Well I thought that this article was very interesting, so I have decided to re-blog it so additional readers can also see this information. Enjoy!
I had a new buyer client ask me yesterday if I rebate part of the commission to clients. He wanted a full point, 1% of the total sales price or 1/6th of the total commission the Seller is going to be paying. I have never had a prospective client ask me that. It caught me off guard.
Just for starters, it is a violation of Texas licensing to pay a real estate commission to an unlicensed individual. I know that Relo companies do it, but I don't know what sort of hoops they have to jump through to avoid the legal issues. Paying a real estate commission to an unlicensed person is the edge of a cliff. Once I know where the edge of the cliff is located, I spend the rest of my time staying as far away from that edge as I can manage. I don't want to know what I have to do to be able to dance on the edge.
I didn't explain that to this buyer. Instead, I explained how real estate commissions work. People see that big number and they start thinking about the stereotype Agent with the Rolex and the Lexus. Very few people outside the industry understand just how flawed that stereotype is. I tell people but they don't believe it. I don't know why people are so resistant to the reality but they are.
The buyer client didn't understand that the 6% gets split between the Buyer's Agent and the Sellers Agent. I walked him through the fact that as a Buyer's Agent, there is really only 3% on the table. The Listing side gets 3%, the Buyer's side gets 3%. And, then both of those agents get to share the money with the company who has their license. The company gets part of that 3% and so do I. I explained that if I were going to give away 1/3rd of the total Buyer's Commission, it certainly wasn't going to come out of The Company's share, it was all going to come out of my share. If I gave him one full point out of my share, there wouldn't be enough left on the table to compensate me for the job he wants me to do for him.
The entire time I am talking, I am watching him. It becomes increasingly obvious that he isn't being persuaded by how it might impact me to give away my paycheck. It was at that point that I remember the lessons I learned in Salespersonship 101. The Salesperson has to explain to the other person what is in it for them.
So, off I went in a completely different direction. The reason this buyer wants to hire me, even though he is not going to get money back, is that he is hiring a lifetime of experience. He is hiring my expertise and negotiating skills. If I can't save him substantially more than 1%, then I haven't been given the opportunity to do the job the way I believe it can and should be done. I know that I can deliver that deal for him because that is what I do.
Did he hear me? I don't know. We will see.