The Worst Way To Explain Your Real Estate Commission To A Client

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Education & Training with Demetree School of Real Estate

I recently saw a list of 184 things that Realtors do to earn their commission. Many items on the list were items like, “Send a confirmation email for listing appointment.” Seriously! Another one was “fax copy of purchase agreement to lender.” Is that worth a five-figure commission? Or is that worth $15 an hour?

A plumber does not justify his fee by saying he had to retrieve a wrench from the truck. A lawyer does not say his job is difficult because he had to place the file folder in the appropriate spot in the file cabinet. Yet, a real estate agent says he deserves a commission because he sent a confirmation email.

Service providers – like electricians, accountants, or real estate agents – get paid well not because of what they do, but because of what they know. That is very important – we get paid well not because of what we do, but because of what we know. As long as we as real estate agents are trying to justify our commission by what we do, we will lose. A buyer or seller can do just about everything a real estate agent can do. A buyer can order a home inspection or contact the lender. A seller can put an ad on the internet or unlock the door to show the house.

Doing the tasks is not difficult, nor is it worth a large commission. However, knowing where to put the ad is valuable. Or knowing how to handle this difficult buyer, that is valuable to the seller.

As long as real estate agents present themselves to the world as worker bees who do a lot of tasks, the world will think we are overpaid and treat us that way. But if we let our clients know that we bring expertise to the table, our commissions seem warranted.

In short, whether the client believes you are worth a commission is not about the number of miniscule tasks you do, it’s about the expertise you bring to the table. It’s about whether you are offering the client something (hopefully real estate knowledge) that he doesn’t have himself.

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Rainmaker
1,329,219
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Karen,
You make a very valid point.  It is about what we know... including all the things to get the transaction to the closing table. 

That said, I think the point of that list was that many people (probably most) people don't have a clue of what all is involved from beginning to end.  Many of those miniscule tasks seem meaningless but leave a few out and POOF goes the transaction. 

Agents need to focus on what they KNOW, not on what they DO.  Thanks for the post. 

Aug 20, 2019 07:32 AM #1
Rainmaker
3,364,841
Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Hello Karen - sometimenes it's the magic that goes on behind-the-scenes that makes it so amazing. In real estate and in other situations.  

Aug 24, 2019 03:53 AM #2
Rainmaker
5,042,464
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Karen Climer we get paid for not only what we do but for how well we do it....

Aug 24, 2019 05:14 AM #3
Rainmaker
1,448,143
Kat Palmiotti
406-270-3667 (MT), 914-419-0270 (NY), Broker in NY with Grand Lux Realty and in MT with (coming soon!) - Kalispell, MT
The House Kat

We get paid for the combination of what we know and how well we do what we do. It's definition not just about faxing a document or sending an email

Aug 24, 2019 05:47 AM #4
Rainmaker
3,022,152
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

That is a great statement, "a plumber doesnt take credit for going to get how wrench."  I think the best work is done behind the scenes as well as what the slient sees. The best way to to learn the difference  is to listen to those consumers who had a bad experience, mainly expireds. My thought is communication is king, let the client know what to expect, what you will do and what they need to do. Then behind the scenes i do wht i do and that is keeping the sale together. Stayng on top of things to ward away those many things that can go bad.  

Aug 24, 2019 05:57 AM #5
Rainmaker
22,485
Karen Climer
Demetree School of Real Estate - Orlando, FL
Teaching people to pass the real estate exam

Kat Palmiotti I agree.  That was my point.  I think to justify your commission by saying, "I have to fax a document to the lender," is absurd.  The justification should just be that I know what I'm doing and I'll make it happen.

Aug 24, 2019 05:58 AM #6
Rainmaker
22,485
Karen Climer
Demetree School of Real Estate - Orlando, FL
Teaching people to pass the real estate exam

Barbara Todaro I agree.  My point is that if you get paid for how well you do something, you can't use the fact that you do it at all as justification for your commission.  This list that was making the rounds had 180 ways to justify your commission, but all of them were based on just the fact that you did it, not how well you did it.

BTW, I'm saying "you" in the general sense.  I'm not referring to you specifically.

Aug 24, 2019 06:01 AM #7
Rainmaker
3,137,551
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Hi Karen... what a great point. I've seen these lists of what agents do as a justification for a commission... and I've often shaken my head.

Aug 24, 2019 06:34 AM #8
Rainmaker
1,314,048
Wayne and Jean Marie Zuhl
Samsel & Associates - Clark, NJ
The Last Names You'll Ever Need in Real Estate

You make a very good point. What we do is important, but not as important as the skills and experience we bring to the party.

Aug 24, 2019 07:56 AM #9
Rainmaker
2,773,195
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

You can’t say in like a selfish or brash kind of a way. We definitely have to be a positive framer of what you say.

Aug 24, 2019 01:47 PM #10
Rainmaker
2,773,195
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Nothing as good of a teacher as experience exist on this earth really at all. That’s just the facts of the matter. Wayne and Jean Marie Zuhl

Aug 24, 2019 01:48 PM #11
Ambassador
3,017,082
Margaret Rome, Baltimore Maryland
HomeRome Realty 410-530-2400 - Pikesville, MD
Sell Your Home With Margaret Rome

Glad to see this highlighted by Carol Williams . So true. It takes a dentist only minutes to pull that tooth. You are paying for the knowledge and his/her experience.

Aug 24, 2019 02:01 PM #12
Rainmaker
1,237,893
Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Karen Climer ,

I thought that Michael Jacobs got it right. Also Margaret Rome, Baltimore Maryland had a great analogy that is hard to refute!

Aug 25, 2019 06:57 AM #13
Ambassador
4,015,820
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Karen:

You've made some excellent points here. Imagine sitting in from of a seller and when asked about commission you look them in the eye and say it's due to all the things I do, like paperwork.

Jeff

Aug 25, 2019 08:41 AM #14
Rainmaker
1,087,293
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

So true! 

I just had a conversation with some sellers and I was explaining why I could price their home better than them. I basically said that everything I've done up to this moment has prepared me for this. And I've been doing it for a long while.

Aug 25, 2019 03:42 PM #15
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Karen Climer

Teaching people to pass the real estate exam
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