Do You Know Why You're Paid on Commission?

I was reviewing my RSS reader feed this morning and came across a post on InmanNews entitled, 4 ways to justify your real estate commission.  Now, to be fair, I didn't get to read the whole article because it was a premium piece and I was out of the 'window' for the free look.

However, the premise was clear.  A seller, who had sold a 4 million dollar home, thought their agent was great at their job but didn't feel that they had done $200,000 (the commission) worth of work.  So the author was giving four different ways us agents to prove to sellers why we're worth the money.

I thought to myself, "we really need four reasons to justify why we get paid?"  Again, I didn't read her four ways, but I'm sure that they were the standard things like "Well, I advertise here" "I market better than the other agent" "I do this" and "I do that."  We all want to tell the seller how good we are at what we do and that we do so much to get their property sold.  In truth, none of that matters.

Getting my ACRE^® designation taught me a few things about the real estate business that most agents never learn.  Whether you agree with their ideas on fee-based service vs. commissions or not, I'd urge anyone serious about this business to get this designation.

One of the key tools in ACRE^® is learning why agents get paid what they get paid via commission. It's not about how much work you do.  It's not about how much you market, or how successful you are or any of the other things we, as agents, usually say to justify our commission fee.  Commission is all about risk.  

Again, Commission is all about risk.  On a full commission sale, the listing agent, not the seller, takes on ALL the risk of selling the property.  The listing agent pays for advertising, invests their time and hopes that the seller will follow their advice on staging, showing, etc. AND that they will actually acceptable the offers that come in on the property.

The simple truth is that as listing agents, we can bring offers to the sellers every single day that the property is on the market and the seller does not have to accept ANY of them.  By taking a listing on commission, the listing agent is betting on theirself, that they can help the seller price the home properly, advertise it to get buyers in the door and then be able to show the seller why the offer should be accepted.

Know why you are paid on commission and never have to justify your fees again.