Do your clients understand how you're paid?

It is a shame that Realtors are still agreeing to lower their commissions - especially since transactions are more complicated than ever, with all of the special short sale and REO rules and requirements.  Our clients are hurting financially and it seems to them that we are making a ton of money on their deal.  It isn't really their fault that they have that impression.  Three or 6 percent of hundreds of thousands of dollars does sound big - but that is not what I get paid.

Perhaps we need to spend a moment with our clients to explain just how our commissions are earned and what percentage we actually receive individually.  And it has been my experience that many people don't understand how we get paid.  I talked to a gentleman recently who supposed that I was on salary with Century 21, and that any commission was on top of that.  Wrong! 

And more than a few people have said things to me that makes it clear that they are confused about this.  I offer to help prospective buyers find their perfect home, and a few have told me that they didn't want to take up my time, since they didn't have a house to sell and they "knew" that only the listing agent makes any commission.  Wrong again! 

Meanwhile, others think that as buyers, they will have to pay the commission of the agent on their side of the transaction, and that this is an additional cost for them on top of the purchase price.  They do not understand that the commission offered by the seller is divided so that the buyer doesn't pay any of it.

And unless we tell them, we shouldn't expect them to understand that we pay for our own marketing, flyers, ads, signs, etc. out of our commissions, or how many hours we spend researching on line for our clients and previewing homes for them - without pay.  Nor do we get reimbursed for all of the gas we put in our cars or have any car allowance. 

We shouldn't tell our clients a sob story, but when you are telling them what services you will be providing for them, why not list some of these things and mention that you have a huge incentive to help them sell their home or buy their new home because you get paid nothing unless you find the right buyer or seller for them, and that you don't get reimbursed for any expenses you make on their behalf.

It's clear that no one who is discussing the stimulus packages and bailouts is going to do anything for Realtors directly, and we have to hope that we will eventually benefit from them, but meanwhile we should be helping ourselves by making it clear that we are not reaping in huge piles of cash at the expense of the buyers and sellers.  We can be our own stimulus package if we stop discounting commissions and instead epxlain the value we are giving them for our compensation.