both agents received half of first month's rent up front and will receive the remainder of their 3% each commission upon the sale.
And finally, never did we ask the agent to reduce her commission because we didn't discuss this scenario in the beginning. I'm trying to figure out how to move forward as I do think it's likely this "procuring our own buyer" will happen again.

Jennifer said: Shannon - Yep. I'd do it, on a trial basis. As long as there were mutual trust and respect between us, and I truly felt that you were doing more than my retail sellers do. I don't know if 50% is the right number - it would really depend on the market. But when I worked only with investors in the 90's, I was happy to work with them on my fee. It assured their loyalty and it helped them be more profitable which meant they could buy more houses (thru me!).

Jennifer, I think a trial basis is an excellent idea to start off with. Yes, mutual trust and respect must be present, but honestly we've been feeling like we're getting the short end of the stick lately in that realm. But I'm sure that's how everyone feels in this market LOL! We're all over-worked, under-paid and under-appreciated. And I do know that like investors, agents do a lot of work "for free" that they may never get paid for and even have expenses that end up becoming "sunk costs".

Thanks for your comment, Jennifer! Much appreciated!

Michael Ford - thanks for your post. I, too, am trying to put a word to the tone that I am sensing on this post and comments. I wouldn't have picked "cartel"...not because it's inappropriate, I just don't really know what that means LOL! Whatever word describes it, I think I'm "with you" with what we're sensing.

I think the most successful blogs/posts/comments are when VERY different and even EXTREMELY different view points are represented and the more the better. Thanks again for your post!

Thank God for the Michael Fords and the Chuck Carstensens of the world!

As a consumer, it's nauseating to read through the comments above! The self-righteousness is absolutely unbelievable, and as I stated in another similar "commission" post recently, it almost makes me throw up just a little. You know...when you get that really, really bad taste in your mouth?

It's common knowledge that Realtors are dropping like flies all over the country, and I'm sure they all shared similar "I won't budge" business models as the rest of you. It's also common knowledge that the majority of the Realtors (at least in our home town) do NO marketing of the home whatsoever. Yes, they put it in the MLS and yes, maybe even buy the $8.00 online flyer. Yes, they also put a sign in the yard, and if they're really "progressive", they might even have a crappy inkjet printed flyer in the flyer box (usually looks like a 4th grader did it.) If you call that marketing, then your commissions for that aspect of your job should so far be around $125.00.

So, then I read about the generalities of other "professional services" provided. No one has the guts to outline what those services are, although I've read laundry lists prepared by some that include the most inane things. Charge my cellphone every night, tell my clients to keep their lawns mowed, get my hair done, call Fred the agent who showed the home a month ago to see what he thought of it. LOL!

Oh, wait...you do so much more than that. Like um, what? Answering a sign call? Taking a call from an agent who found the home in the MLS and has more questions? You did nothing when that agent showed the house (you weren't there....HE was). And you seem to be referring to "negotiations" as sitting down with us and reading over the offer (we could have done that without you.) You made no recommendations about the offer, other than to ask whether we wished to accept it as-is or counter, as it was $5,000 less than our listed price. You asked US whether we wanted to require that the buyer be pre-approved versus just pre-qualified. And once we accept the offer, you tell us you'll stay on top of things.

So far, you're at about $400.00 in total value near as I can tell.

Escrow is opened. You don't even read the escrow instructions (WE caught the errors, NOT you). The appraisal comes in low, as it turns out your CMA wasn't very accurate after all. You've never read a preliminary title report in your life and had to call the broker to find out what ingress and egress meant. You weren't there during the home inspection. The BUYERS agent was there, but OUR agent wasn't.

You never held an Open House. Nor did you ever bring any buyers of your own by to see the house. But you DID call us to let us know that loan docs were being drawn after 60 days. Oh...after the closing, you called us to let us know that escrow had our check ready. WOOHOO!!

The house sold for $400,000. Your office was paid $12,000, and you probably got somewhere around $10,000 for "all the work you did" (you must be exhausted!!).

Who in the world are you people kidding?

60-80% of the homes on the market today are either short sales or foreclosures, where the sellers are desperately trying to save every ten dollar bill they can get their hands on. People are losing their jobs left and right, along with health insurance, value in their savings and stocks, etc. They're having to move in with grandma and grampa because their credit is ruined and they have nowhere else to go. They can no longer afford to send their sons and daughters to college, and have had to file bankruptcy.

And yet the majority of agents here (by the way, ANYONE can pass that test, so please don't compare yourselves to doctors, attorneys, CPA's, dentists and the like....it's embarrassing) the majority here won't budge one iota when a poor seller asks them to make only $10,000 gross to their office, instead of $12,000.

That's laughable.

That's shameful.

That's why we have a housing crisis which will remain unfixed until the government decides to step in and regulate your industry and your self-serving attitudes and payscales.

If you think Realtors are dropping like flies now, wait til the above happens. Many of you will have to return to office jobs where you make $1,800.00 - 2,500 per month (you should have taken the ten grand). And sellers will have their homes sold by salaried agents who are at LEAST as competent as most of you.

For around $1,500.

These are the kinds of blogs that, if published by ANY newspaper in the country, would have sellers across the country standing up for themselves and demanding MUCH better...for a hell of a lot less.

It's so pathetic.

I dare anyone here to come up with a list of what you REALLY do in a typical real estate transaction that you feel justifies your $12,000 payday. Itemize it...and don't peter out in your own salesmanship by falling back on the old and tired "I maximize the price my sellers get". Buyers offer whatever they offer, and none of you have prevented the 40% devaluation of real estate thus far...so that argument doesn't really hold water, does it? And please, please, please...no one use the canned "If I can't negotiate for myself when it comes to commissions, then what kind of job do you think I'd do for you, Mr. Seller?" << barf >>

Look, if you're already walking away from and/or losing selling opportunities right now, you obviously CAN'T negotiate for yourself as well as you think. Standing firm and saying "Take it or leave it" is the poorest example of "negotiation" as I've ever seen.

So tell me...what exactly does your list look like? The one that justifies your $12,000 on the ONE sale? Hmm?

Karen

JUN

2009

I have discounted my commission. For friends and family who will refer others. If I have both sides--I will discount if I need to help the client over the last hump. I refuse to discount for listing brokers who are not spliting commissions 50/50. I also will not discount for listing brokers who are working with difficult clients. Let them have all that misery to themselves.

Just shaved a point off my sellers commission. Why? Because I am also selling him another home. The two transactions are worth over $1,0000,000.

I just lost a listing after all of the footwork....had to wait a day for the ex wife to sign..... Who is that masked man? In rides the discount broker, lasso's the seller. Tadah! You can tell by looking at the listing on the MLS...good luck buddy in selling your now overpriced, poorly listed home. Certainly not all discounters do a poor job.....but do I feel bad? Not bad but disappointed as to what I now know that I could have done better.

WOW..what a response from Karen the consumer. I defer to Rhonda Duffey who said that "The inconsistencies in real estate have produced this behavior." I have known so many agents who perfectly fit the description offered by Karen. Those are the ones that are dropping like flies. It's because eventually their 'sphere' and 'locale' figures out that they aren't worth their fare.

The way I understand it Karen, you aren't happy with your choice of representation. Let's just try an little analogy here.

Let's say you were terribly ill, and in much pain. You see a doctor, and then another and another. After three different visits to doctors you are still suffering. You finally decide to see a specialist. This doctor quickly diagnoses your problem and your pain is relieved.

Did you try to negotiate the fees of the specialist or give him any grief whatsoever? Of course not. You gladly paid the bill in full and you were so relieved to feel good again. You even shook the doctors hand and thanked him! The last thing on your mind was HOW he did his job, or HOW MUCH it cost. You left smiling and told all your friends about this wonderful doctor.

The point is that there are fantastic agents who are worth their price, who deliver results, and have a trail of happy clients. And then there are the other ones. It behooves the consumer to figure out the difference.

Karen, you should also know that just ANYONE can't pass the real estate exam and be an agent. In many states, you must have a college degree to apply. And in states that don't require a degree, such as my state, there are other requirements you must meet. You must be properly educated and pass multiple exams before even taking the state test, which is not an easy feat. In addition, agents are required to continue their education and a certain number of hours is required yearly or we lose our license.

I'm sorry you had a bad experience with your agent. But using your bad experience to demean our entire profession is not only unfair, it shows a lack of common sense.

In most cases I agree our confidence and experience should easily enable us to override any objection to a request that compromises our livelihood. With one exception - where it would cost my client a home they so desperately want and need. I would never be so selfish to put a few hundred dollars above my client getting a home they deserve.

Shame on the banks - asking us to forgo our income because of their inability to set proper guidelines on loans just a few years ago.

Great post. It reminds us that there is value to our work, and is not to be given away.

Jerry Gray CRB,CRS,GRI / Prudential Carolinas Realty / Winston Salem, NC

Yes, I have had to reduce commission from time to time. It just depends on the circumstances. thank you all for sharing your info! very informative! great blog!

Thanks for the reminder that I am worth even more than my normal commission. In these times when I ask myself every day where my next dollar is coming from, I have been very tempted to do just that. Cut commision to win a listing. However, I do put that as a final act in my sales pitch" If agent A said they would cut their commision, then why are you talking to me? If that is your only objection, then I will match price if you sign right now. But I want your listing for an extra three months." I believe this still leaves me in charge, and shows the client I will do what is necessary to win.

Janet,

Good points here. How often does a person ask the doctor to cut his fee? Or an attorney or the grocer?

Ann Hayden in steamy Wildwood, Missouri

Kudos for Karen!!! It's all true. While our Country is falling apart most brokers/agents stand by and continue to let everyone know just how much they are worth. If every Realtor in America decided to step up and help, they would reduce their commissions thereby helping families retain some of their equity and give them a greater ability to buy another home. It's in your power to make a change but it will not happen as long as this mentality is supported. I for one chose to make a difference. This life is short.... too short for pompous arguments that do nothing but inflate the already overinflated.

Janet - I learned this lesson very early in my mortgage career. In my first year, I did some friends and family member and did cut my origination a little and after closing those transactions, vowed never to do it again, and I haven't, not even for family and friends.

Over the years, I lost business with some family and friends because I wouldn't reduce my origination, however, I have never regretted my decision not to discount and truly consider it a blessing in disguise that I didn't do those peoples loans.

Whenever asked by a client to reduce my origination, I simply tell them "no", period - end of discussion. If they walk, good riddance.

The only people I get this from is sellers. I did have a guy use me to buy a very expensive home and asked me to list his old 7 figure home and discount a little. No upfront cost for me in terms of adverting cost. I agreed.

I'm a mortgage broker, so I don't work on a set percentage like most Realtors, however over the years I've probably used all ten of your excuses (Some transactions required several of them!).

I've come to realize that usually the transactions that you cut your commission on are the ones that eat your lunch & you wish you would've raised your commission!!

Kimberly wrote: "I'm sorry you had a bad experience with your agent. But using your bad experience to demean our entire profession is not only unfair, it shows a lack of common sense."

I disagree. Karen described a very common experience among consumers, myself included.

I'm all for people getting paid IN FULL for a successful job completed despite the number of clowns you had to go through before you found the right one...as in your example of paying the doctor who found the cure after going through several doctors who didn't get the job done.

But why is there the expectation that the agent get a full commission when they didn't fetch nor negotiate the full asking price of the listing agreement?

You say it isn't fair to demean your entire profession. Well how is the below scenario fair?:

Assuming the listing agent and buyer agent are one in the same (if not, just split the numbers 50/50)
Listing price $400,000. Let's assume this is a fair and competitively priced figure that any full-service good agent would be able to provide.
Potential 6% commission = $24,000
Offer comes in at $385,000 with 3% seller help (or $11,550 seller help).
Seller is giving up $26,550 in their gross net while the agent still gets $23,100 in commission...a meager $900 reduction in their commission!
And boy is the seller really taking a hit if the full 6% seller help allowance is needed in order to get the deal closed.
First of all, it should be a STANDARD RULE that agents commission is based from the figure AFTER seller help is factored in...I mean how wrong is that to get paid on money that the seller had to give to the buyer! Agents do this ALL the time unless a seller is savy enough to catch it and raise hell about it.
Secondly, common sense leads me to conclude that there's no way a real estate agent is acting on behalf of the seller's best interests when they are advising the seller to take the offer and binding them to a full commission on the PRE-seller help purchase price.
Now having said that, it may be the best thing for the seller to take this offer. The POINT is, why is it TABOO to EXPECT that the agent share in the overall LOSS to the seller? They relied on your CMA to set a fair price and relied on your sales pitch that you'd be able to find a buyer at that price.
And when the seller decides to refuse the offer, can you honestly say that you would continue to work hard to find the buyer for the terms that YOU contracted with the Seller? Common sense and being real and honest puts my conclusion to NO.

Bottomline, Karen is presenting a valid argument and frustration from the consumer's viewpoint. I think all agents reading this would do well for themselves to understand the consumer's point of view. We are still waiting to hear from the agent's point of view that would help us consumers feel good that you're worth every bit of commission you are demanding. As Karen said, no one has taken the time to do so and for the most part have only quipped with canned answers.

There's flaws and unfairness to all industries and imperfect people create imperfect situtaions. Why is it not appropriate for BOTH sides to flex a little and work together? Why is it so insulting and degrading to lower your commission when you didn't accomplish what YOU contracted to do?

any agent that does not read this thread very carefully risks being "disintermediated". the business is changing, however slowly, and failing to adapt will make you roadkill.

clients in every corner of our economy have been seeking lower transaction costs in every element of their financial lives since before any of us were even working...that's a core element of any benefit seeker...they seek to maximize their utility and minimize their expenses attendant to transacting. rhonda duffy's is a prime example of a novel/innovative business plan that has gained great traction with her clients. anyone who dismisses it is making a huge error.

what hasn't been raised here is the basic structural inefficiency of the real estate business as it's commonly practiced today. in a typical deal there are two agents, two brokers and often two franchise fees that need to be paid. that's six guys with their hand out looking for a payday. on it's face it is inefficient. fortunately for those clients who care (some don't) just a bit of effort can result in many thousands of dollars in savings to the savvy seller, or buyer.

i am not suggesting that every seller should do so however...there are instances where the savings are negligible or accrue to a third party. to lean on an agent for reductions on a $2,500 commission is unlikely to cause savings at any meaningful level, and to do so in a shortsale is pointless as well. really, who cares if the bank saves a few thousand? presuming that the seller isn't being asked to bring cash to that closing, i don't.

negotiated commissions are the new reality. the great news is that when the clients ask for them we have an opening to set the expectations. you want open houses? sorry, waste of my time. you want photos on a flyer box? no, the website has dozens. you want me to accompany every buyer on every showing? no problem, i'll be needing an extra point or two to cover the expense of 35 showings that result in the two serious offers.

those of you who do not remember PAPER MLS books may have no real reference, but there is no other industry i know of that is more rapidly changing than ours...(okay, music publishing and distribution). every year we see wholesale and permanent changes to the very core of the trade. you can get on the bus or get run over.

Unfortunately, this disgruntled seller may be a bit overzealous in condemnation, but has some valid points. I have cut commissions to help first time homebuyers get in a home, to help family members, and where it made sense. It is simply untrue to say that all Realtors are competent, are adequately trained, and earn the commission they receive.

I wish you had a chance to talk to one of my clients, and I believe you would hear a different story. You do not always "get what you pay for." Sometimes the highest commissions result in pure crappy service. that is a fact that the industry does not like to talk about. I deliver the absolute best, knowledge, experienced high quality service REGARDLESS OF WHAT I AM MAKING IN COMMISSION! It disgusts me to hear agents say they will not even show a house if they aren't getting their 3%. That is an ethical violation and exactly what creates angry consumers.

We need higher standards in the industry. We need, at least in Texas, a regulatory oversight agency that is not run by Realtors. We need the ability to report abuses and inadequate service by Realtors confidentially and to an agency that will actually take action.

The best cure for unhappy consumers is not cutting commissions, it is raising the bar on who can be a Realtor and the level of professionalism in the industry.

I always tell my sellers that the time to negotiate commissions is when I'm taking the listing, not when I've done my job and brought in an offer. I fully understand if they don't feel they can accept an offer because it will not net them enough money - but it's not part of my job to make up the difference.

I believe the current compensation model for real estate agents does not make sense.

I will stop short of saying it is broken, but it needs to change.

I don't think SELLERS should carry the burden for BUYERS. Buyers should select their own agents and agree to pay them for their services.

Sellers should select their own agents and pay them for their services.

Services should be negotiable. If a seller wants to do their own marketing and find their own buyer, why not?

The world has changed in a way that makes SELLING your own home easier than it was before.

The world has changed in a way that makes BUYING your home much more difficult.

Why do we continue expect the seller to carry the load even as there is a groundswell of resentment?

If you saw things change from taking a percentage CUT from the selling price of the house to hiring a real estate professionals for specific services, you would see a great deal of improvement in how consumers view our industry.

I agree. But, as I said, for that to happen, we need to work harder to EXCLUDE more people from being Realtors. Yes, you heard that right. We want to try to be inclusive, and big companies have built their model on recruitment of more and more agents, like a big pyramid scheme. You bring in more agents, they each have a circle of friends that generate business, then they run out and in a year or two and the person is no longer an agent. Tell me how that benefits any one except the ones at the top?

I do other consulting work, and am paid very well, either flat fee or by the hour for doing it. I have made myself more valuable by obtaining professional skills and abilities. We need to do that in this industry as well. Get rid of the minimal classroom requirements, require apprenticeships just like a master plumber or electrician, or doctor. When we as an industry decide you need more than a gold cadillac, 400 hours of watching HGTV, and a glamour shot to be a Realtor, then we will find consumers more than happy to pay.

Steve: Very clearly if all agents needed to convice BUYERS to pay them a fee (as you are paid a consulting fee) then many agents would fall by the wayside.

No buyer would pay money for a part time unproven substandard lazy or unpleasant real estate agent. They would only want the best for their hard earned money.

Right now, lots of agents can survive because buyers are not that choosy....why should they be? They DON'T have skin in the game!

Once consumers start paying, they will automatically come to realize the value of a good real estate agent. How? Lots of them will try to do it themselves and fail.

PS I don't know Realtors who drive a gold Cadillacs....that is a little 1980's...don't you think?

Love this article! I heard this quote quite a while ago and use it when faced with this situation . . ."so and so will take ___%" "My response is that some agents reduce their commission and they should". What I think it comes down to is if I get the reduce commission response, that I have not made a good enough presentation to show the value on what I do. At that point I review again what value I am bringing and the list of what I am doing for them. Then I ask them what part of my service they are not interested in having.

The responses here are so interesting. There were some who actually read my rant (which I appreciate very much) and they took the time to respond. I must say that I'm extremely grateful to Janet (the creator of this post), Michael Ford, Lonnie and especially Shannon and Keith French for taking the time to so eloquently and thoughtfully either respond to my own personal experience, or for at least THINKING in terms of how this industry COULD operate, if and when forced to do so. Any one of them would have my business in a heartbeat. Oh, I know....some of you think I'm rude and a difficult customer. I'm not. I'm just not thrilled with the attitudes I see flooding the housing industry in the biggest real estate crisis this country has ever seen.

Others commenters were simply too anxious to respond, and blindly wanted to just write down their justifications for not budging. They have the herd mentality that is killing off the real estate industry as we know it today. You think GM and Chrysler were able to do business THEIR way? They did for years, and were smug in their self-righteousness too. Hey...you don't wanna buy one of our cars? Good! Go buy a Ford then!

(They did.)

Commenters here jumped onto the cow-tipping experience because it seemed like the thing to do. But they aren't overly concerned with how most consumers feel, or the hardships they're causing by "not budging". Nope. They're too excited to have yet another opportunity to hear themselves speak, and voice their own opinion while touting their "professionalism and experience".

Laura directly above is a perfect example. She obviously didn't read (m)any of the comments. She just hopped on the bandwagon because of what she THOUGHT was being said. And thus far, not a single agent has committed to an answer as to what it is exactly that they do to earn $12,000 on one single transaction.

That's hysterical. But I understand why (no one has a clue).

And for Kimberly Wilson (#89), let's just try a slightly different analogy here, k?

Let's say you're sick, but you don't have health insurance. You debate whether to go to the doctor because after all, most doctors won't take you without health insurance, and urgent care costs $100 per visit. So you take a couple aspirin and you hope you feel better in the morning.

The following week, you're feeling a bit worse. So, you decide urgent care might be your best option. You get there, and wait for 2-1/2 hours because there are simply too many other sheep in this particular flock. Finally, they call your name.

The doctor asks you the typical questions. When did it start? Do you have any other physical ailments he should know about (he's not accessing your medical records, he's simply probing to help him do his job better.) He looks at the vitals the nurse took and he sticks a tongue depresser down your throat and asks you to say "aaaaahhhh". ANY doctor can do THAT so far...in fact they ALL do!

Within 4 minutes, he says it appears you have an infection of some sort, so he writes a prescription. You're relieved that it's not life threatening. You drive over to Walgreen's and find out that the prescription is $75.00 with no generic available. You can't afford it, but you pay anyway (Doctors know best and all that jazz).

Three days go by, but you're not feeling any better. Nonetheless, you still have pills left in the prescription bottle, so you don't panic (yet). It's just taking a little longer to feel better than you were hoping.

Ten days later, you're dizzy and weak. Something's wrong. Something's definitely wrong.

But you have no insurance, and the urgent care is closed this time of night anyway. You talk to your husband and the two of you are afraid. You've never felt like this before. You call friends and ask for advice. You talk to family to see what their opinion is. Most suggest you go to the hospital, but you're thinking "Oh my god, we can't afford $2,800 right now." But your condition worsens, and you're left with little choice.

This story could get very long, so allow me to cut to the chase.

It turns out you have cancer. The first doctor's diagnosis was wrong. Wayyyyy wrong. The prescription was also wrong (it's not an infection, it's cancer for chrissakes.) No pill cures that.

Here's what I find ironic.

The doctor who misdiagnosed the symptons is licensed, certified and a member in good standing with the AMA. It's just that he doesn't know how to diagnose very well (and trust me, the education and licensing requirements YOU desperately tried to defend in your comment are nowhere NEAR what HE had to go through.) It's just that he's not a great doctor. He was also in a hurry. He's also underpaid. He also has too many things on his plate.

You'll never get your $100 back (who cares), nor will he reimburse you for the prescription you paid for. Nor will he pay any of the hospital bill, or the upcoming treatment. In fact, he's sleeping while you're at the ER receiving the devastating news that it's cancer. Your family is in crisis. You're forced to make plans for all the "what-ifs", and he won't even be awake for 6 more hours.

Tomorrow, he'll see another 45 patients.

Kinda scary huh??

Kimberly, I understand what your analogy was trying to convey. But here's my point. In YOUR example, it took four tries to find a specialist, even though each doctor was just as certified, licensed and presumably trained as the next.

In real estate, it may take 100 tries to find a Realtor worth their salt. And worth it they'll be! I don't deny nor dispute that. And those are not the Realtors I was condemning. It's the 97% of the other agents who AREN'T that star Realtor, but who still feel so completely justified in charging the same amount as the star does. And they won't budge no matter how bad their diagnosis is either.

Did anyone here notice that the DOCTOR who made the wrong diagnosis only made $100? But the Realtor who did the same made $12,000??

Now THAT is a hoot! Oh, I know one was life and death...and the other was just an extreme financial hardship. But still, don't you somehow find that ironic?

I do.

Karen

JUN

2009

Karen, My point was that your bad experience doesn't warrant your rant generalizing all of us. In your analogy the urgent care doctor wasn't a good doctor and although you weren't happy about the money spent for 'nothing', you wouldn't necessarily label every other urgent care doctor a quack who doesn't deserve to practice medicine. And every priest is not a child molester, and every CEO of a hedgefund is not a crook.

Several years ago I needed to see a specialist. I didn't randomly choose one. I searched the internet for someone who specialized in what I thought my diagnosis was. I called to ask questions. I verified the doctors credentials. And I made the right choice. The doctors charges were very high, and I didn't have insurance. But negotiating the fee was never a thought in my mind. I paid the bill and was grateful for results.

Regarding the list of things to deserve the $12,000. You wouldn't be so concerned about the list if you were happy with the results that you got. I never asked the doctor for a line item report of what he was doing and how he did it. 90% of the actual results came from the doctor's knowledge by training and experience. How could he possibly make a list of that for me? Personally I hate the list, but the list was born from consumer demand. I don't have a list. My clients trust me or they hire someone else.

I'm very sorry you had such a bad experience, but my clients wouldn't agree with you.

It doesn't take 100 tries to find a realtor worth his/her salt. Again I say, it behooves the consumer to distinguish the difference.

You could ask for referrals from previous clients. You could ask to see a productivity report of homes sold in the last 12 months and how long they were on the market, and how much they sold for compared to listing price. You could check with the RE Commission to see if any complaints were filed. And most importantly, you could always cancel your brokerage contract with the agent if you felt you were not being properly represented.

And finally, if you never intended to pay $12,000 to sell your house why did you hire a realtor in the first place? As intelligent as you seem to be, I'm sure you understood the fee structure when you signed the listing agreement. Wouldn't that be like ordering a $38 steak dinner and eating it, then complaining that the bill was too high? Checking into the presidential suite for 3 days and then complaining that the charges were ridiculous?

Sorry don't agree, when did you get your real estate license again? The commission cut is negotiated by 'you' with 'you' and is simply a business decision yes or no. That's it.

What would our clients would say if we went to their work and said no job this week if you don't work for 20% less than your current salary, or if you don't buy a new copier for the office this month. Same concept.

NEWS 11/14/07 REPRINTED WITH PERMISSION

THE FOLLOWING ARTICLE BY SHEILA CORSON AND THE OMAK-OKANOGAN COUNTY CHRONICLE, OMAK

By Sheila Corson
Chronicle staff

With the face of real estate changing across the nation, Lonnie J. Good says he wants to change with it.
In Okanogan County, Good said that "Okanogan has been discovered."

He said his first responsibility as a real estate broker is to look out for the well being of his clients.
In order to do that, Good said he has opened his own real estate office in Okanogan, L.J. Good Real Estate. And he's doing things much differently than others, he said.
Good said Okanogan County assessor Scott Furman gave a presentation at Good's former office, John L. Scott - Methow Valley, and indicated that in four years, real estate value has soared 50 percent. And it's not stopping.
Good said after moving to the area three years ago, he entered the real estate business. For two years, he worked with John L. Scott, first at the Omak office and then at the Methow Valley office, to get his required experience for being a broker.
While at his brokerage class in Bellevue preparing for his state broker's exam in September, Good said a fellow realtor said he couldn't "in good conscience" charge clients the current going rate for real estate transactions.
Good said he knew commission rates ran at 5-6 percent throughout the nation. Most of the time, any lower commission meant limited services, such as some that were only online or that didn't offer all the help of a regular real estate office, he said.
But, he added, times are changing and commission rates are coming down. They've dropped from a 6.1 percent average to a 5.1 percent average in the last 15 years, he said.
More realtors are offering services as "discount brokerages," at rates as low as 3 percent or for flat fees.
Through online discussion with realty professionals, and through information gleaned from Furman and fellow realtors, Good said he heard much about the benefits of changing the way real estate agents and brokers work.
Good said he decided to embrace the trend of dropping rates at a much faster pace. He said he will run a full-service brokerage at a 3 percent commission.
For Good, his decision also comes from personal experience. He said he has purchased homes and had to hand his agent between $15,000 and $20,000 for the sales.
As a single father for many years, the extra cash he could have saved with a lower commission rate could have gone toward school tuition, a more reliable car and other items.
The average home seller would save $7,000 in Okanogan County if sold at a 3 percent commission instead of 6 percent, according to Good.
Lately, Good said he's been working out of his home office, but he now has a building at 308 N. Second Ave., Okanogan.
Already, Good said he has called people with "For Sale by Owner" signs out front and offered them his 3 percent rate. He said one couple immediately made him their agent; they said they'd gone on their own because they wouldn't pay a higher rate.
Good said that if people's response to his agency is good enough, the new rates might spread. He said he hopes to see lower rates go nationwide.
"Starting a business in real estate right now should feel like a real risk and yet with my philosophy and determination to make this work, I couldn't be more excited," Good said.
Good's also lists property online in a manner different from most. He said he has created movies in Windows Movie Maker, which he posts on his Web site and on YouTube for easy access.
Good also plans to recruit a few agents for his Okanogan office, he said.
When he's not in the office, Good said his passion is music. He and fiancee Teresa Sawyer are in a group together and perform, and have a CD.
He has two children at home, ages 11 and 13, one in Omak School District and the other in Okanogan.
Good also is a licensed pilot and pioneered the Washington chapter of non-profit Wings For Christ, which focuses on getting mission trips into Mexico, he said.
After being in the aviation industry for 20 years, including a while with Boeing, Good said he hopes to get the organization re-established in the area.
Good is a member of the National Realtors Association and uses the Northwest Multiple Listing Service. He can be contacted at 422-1400 or e-mailed at lonnie@ljgood.com.
His Web site has more information at www.ljgood.com.

LJ,

i'll be interested to see if you can make it with a 3% plan for full service. i suspect that the more experience in the endeavor will bring a modification to your price structure that accommodates more scenarios. specifically, i'm not sure how you'll be able to compensate an affilliated agent with a point or less for his side of the transaction. i also think you'll have an issue with offering just 1.5% to the selling side...co-op agents are NOT obligated to show your listings...this is a common misconception.

the realities of maintaining a viable business mean that there are certain facts that must be accepted...some of the homes in your trade area are very inexpensive (i wish we had those prices down here!). please correct my math if i am missing something but for an $85,000 home you are offering $1,275. if i have a broker to split with that leaves very little for my share. this illustrates why the six percent commission arose and became "standard". the price point of the smaller deal means that some transactions MUST be charged a higher rate of commissions simply for them to make economic sense for the players.

your plan is a valid one, and the motive is certainly solid, but i think it needs refinement

JUN

2009

I think #5 and #6 are common excuses. Insightful post Janet.

Michael

I have made some adjustments since that article broke, i.e., To be rock solid on the 3% the home needs to be worth at least $150,000. below that we make adjustments... but even the least exspensive home is still listed at less than what appears to be the normal "6%" commission.

In this time of America's crisis there is one group of people that could make a difference... it's us. It's the people who set the commission. And since the houseing market is what got us here in the first place we should be the first to step up. I, personally, feel that I am making a difference here where I live..... I can count the thousands and thousands of dollars that I am responsible for putting back into the economy via lower commissions. Instead of putting it into my personal economy. If we all did this there would be a wave effect. We, as a group would be remembered for making a difference instead of causing the problem. It's simple. It's real. And it works.

JUN

2009

VERY interesting conversation! Lots of differeing viewpoints and beliefs - including unhappy consumers (which makes me wonder about a lot of things!) I have cut my commission at times. I do it reluctantly - and rarely any more (both sides usually and negotiated up front, although I'm going to do less of that too) -- because I find that those are the people that are more difficult to work with. I also agree with whoever it was that said, people often think you were overcharging in the first place, if you discount. WHat I liked most about the post was the point that first you have to figure out that you are negotiating with yourself first - before a seller even asks the question. WHich makes it seem to me that I need to know what my fees are, and why I am worth that, and talk about that in the listing presentation -- or in the first meeting with the buyers. thanks for the thought provoking post.

JUN

2009

This was a great discussion. I agree that cutting commissions for anyone is not worth my time. I think REALTORS should be treated as professionals. What lawyer or doctor would cut their fee? I think we should take a retainer fee from our clients. If they are paying for our services up front like contractors, doctors or lawyers just to name a fee I think we would be treated like the professionals that we are. When I get calls from vendors that want me to invest in their services like lead programs or websites I ask them if they will let me pay them when I get paid. You know what that answer was so why should we wait? I also think that not paying a retainer fee hurts the marking of a home; I've heard agents say that they are not spending money on their listing because had to cut their commission to get the listing. I am knocking people who do; I understand why; but I think agents that do hurt themselves and the rest of the agents. Agents work hard for their buyers and sellers they should be paid for it.

JUL

2009

Janet. You are completely right. If you cut your commission...you are telling the Client that your services are not worth the Standard amount. I sometimes charge MORE than the going rate and Clients respect the fact that you get exactly what you pay for.

NOV

2010

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Janet Guilbault California Mortgage Banker

Walnut Creek, CA

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RPM Mortgage

Address: 3201 Danville Blvd, Suite 195, Alamo, CA, 94507

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