After reading just too many complaints about commission rates....about clients negotiating commission rates.....about how to deal with negotiating commission rates, about negative comments about clients or prospects negotiating rates, I had to say something about it.
It is absolutely OK for your clients to ask for commissions reductions. Moreover, you should expect your client to ask for commission reductions. And a double "moreover", you should expect only people that do not like to negotiate not to negotiate commissions (that was a mouthful of double negatives).
SIDE NOTE: We are in a totally different world than we were in year's past. Though that statement has nothing to do with my position it does have alot to do with society as a whole. 20 years ago communication was quite limited compared to what it is today. Today we can learn just about anything we want to learn in a minutes notice via the internet, TV, radio, etc..... These mediums are dramatically different than they were 20 years ago......heck, 5 years ago. Many of us remember when we had but a handful of TV stations, one or two talk shows on the radio, and pre-internet. Thus, what we are learning and taking in is substantially different than previous years. Thus, we are all becoming "experts" at more things than were previously though possible. Now back to commissions. NOW WHEN I REFER TO COMMISSIONS, FLAT RATE FEE PROGRAMS WILL APPLY AS WELL. SO IF YOU ARE A FLAT FEE AGENT, MERELY PUT IN FLAT FEE IN LIEU OF COMMISSIONS.
You cannot go anywhere without hearing about negotiating commission with a real estate agent. Go on line to a zillion real estate blogging sites. Turn on the TV. Turn on the radio. We have all heard or read a tremendous amount of topics on negotiating real estate commissions. Some of these comments are by some extremely well respected individuals who people follow their advice to the "T". So many of us hear or read these comment and we cringe and get angered. It is human nature to get angered by some individual making a comment about someone else's industry without that individual really knowing that industry. Well, we can cringe all we want, but that wont stop the comments from being made. We can always reply to a blog, or call in to a radio talk show, or comment on the internet about a real estate show.........but it will continue.
We real estate agents, for the most part, are all in business for ourselves and we know what our profit margins are based on our models. Some have models for "x" fee, some have models for "y" fee, some for "z" fee and so on. We know what we personally do and what percentage it takes in order to make a profit. The media tends to put all of us in a little box rather than boxes of assorted sizes. Thus, the perception is throw out that agents make a gazillion dollars on each transaction......as...hey, it's simple, just do the math. Even my step-dad told me last week after I closed a $700k home "wow, you made $42,000 in a day". Mind you, if I have been in business for 28 years and have tried to explain this to him for 28 years and failed, why would it be a mystery to me that others would not understand this as well.
OK, my step-dad may be to the extreme, but that is the perception of many....including the internet, TV and radio. So if you thought someone was making that kind of money for just throwing a house up on the MLS, would you not want to negotiate the commission down? I mean, that is an crazy amount of money for typing in a few words and putting a sign in the ground, right? That's is the perception that is being thrown out to the world and more so in today's market than ever because of the massive increase in communication.
So knowing that most people are being fed this information from multiple sources, why would you not expect someone to ask for you to cut your commission. I think it is not only understandable, I believe it is to be expected from prospects or clients. Moreover, I am usually a bit shocked when someone does try to negotiate. It is our job to professionally re-educate prospects and clients on the reality of our business. Why would I expect the public (or media) to know how expensive it is to run a real estate operation if they have not been in our shoes.....and are constantly being fed misinformation?
The point that I want to get across is to expect each and every prospect or client to try to negotiate commissions at some point in the real estate transaction process. Our society has told them to do this. Thus, they will. Therefore you have to have a script to handle this as you would with any other objection. It is a must as if you fumble with your words you will appear as if you actually are making as much as they think you are. If they don't ask, great.....but don't expect people not to ask.
Like I have said so many times before, it is such a simple mindset change, and you will enjoy your job so much more.
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I recently had a clients ask me, "will you reduce your commission because you sold the home so fast?"
My reply was, "No, but I wont charge you extra either for doing such a good job."
The client asked and that was the end of the conversation. My feeling is that I negotiate my fee in advance in most cases and unless there are some extenuating circumstances it is not necessary to re-enter the same negotiations.
I personally don't like it when someone tries to neogitate the price of an item AFTER the service was already performed. It almost blackmails the service provider into having to discount since they have already done the work.
Imagine if Joe Public went to his job at the factory and at the end of the week his employer called him in for a meeting to discuss the idea if he would be willing to take less for the past week? Not next week, but the week he already worked! It is the exact same thing when a client wants to negotiate AFTER a transaction is arranged.