Why Real Estate Agents Shouldn't Reduce Their Commission

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Real Estate Agent with Online Real Estate Agent Training
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Why real estate agents shouldn't reduce their commission sounds like a no-brainer.

But if you've been a real estate agent for any length of time, you have been asked to reduce your commission.

The question I always ask myself is this, "Why do people think it's okay to ask their real estate agent to reduce their commission?"

Do they not understand that this is our job, how we pay our bills and how we provide for our families?

Why should a real estate agent donate money to help you buy or sell your house?

Ask Your Doctor to Reduce Their Fees

What other profession do they ask for a reduction in fees or are we just that special of a group?

Can you imagine going to the doctor for a check up and asking for a reduced price?  After all, the doctor only spent 15 minutes with you and didn't find anything wrong. Why do I need to pay the entire $450?  How about knocking off $200...and you can forgot about that co-pay.  Why should I pay that?

That scenario would never happen, yet real estate agents must defend their fees at every turn.

Just like any other professional, you are paying not just for the service provided, but for the knowledge and experience of the provider.

Real estate agents are required to complete a certain number of continuing education courses to maintain their license.  In addition to that, many agents take seminars and attend conferences to improve their skills.  Good real estate agents are consistently looking to improve their business and deliver five-star service to their clients.

What's the Problem?

In my opinion the reason people feel it is okay to ask an agent to reduce their commission is two-fold.

First, the consumers need to be educated as to what real estate agents actually do.  All they see us doing is showing beautiful homes, wearing nice clothes and getting "high" commissions for what looks to be very little work.

What they don't see is what goes on behind the scenes.

Showing houses is about the easiest part of being a real estate agent.

Getting the property to settlement is a completely different story.

What Happens Behind the Scenes

We are behind the scenes making sure that everything gets done in a timely manner.

  • Negotiating home inspection repairs
  • Making sure the appraiser gets to the house and providing the necessary comparables
  • Talking to the lender to ensure they have received all the required documentation
  • Working with the settlement company to resolve any title issues

There are a lot of moving parts and numerous people involved in the transaction.  The job of the real estate agent is to coordinate all of the parties so settlement happens on time.

Being a Real Estate Agent is Easy

The second issue is that good real estate agents make the job look easy.

Good agents will never let you see what is happening behind the scenes.  It could be a difficult agent, an appraiser that used the wrong comps or an unresponsive lender.  The real estate agents shields any chaos from the client.

As a result, the client thinks that what we do is easy.  I can't tell you how many agents become agents because they just bought a house and thought they could do the job.

Upfront Costs Real Estate Agents Hope to Get Back

Agents spend a great deal of money upfront, with the hope of making money in the future.

For example, when we get a listing we may pay for:

  • Staging
  • Professional photographer
  • Marketing pieces
  • Postage
  • Sign installation

These things have to be done just to present it to the market and there is no way around it.  This doesn't include any items that we pay for that the seller reimburses us for or the time we spend meeting contractors at the property.

How the Commission is Divided

The commission we receive may look big to the untrained eye, but the agent knows that from that commission:

  • The broker gets a share
  • Set aside money for income taxes
  • Pay for health care
  • Save for retirement
  • Pay business expenses

This is just the bare minimum.  By the time you deduct these items from the commission, it's not as much as you think.  What's left is used to pay bills, donate to charities and other things.

To add insult to injury, when you do reduce your commission, those clients are usually the most unreasonable.  As a result, throughout the entire transaction you're kicking yourself because you are working at a reduced rate.

Time Has Value

Real estate agents work too hard to ensure our clients have an excellent real estate experience.  We negotiate offers that fall through due to appraisal issues, home inspection issues and title issues.  All in the hopes of making it to settlement so we can see a commission.  All of this takes time and time has value.

In a hot market where you face multiple offer situations on a regular basis, it's not uncommon to write four or five offers for one client.  That takes a great deal of time.

As with every profession there are those agents who don't do the work or put in the effort.  However, the majority of us go above and beyond to make sure our clients are represented well.

To ask a real estate professional to reduce their commission is like a slap in the face.

Enjoy less stress by having smoother transactions by implementing these simple strategies today!

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In 2016, Inman News named Candy Miles-Crocker as one of the Top 25 Real Estate coaches in the United States.

Candy,  “The Real-Life Realtor”, coaches, mentors and trains new and experienced real estate agents to transform their business by mastering her proven systems for success.

She is a firm believer in managing expectations.

Her goal is to elevate the perception of real estate agents among the general public through education so every client has an amazing real estate experience.

Candy’s unique training methods have shown agents what it takes to be successful!

Learn more about her training program at www.RLRETraining.com or send her an email at Candy@RLRETraining.com.

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Posted by

Candy Miles-Crocker

Real-Life Real Estate Training

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. M.C. Dwyer 12/06/2018 08:20 AM
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Rainmaker
1,351,560
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

Great points. A good real estate agent does a lot of work that is never seen by the clients. The process does not work as it appears on Reality TV. 

Dec 01, 2018 04:16 AM #1
Rainmaker
3,412,246
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Candy. During my years of practice I never reduced my commission. I have a lot of education but while that helped, it was more about the service I brought to the table which was generally more than many of my colleagues. I actually charged a higher commission than most but my sellers sold for more so it was offsetting.

Dec 01, 2018 05:29 AM #2
Rainmaker
3,720,194
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Candy Miles-Crocker ,

OMG..how have I missed your posts? I'm so glad that Carol Williams feature this post in her Second Chance Saturday series! Loved it! Time has value and we are worth every dime of our commission!

Dec 01, 2018 07:13 PM #3
Rainmaker
1,045,655
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

Regardless of how you educate your clients, sometimes the dollar is all that matters. And the reason they ask for a reduction is that they like you and may want to hire you - but someone HAS offered or agreed to a reduction. As long as other agents continue to reduce their commissions to get listings, we will always be asked this question. 

Dec 02, 2018 04:30 PM #4
Ambassador
3,859,078
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Candy

You’ve certainly outlined a very compelling argument for keeping commission intact. I find many sellers really do not understand all that goes into our role, even when things go beautifully!

Jeff

Dec 03, 2018 09:28 PM #5
Rainmaker
3,088,866
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

This post is a good teaching post for entry level agents, I am always amazed that without asking they drop their fees...in 24 years I can count on two hands how many times I was asked to reduce my fees... Part of it is I suspect in delivery and confidence of the person that is being asked, Endre

Dec 03, 2018 11:08 PM #6
Rainer
15,727
David Smith
Brokers Guild Classic - Lakewood, CO
Residential and Commercial Broker

Maintaining a policy of not cutting commission can make competing for some business difficult, but as you point out, taking cut rate business is equally costly! 

Dec 04, 2018 07:10 PM #7
Rainmaker
1,482,380
Amanda S. Davidson
Amanda Davidson Real Estate Group - Alexandria, VA
Alexandria Virginia Homes For Sale

Candy, you make excellent points in your post. I agree that a big part of it is not seeing what goes on behind the scenes and not realizing what shows on the settlement statement isn't our take-home pay. Agents are also part of the problem, too many are willing to lower their commission just to get a client and it opens the door for the question to be asked over and over again. The really good agents rarely if ever do it because they know how to convey their value. 

Dec 05, 2018 04:55 AM #8
Rainer
116,124
Anne Corbin
Long and Foster - Lake Anna - Spotsylvania, VA
Serving Lake Anna & Central Virginia

I always wonder who came up with the commission pay structure for realtors? We should be paid by the hour like accountants and lawyers plus expenses!

Dec 05, 2018 06:06 AM #9
Rainer
271,796
Ron Aguilar
Continental Mortgage - Saint George, UT
Mortgage & Real Estate Advisor since 1995

Excellent post to talk about, especially in this changing environment. I wish the consumer could read this information so that an Agent would not have to justify their hard earned compensation.

Dec 05, 2018 09:14 AM #10
Rainmaker
486,324
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

I agree with you.  I rarely get asked to reduce commisson--if I do, it's usually b/c a competing agent has said they would reduce theirs! Or, a discount broker is involved--recently I had a prospective buyer ask me if I would 'rebate' any of my commission back to her--like other brokers do,  (not sure which ones, probably a start up).  Anyway, I always want to shoot back with something like: Can I have jpart of your salary but I don't.  

Dec 05, 2018 09:34 AM #11
Rainmaker
134,087
John Henry
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Luxury Custom Home Design

This is a good list of activities that describe the work of a real estate agent.  You would be surprised how many other related professions have requests for fee reduction.  The AIA at one point was suggesting a fixed fee of 18% to design a house.  They were sued.  It seems doctors and real estate agents have had somewhat fixed fees for services rendered for a long time.  Doctoring has insurance tied to it unlike real estate activities.  Lawyers have ranging fee schedules.  Homeowners have to negotiate the value of their houses.  Nearly everyone has to negotiate fees... except for real estate agents??

Dec 05, 2018 04:28 PM #12
Ambassador
1,577,381
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I always hated listing appointments and I know that many people are good at it. For me it always seemed like a cattle call and the question is who can drop their drawers the fastest and be the most cut rate agent there.

Dec 06, 2018 06:17 AM #13
Rainmaker
353,386
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

What a great post Candy Miles-Crocker .    I'd love to reblog this - is that okay with you?    Truly, the mark of good agents is that they "shield any chaos from the client."

Dec 06, 2018 08:08 AM #14
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Candy Miles-Crocker

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