Should agents cut commissions in a slower market?

By
Real Estate Agent with Keller Williams Realty

GOTTA LOVE THE BEAUTY OF SEATTLE!

 

I was in the middle of a listing presentation the other day and was asked by the seller "so how much are you willing to cut you commission?" I am sure we have all experienced this before (and no this was not the first time I have been asked this question) but the difference between this seller and the others who asked was his reasoning.

Like buyers, sellers are looking for a deal. Obviously they desire to walk away with as much equity as possible. Can you blame them? This particular sellers reason for asking me to cut my commission was not entirely because he was trying to save equity. He came right out and said that the last agent he interviewed supposedly offered to cut his commission because the market had cooled off a little bit and he was trying to remain competitive. It's because of this that he felt all agents should be willing to do whatever it took to earn his business. ARE YOU KIDDING ME?!? First of all, the Seattle market is still an excellent market to be in. Yes, prices have leveled out a bit, but in no way is the market crashing! We all remember how ridicuously HOT it was for while when everything was selling within weeks if not days after being listed, but just becasue it is no longer like that does not mean that our market has gone cold. It is mind blowing how many people take national "doom and gloom" statistics and try to apply them locally. Sorry Jack, the business doesn't work that way :-)

As Realtors, we already know that cutting commissions is not our primary objective and to do so could result in unnecessary repercussions. I am personally not a fan of cutting commissions, but admit that I have done so in the past for some very specific reasons. I have also heard of agents cutting commissions as a favor to a friend, relative, neighbor, etc, but once you do the word will get around and everybody will want a discount. Also, discount agents usually offer discount services so you get what you pay for. Some consumers may not care, but those who want a true professional and expect the best service are able to recognize the tremendous VALUE that agents offer.

Based upon the responses I received from my last blog, every market is obviously different. It would not surprise me if certain markets have agents that propose cutting commissions in order to remain competitive. Personally, I think that if an agent does so they are only selling themselves short and are not very confident in their abilities. Again, there are those incidents where cutting your commission is justifiable, but all I am saying is that agents should use this as a last resort or simply just WALK AWAY from the deal. You may not have gained anything from that particular seller, but you most certainly did not lose anything either! If anything, you most likely saved yourself from a killer headache :-)

As for my presentation, I politely finished and told the seller that I refuse to cut my commission. I explained my reasoning and that was that. I obviously did not get the listing, but honestly... I really don't care :-)

IF ANYBODY HAS ENCOUNTERED A SIMILAR EXPERIENCE OR IS IN A MARKET WHERE AGENTS ARE HAVING TO CUT THEIR COMMISSIONS, I WOULD LOVE TO HEAR YOUR THOUGHTS :-)

 

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Ambassador
1,052,265
Steve Shatsky
Dallas, TX

I don't think that there is an agent out there who has not been approached about cutting their commission at one point or another.  As a general rule I would say that reducing your commission is not a good thing.  To me it implies that you don't value the service you provide, and if you don't it is unreasonable to expect clients will.  However, there are circumstances where I believe that cutting your commission may not be a bad practice (such as multiple transactions with the same client, large volumes of transactions over a period of time, etc.), so I do not believe there is an absolute answer.

Jul 23, 2008 08:10 AM #7
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you for your reply Steve! I agree that multiple transactions with the same client is a legitimate reason to cut commission. It is definitely not unheard of for a listing agent to take a listing office cut so long as they are guaranteed the sellers business when they turn around and buy their new home.

Jul 23, 2008 08:22 AM #8
Rainmaker
177,210
Leander McClain
North East, MD
Cecil & Harford County Realtor

Pete,

I have been approached about cutting my commission.  Usually after I spend some time explaining to my clients all that I do for them to help make their dreams come true, they agree to an increase in commission.  However, there are circumstances where I would agree to a cut.  That is my exception rather than a rule

Jul 24, 2008 07:44 AM #9
Rainer
6,025
Chris Cox
Coldwell Banker United, Realtors - Tyler, TX

If you start cutting commission, then you will start discounting what we actually do as agents.  People will often ask you to cut, but the best way to avoid this in the beginning is to show up to a listing/buying presentation armed to the teeth with information.  We have several tools available that help us make our case. We are here to perform a service, and should be paid for performing our job. If we cut the commissions, we belittle our worth.  Show your clients where you plan on spending money ie: advertising online, your website, television, newspaper ads, fliers etc. If you show them all the marketing materials you can, then they will understand that they are getting something for their money, not just a sign in their yard.  Hope this helps.

Jul 24, 2008 07:55 AM #10
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you Leander and Chris :-) Your thoughts are greatly appreciated!

Jul 24, 2008 08:38 AM #11
Anonymous
Jamie J. Vota (Sulek & Dutton Real Estate)

Peter- This is a question that will be discussed until the end of time. My first response to the question you post is frustration with sellers. I work hard for my commission- as I am sure you do. How many other services are there where the price is reduced upon request? After my initial rant ( to myself) I fell that the best Realtors should NOT reduce their commission but help the seller understand that the services being offered are well worth the fee paid at closing. There are Realtors in our market that will discount their commission by 2%. This just hurts us all. Stick to your guns- that seller just may be back after his listing expires and he is dissatisfied with his "discount" service.

 

Jul 24, 2008 09:10 AM #12
Rainmaker
231,276
Richard Byron Smith, NMLS #184479
Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289 - Chattanooga, TN
Mortgage Loan Officer

I spoke about this just today with one of our top agents in Chattanooga. She had a seller who asked her to cut the commission because he had dropped the price, and he actually said that other companies were dropping their commissions.

To my knowledge companies are not dropping commissions.

And she did not drop hers.

Richard

Jul 24, 2008 09:10 AM #13
Rainmaker
1,353,711
Raymond E. Camp
Howard Hanna Real Estate Services - Ontario, NY
Licensed Real Estate Salesperson Greater Rochester

Pete, As an old professor taught you are in business to make a profit; if you drop your rate you will end up doing more to make less. Take a look at the auto industry and see the condition they are in. 

Thanks, Ray

Jul 24, 2008 09:19 AM #14
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you Jamie, Richard and Raymond! Your words are greatly appreciated!

As Jamie said, this topic will be discussed until the end of time and I cannot help but agree. As agents, I think that we are all in agreement that we work very hard for our money. If the majority of the agents started cutting commissions on a regualr basis, that would bring down the compensation level over all and the industry standard would not longer be 6%.

Thank you again to everybody that has replied to this posting. I greatly appreciate each and every one of your opinions!

Jul 24, 2008 09:31 AM #15
Rainer
42,659
Mandi Perkins
Pioneer Title Agency - Pinetop Lakeside, AZ

Peter,

I have been asked countless times to cut my commission especially in the last year. I have a partner named Donna. We are a small office and most of our clients pick us because of this reason. First I tell them no I do not cut my commission and this is the reason why.....I go on to list every single advertisement that we are in, plans for any future ventures and of course the web. While many agents are cutting back on their advertisement we have actually increased ours and they get two agents for the price of 1 which means they are really getting a bargain compared to some other agents....definately more bang for their buck. I generally get the listing over the "discount" commission agents. This being said I too have cut commissions due to special circumstances. All the best to you....knock em out with that presentation and follow through and they'll gladly pay for your services!

Jul 24, 2008 01:45 PM #16
Rainer
18,764
Paul LeMay
Caretaker Property Services - Tulsa, OK

If a market is leveling or slowing up, cutting commission should have nothing to do with the market.  The amount of marketing, and service level stays the same if not increases in a tougher market.  Seattle is still a strong market from all I have been hearing. Perhaps you should of said that in a market as good as ours I've been thinking of raising my commission.  In all seriousness there may be exceptions to the rule on cutting, but those who make it a habit, I wonder....as the saying goes, you get what you pay for.

Years ago when I had a carpet cleaning business, I took pride in the quality and level of service we performed.  My competitors would slash prices for volume work, they were actually selling themselves out.  I fought of people who shopped by price, and refused.  The level of our work, kept me in repeat business and referrals... I rather offer quality keep my reputation compared to working cheap and cutting corners to compensate for the loss of income.

Jul 24, 2008 02:06 PM #17
Rainer
9,330
Erin McGinnis
Picture it SOLD! Home Staging - Novato, CA
Marin Home Stager Staging

No Way!

In slow markets, Realtors have to work even harder to sell houses!  You are not the "order takers" you were 2, 3, 4... years ago.  And like Brian Buffini says, "sure, hire someone who works for 4%. You'll get KMart service, whereas I provide Nordstrom service." (He says it much better than I do!)

(My husband is a Realtor, that is why I have an opinion on this!)

 

Jul 24, 2008 02:30 PM #18
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you Mandi, Paul & Erin for your comments. I really do appreciate it!

 

Jul 25, 2008 03:43 AM #19
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you Mandi, Paul & Erin for your comments. I really do appreciate it!

 

Jul 25, 2008 03:43 AM #20
Rainer
1,232
Thomas Moviel
Waterstone Mortgage Corporation - Denver, CO

It's all in how you present yourself. Cutting your commissions also shows you value less what you have to offer. Honestly, I do believe a truly motivated buyer or seller is willing to pay more for added value. The question isn't, "should I cut my commission and buy how much?" But rather, "What do I offer that is more than worth my standard commissions?" I'm a mortgage banker/broker and no way do I cut commissions. My only test is in presenting, and fulfilling on, my services and how they're worth more than the other brokers who may be charging less. This is why a Mercedes is a Mercedes, and a Chevy is a Chevy. They both get you from A to B, but it's all in the experience and value.

Jul 25, 2008 07:34 AM #21
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you for the words of wisdom Thomas :-) That is funny how you used the car analogy because I use that all the time!

Jul 25, 2008 07:52 AM #22
Ambassador
1,495,762
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Only inexperienced agents should do this.  You either are a professional or you are not.  Ask you attorney,  your doctor or your dentist to drop their fees.  They won't.  Professionals never have to, only those at a disadvantage.

Jul 25, 2008 08:20 AM #23
Rainer
15,629
Peter Mann
Keller Williams Realty - Bellevue, WA
Peter Mann Seattle-Bellevue Real Estate Agent

Thank you for your response Jim. You obviously share the same opinion as the majority of the agent population :-)

 

Jul 25, 2008 08:48 AM #24
Ambassador
1,495,762
Jim Crawford
Maximum One Executive REALTORS® - Atlanta, GA
Jim Crawford Atlanta Best Listing Agents & REALTOR

Anytime Peter!  Best wishes!  Great post!

Jul 25, 2008 10:29 AM #25
Rainmaker
3,069,179
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 09:16 AM #26
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