It's Not the Time to Cut Commissions!

By
Managing Real Estate Broker with Benchmark Realty, LLC TN Broker License# 289736

This morning as I poured my first cup of coffee I opened my morning newspaper here in the Nashville area, THE TENNESSEAN, and read the headline “It pays to haggle with agent over real estate commission.”  What a way to start the day!  I immediately took that section of the paper and hid it from my wife who reacts quite angrily at these articles.  I think she believes in “modern journalistic castrations!”

I have spent the past few weeks and months reading nothing but negative news from the liberal media in this country about the state of the real estate industry.  This particular article, highlighting survey results conducted by Consumer Reports, touched a very sensitive nerve with me.

I find myself constantly defending my profession with those who really do not understand what we, as professional REALTORS®, do for a living.  Many in the public, including the uninformed media, compare us to professions that have traditionally and consistently made them out to be “scum of the earth” in what they do for a living.  I do not want to name these particular jobs, as I know I will offend many.  But, I think most of us know these folks about whom we are speaking.  

I am very proud to be a professional REALTOR®.  I have spent the past several years working in an industry that serves the needs of those who either are selling a home or purchasing a new one.  In addition, I have added to my expertise by earning professional designations to my resume as well as obtaining my real estate broker’s license.  When I read an article stating I need to be willing to reduce my compensation then I become defensive.

Educating the consumer. Most consumers do not realize why we charge what we charge.  They don’t understand we operate small independent businesses that have expenses.  As business owners we incur marketing expenses, insurances costs such as health, errors and omissions, liability, automotive, disability, etc; fuel and automotive upkeep, office expenses, brokerage expenses – and the list goes on.  I equate our business models similar to that of attorneys and doctors.  It costs a lot to do what we do.

I am worth what I charge!  I always tell my clients what I charge you will be different that what it costs you.  I work with a successful written marketing plan on all of my listings and use some of the most cutting edge tools for my clients such as podcasts, You Tube videos, virtual tours, professionally printed brochures, etc.  I spend a considerable amount of time and effort in marketing a listing and ensuring it receives maximum exposures.  Most of the public does not realize the time we spend in front of a computer, on the telephone, at open houses, in meetings, in the car, etc.

When reviewing our brokerage fees with clients I always tell them that the breakdown is as follows:  I must pay a certain amount to the selling side (usually what the market is commanding); I have to pay my brokerage firm a certain amount; I have to pay Uncle Sam his share of taxes; I have to pay for all of the marketing expenses in marketing their home; and finally I need to put food on the table for my family.  When the question of cutting my fees comes up I usually respond with “which one of these components do you want to take away?  I would hate top take away money to market your home. Do you want me to get in trouble with the feds for not paying taxes?  Don’t you like to feed your family?”    I also ask them if they asked their doctor to reduce his fees when they are about ready to get their annual physical.  Heads go side to side with an affirming “no.”  I have never had a client ask for a reduction once I go through this exercise. Again, it comes down to educating the consumer.

The modern real estate practice has become more and more demanding and the costs have risen dramatically over the years.  To effectively service our clients we must be able to use the latest tools and resources that will allow us to sell a property at the highest price in the shortest amount of time.  It costs money.  If, in turn, we can help a seller realize the highest amount of money in their pocket with our expertise and the tools we use then the saying “what I charge you is different than what it costs you” remains true.

I will continue to charge what I charge and defend it every time.

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Rainmaker
428,973
Betina Foreman
WJK Realty - Austin, TX
Realtor, C.N.E., with WJK REALTY

They ran the same drivel in Austin earlier this week. Ask your potential clients, would you go to the cheapest heart surgeon?! or lawyer?? What garbage. You get what you pay for. do you want a professional or some cut rate chump to help you with the biggest purchase of your life? The media is killing us!!

Aug 09, 2008 04:14 AM #1
Rainmaker
544,628
Shirley Parks
Sands Realty 210-414-0966 - San Antonio, TX
Broker, 210-414-0966, San Antonio TX Real Estate

If they knew how much work we put into their transaction they would realize they are getting a great value.

Aug 09, 2008 04:16 AM #2
Rainmaker
3,247,570
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

John

Your post has excellent information may be the reporter should read it and become educated about the profession of real estate

Good luck and success

Lou Ludwig

Aug 09, 2008 04:18 AM #3
Rainer
218,482
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

John, Fantastic Blog!  I am a 19 year veteran of this business and do not cut my commission.  I say all of the above and still lose a lot of business by not cutting.  Curious as to your response when someone comes back with "I understand all that, but the guy down the block charges 1.5% less than you do and he also has twenty years of experience" as that is the case in my area.  There is a big guru across the street who undercuts everyone by a large margin.  I have dealt with him on transaction and he is good.  What do you say when someone is equally as good as you, but considerably cheaper?  Any words of wisdom?

Aug 09, 2008 04:20 AM #4
Ambassador
296,675
David M. Childress
Howard Hanna Real Estate Services - Akron, OH
I would love to be your Realtor® in Akron Ohio!

I never could figure out who writes these commission suggestions. We have them also. It is insane to think of cutting our commisiion for a seller who is upside down thru no fault of ours or just plain cheap. I work hard as you all do.

Aug 09, 2008 04:23 AM #5
Rainmaker
683,033
Bill C. Merrell
Merrell Institute ~ Appraisal Education Network - Bohemia, NY
Ph.D. - Merrell Institue

I absolutely agree with you.

Professionals are working harder than ever for less potential deals out there.

Lowering your commission, is like cutting your hourly income in half, while you are working harder than ever.

It just does not make sense.

All the best.

Bill

Aug 09, 2008 04:26 AM #6
Ambassador
296,340
Tim and Pam Cash
Crye-Leike (Sango) - Clarksville, TN
Real Estate Professionals - Clarksville TN

John, FANTASTIC blog.  I really appreciate you taking the time to educate the public on this.  It would be good if THE TENNESSEAN would print your thoughts as well.

Aug 09, 2008 04:28 AM #7
Rainer
215,888
Frank & Jodi Orlando
Frank & Jodi Orlando Get Us A Home Realty Atlanta Homes Sale - Cumming, GA

The numbers do not lie, the first set of CMA is unrepresented buyers, second is represented. Represented bought one more bedroom at virtually the same price w/ $12,000 more off original list. This is in our area, you may want to check your own!!!!!

           Beds Baths   orig list    sold   DOM

Average   4 3 1     $412,673 $387,945 110

Average   5 3 1     $425,191 $389,096 96

Aug 09, 2008 05:37 AM #8
Rainer
122,409
Jim Albano
Prudential Damiano Realty - Little Falls, NJ
Team - Jean-Marie Vantuno / Realtors North Jersey Real Estate

John, great post. The media should stick to reporting news instead of trying to make news by offering their opinion.

Aug 09, 2008 05:39 AM #9
Rainmaker
655,882
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Right -- and let's all go and get our doctors to lower their fees, and the gas stations to lower their fees and the grocery stores to sell food at discount to us. You know how far that would go for us all.

Aug 09, 2008 05:47 AM #10
Rainer
218,482
Lisa Friedman
Alliance Realtors - Bedminster, NJ
Central New Jersey Real Estate

Hey, I never thought of asking the gas stations and grocery stores to lower their prices - Great Idea!

It really is the Realtors who self perpetuate the problem. If no one cut, then people would stop asking!

Aug 09, 2008 06:11 AM #12
Anonymous
Mike K.

Consumers are not opposed to commissions, they are are opposed to what seems to be a non-negotiable fixed commission rate. 

I just had to terminate a purchase contract on a second home on an issue that a lazy listing agent realtor could have addressed before I EVER ordered inspection services. I am out $650 but I am so glad that I didn't pay him his non-negotiable 3.5 %!!! 

For you who say " I never thought of asking the gas stations and grocery stores to lower their prices".... I assume you paid list price for your SUVs.

Cheers - a disappointed buyer

Aug 10, 2008 09:07 AM #13
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John Giffen

CRB, CRS, CDEI, GRI, SRES, BROKER, REALTOR®
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