DISCOUNT COMMISSIONS....love em or leave em?

By
Real Estate Agent with Align Real Estate 1219426

 

DISCOUNT COMMISSIONS.....love em or leave em?

 

discount commissions

 

What is it about commissions that gets people sooooo excited?  

When you talk about discount commissions with Sellers, does it get their attention?  Absolutely!  Do they love it?  Absolutely!  Especially in this current 2013 Seller's market that we are now experiencing here in the Sacramento Valley.  

Well, that's just dandy, but boy it irritates the Selling Agents.  And they surely don't hesitate to express their dislike and disapproval about them.  What makes the Sellers (who love it) different from the Selling Agents (who don't).....aren't they similar to Buyers and Sellers?  Absolutely!!!

So, let's do a tongue-in-cheek comparison here, shall we:

 

Buyers want to acquire properties at the lowest price possible and they want that property to be in the best condition.  Sellers want the highest price possible and would prefer to do the least amount possible.

 

Compared to.....

 

Sellers want to pay the lowest commission for a "full service" listing.  Agents want the highest commission with the least effort and expenses possible. 

 

As Realtors, we accept the first scenario (hopefully with grace and dignity) much easier than the second scenario, because we all know that is the nature of real estate.  However, in our current market, isn't the second scenario also the nature of real estate market?  

If it takes one week (or less?) to put a new listing into escrow, why wouldn't the listing agent agree to reduce their commission, get the house quickly sold for top price and move towards closing that new Buyer?  What "full service" did you provide that is justifiable marketing, advertising, etc. warranting a 6% commission?  If you accept less than 6% commission and quickly put that house into escrow then you have the time and energy available to move on to the next listing or Buyer, right?  Right? RIGHT!

I realize as a Buyer's agent who is constantly out there pounding the pavement....aka writing 20+ offers and PRAYING that one gets accepted for my Buyers...that accepting a 2% commission is painful, but I'd rather get something rather than nothing.  Let's face it....we all know that this market can be tough (Hmmmm, I was just writing about a "tough" market a year ago but it was a completely different "tough" market!), and as agents we also know that sometimes Buyers will go directly to the listing agent to "cut a deal" so why take that chance and poo-poo a reduced commission?

I've been selling real estate here in the Sacramento Valley for 16 years, since I was licensed in 1997.  I represent both Buyers and Sellers, equally.  I'll admit I've never been particularly fond of reduced commissions....until now.  I see them as an opportunity to set myself apart from my competition.  I see them as an opportunity to put more money in my client's pocket, even though it would appear I'm putting less in my own.  I see them as an opportunity to put a deal together....where perhaps there wasn't one.  I see them as....

 

Opportunity Knocks

 

What do you see them as?

 

Shelly Long Sachs

RE/MAX Gold Real Estate

shellylong@att.net

916-806-4663

 

Posted by
Shelly Long , Realtor

Cell  916.806.4663

RE/MAX Gold Real Estate

2340 E. Bidwell Street, Folsom, CA 95630

CA DRE #01219426

Successfully representing Buyers AND Sellers since 1997!

 

 

www.shellylongteam.com

Comments (20)

Frank Nolan
Nolan Realty Team / Pacific home Brokers - Palos Verdes Peninsula, CA
Jump and the net will appear

I see them as a bad precedent. Just because listings are being sold in a week right now it doesn't mean it will always be like that and once you set a precedent like that......

Apr 15, 2013 04:48 PM
Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836

It is 1:45 AM and I just read your blog, Shelly. Will wait until 8 AM and think over what you discussed on 'discount commissions.' It has been - as you say 'tough markets -  for a long, long time. Many in the field of real estate have been strugging. There are many way at looking at the premise behind your thought. Will read it again in the morning.

Apr 15, 2013 04:48 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

Market is good, I see no reason to discount yourself. I believe I provide service for my 3% and sometimes I don't think even that is enough. Some escrows are particularly stressful and painful and only a skillful agent is able to keep all team together and skillfully navigate though all stresses that buyers and sellers go through and successfully close the transaction.

If an agent is not able to negotiate his/her commission, how this agent can be trusted in negotiating of the whole transaction?

Apr 15, 2013 05:25 PM
Shelly Long-Welborn
Align Real Estate - Sacramento, CA
(916) 806-HOME Sacramento Real Estate Lady

Frank Nolan...thank you for your honest comment.  I am setting that precedent for myself because I feel that the market warrants it, but that doesn't mean I will forever be willing to do it.  I reserve the right to change that offer according to the demands of the market.

Apr 15, 2013 05:53 PM
Shelly Long-Welborn
Align Real Estate - Sacramento, CA
(916) 806-HOME Sacramento Real Estate Lady

Inna Ivchenko...thank you for your honest commment.  I agree entirely with your comment in terms of how some transactions are much more difficult than others, and they absolutely warrant 3% commission, if not more.  However, at the end of the day, we all know that some are also much easier than others and they all balance out.  

I don't agree with your final comment, however.  This is not about an "inability" to negotiate....anything.  

Apr 15, 2013 05:59 PM
Shelly Long-Welborn
Align Real Estate - Sacramento, CA
(916) 806-HOME Sacramento Real Estate Lady

Jane Chaulkin-Schott....it's 1am here now and I'm tired too. It's been a long and productive day, but time to close this computer.  I look forward to hearing your comments tomorrow~  Thanks!

Apr 15, 2013 06:01 PM
Shelly Long-Welborn
Align Real Estate - Sacramento, CA
(916) 806-HOME Sacramento Real Estate Lady

More food for thought....  A local Realtor wrote this blog yesterday....coincidentally?

 

If you hire a Realtor who is willing to discount their payday (i.e.–the commission),  how much will you wind up discounting YOUR payday (final net income to you from the sale of your home)?  I work hard for my clients–getting a home in the appropriate contract to protect my sellers is not a push button process. Getting an escrow closed with minimal bumps is not on autopilot. Every escrow is difficult these days, despite the higher demand than supply. Money is funny with these lenders and every escrow is bumpy.  I work hard, have self-respect and look forward to your closing!

If a discount Realtor has so little self respect to discount his/her payday-just to get your listing, how much respect will they have for your payday???  How much will they “discount” their work to match their pay? Less hours working for you, less attentiveness to detail, less personal service. Why would a Realtor working for less go back and forth with a buyer’s agent, negotiating the best transaction for you, the seller, when they are getting paid less?

 

I love when Realtors get this excited!  I find it absolutely absurd that someone would insinuate that discounting your commission has ANYTHING to do with no self-respect.  Come on folks....let's look at the economy as a whole.  People are discounting many things in order to sell them.  We provide a service.  We have the right to discount it or not, and doesn't have anything to do with our self-respect, the job we do (or don't do) or ability to negotiate a GREAT deal for our clients.

I suspect this blog post will generate some very heated comments, but that's okay....this is the blessed USA and we have freedom of speech.  I don't have to agree with you and you certainly don't have to agree with me.  However, please don't slam me as incompetent or lacking in self-respect just because you don't agree with me!

 

Apr 15, 2013 06:38 PM
Pat & Steve Pribisko
Keller Williams Greater Cleveland West - Westlake, OH

Shelly, I am not in favor of those seller's agents who have discounted commisions; as, when we are representing a buyer, we end up doing all of the work.

Apr 16, 2013 01:44 AM
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Shelly  GREAT blog and suggested.  Welcome to ActiveRain, you will love it here.  I will write a blog today to answer some of this flap.  Incompetent or lacking in self-respect...not a chance.  You rock!

Apr 16, 2013 04:47 AM
Shelly Long-Welborn
Align Real Estate - Sacramento, CA
(916) 806-HOME Sacramento Real Estate Lady

I see that another Realtor re-blogged my post and as a result MANY of the agents commenting on her blog are suggesting that reducing your commission results in limited service.  This is IMHO very "limited" thinking.  Perhaps some agents do just that, but not this one.  I have NEVER provided limited service to any of my clients, buyers or sellers.  I believe in doing a job well and having pride in my work/service.  

Many times I've had to pickup the slack of another Realtor, regardless of the commission.  Again, it's an ebb and flow...work ethics, morals, integrity and money.  Some of us have it more than others.  That what sets us apart....as Realtors and as people.  I choose to go with the flow...sometimes for less, so I can help others, which helps me in the end.  Perhaps best viewed as making more in the long run due to more flow...  Again, this is in my humble opinion.  

Thanks to all who commented and/or read the post.

Happy Tuesday....and Go Sell A Home~!

Apr 16, 2013 05:16 AM
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Shelly   I wrote my blog and credited you for inspiring it.  Enjoy the day!

Apr 16, 2013 06:52 AM
Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

Well..I do have a couple of issues..first, it's up to you what you will charge your clients for the services yu provide.  I don't get mad at Realtors® who charge a flat fee or "discount" their services.  In all actuality, since commissions are negotiable and no SET fee, discounting is a farce...but that being said, I do charge a certain amount.

However, my problem with your post stems from the premise that I should reduce my fee based on the length of the listing..this will give me a quicker turn around time in your estimation allowing me to reduce my fee with another seller and "get more' listings.  

Would you surmise then that I should charge more for a listing that is on the market longer?  I am guessing your answer would be no since that doesn't really make any sense.  Nor does it make sense to charge the seller less just because their home sells quickly.  This means that the price was right and my marketing worked and the stars lined up..but my fee isn't just based on the pricing and marketing of the home, my fee is based on taking that seller from listing to closing as smoothly as possible and to do that requires more service then just sticking a sign in the yard and hoping for a contract.

This is what I base my fee on.  

When you arbitrarily state as a professional in this arena that "why wouldn't you reduce your fee" if the listing has a quick sale then you tell consumers that what we do doesn't have a lot of value. 

Again, I don't care what a Realtor® charges..up to them as it's their business and I don't discount anyone's model..so please don't misunderstand.  

 

Apr 16, 2013 09:31 AM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Shelly, the days on market for a listing now-a-days is tip of an iceberg. There is lot of work going into listing process itself - so I'd say, even when houses are selling quickly, it really is not helping the listing agent much - except that they get paid sooner! 

Apr 16, 2013 01:46 PM
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Shelly,

You raise some great points here.

There are a couple of things that sellers need to understand about deeply discounted coop commissions.  Most of the buyers' agents have their own agreements with their buyers, and especially in a sellers' market, that could include the buyer paying the difference between the coop commission and whatever the buyer agency agreement calls for. 

The end result is effectively increaseing the the cost of the discounted listing to the buyer and decreasing the appeal of the property - and perhaps the buyer agents' incentive to sell it.  Also, it is going to be difficult for a listing broker who deeply discounts a commission to offer the level of service that keeps up with the competition.  I double the a Sell-Your-House-For-Cheap-Realty firm could match my company's professional photography, professionally produced brochures, staging, and other efforts to maximize it's exposure to the market. 

In this type of market, anyone can sell a house fast.  The idea is to sell it reasonably quickly and for top dollar - something that takes great market exposure and then being professional enough to help them pick the best of the offers that come in.

Apr 17, 2013 02:12 AM
Micheal St. Peter
The Bayshore Group - Traverse City, MI

Paticia- Great response, I agree completely

Apr 18, 2013 03:11 AM
Frank Nolan
Nolan Realty Team / Pacific home Brokers - Palos Verdes Peninsula, CA
Jump and the net will appear
Hi Shelly, First let me say that i think it is totally up to you what % you charge your clients, however I disagree that the precedent being set is only for yourself. Don't forget unless you are listing AND selling your clients house, your discount is affecting the buyers agent as well. So if you take a listing at 4% you have just reduced the buyers agent commission as well, UNLESS of course you are only taking 1% and giving the buyers agent 3%. If that's what you are doing, then I agree you are only setting a precedent for yourself. Is that what you mean?
May 02, 2013 03:59 AM
Angela Fish Chan
Rockland County Real Estate LLC - Nanuet, NY
Licensed Real Estate Broker Owner

Brenda:  Great great great response.  Well said.  I absolutely agree.  I've been working with a buyer for over a month now.  Look's like the one they want is a discounted buyer fee.  I'm not greeeding and I would NEVER steer away a client from the best house for them.  BUT, I've worked very very hard and this bites.  I think the listing agent does a great disservice to our profession by discounting.  What we do is so much more than sticking a sign in the yard. We have to as agent develop the skill set of showing our value to our clients.  It makes such a difference.

 

 

Jul 25, 2013 01:38 AM
Anonymous
Sterling Watkins

Ran across this blog post and had to comment (even though it's not recent). I concur with your comments Shelley. I've been in the business for over 30 years and it's never been easier to promote our listings, handle contracts with electronic signatures, converse via e-mail, text, etc, and we can reach each other by phone in almost any location.
I sold my first house for $24,000 and today my average sales price is nearly $400,000. Should I be charging fees commensurate with that increase? That's $1,440 then vs. $24,000 now, at a 6% rate.
I can't answer that for other agents, but I now do a higher sales volume while providing full service to my clients, all with a "set fee based" program.
I'm happy and my clients love it.
That being said, IF the average marketing time to sell a home doubled, would my current business model still work? Probably not. I might need to adjust fees to make it possible to keep my doors open.
Any agent can cite that "problem listing" with the "unreasonable seller" as the exception, but who said you HAD to take that listing? Work with reasonable people and you can stay profitable charging less than traditional rates, in my experience.

Jan 26, 2015 03:43 AM
#19
Equity Assets Real Estate Inc. - Jason Nenadov
Equity Assets Real Estate, Inc. - Jason Nenadov, REALTOR® - Fresno, CA
expert advice and services to buyers and sellers

Now I am seeing "open listings" which are essentially glorified FSBOs.  The listing agnet is out of the area and there is ZERO commission offered to the selling agent in MLS.  In the agent remarks the listing agent says that the selling agent's commission is negotiable directly with the seller and their contat info is listed there.

Mar 23, 2015 04:34 AM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

The time for the "discount" versus "traditional" commission has come and gone.  The new words I see from consumer posts all over the web are "reasonable" and "exorbitant". 

Sep 14, 2015 09:07 AM