There is one lesson I am consistently reminded of; the self-employed spend a lot of time defending their worth. When you're a realtor, this happens during the "What's your commission?" conversation.
Picture this, you’re at the dining-room table in the home of a potential client. You’ve discussed the comps and the price you plan to list their home for. They look over your marketing material, they laugh at your jokes, you are certain the listing is yours and it probably is. Then comes the big question...
“What is the commission you’re going to charge me?”
This question can elicit cold sweats and nervous energy from both the seller and the realtor because most people get nervous discussing money. That being the case, the more comfortable you are when talking about money, the easier these conversations will be.
Odds are high the seller is going to try to negotiate the commission down to the lowest possible rate therefore, when the broker says 6%, the seller is ready to ask for 4% in hopes you will find a middle ground and that's 5%...but there are brokers who work for less. At the end of the day, accepting a commission below 5% implies two things, you think you are worth less than another realtor, or you're afraid they will give the listing to someone else assuming they will charge less. It’s understandable to have these insecurities but that’s exactly what they are... insecurities. So let’s do the opposite and gain some security here.
An agent once told me a seller was demanding to only pay a 2% commission because he already had a buyer lined up and he just needed a broker to run the transaction, not the marketing. We had to brainstorm how to procure a commission relative to the labor involved. I advised him to itemize the commission so the seller will see that the majority of the deal isn’t in the marketing, it’s in the transaction. There will be a contract to go over with the buyer, there will be an inspection which will change the dynamics of the deal, the buyer might want some last minute changes before the closing happens...etc. Once we discussed the whole scope of what the deal involved, he felt more confident going back to the seller and managed to get a 4% commission on the deal which the agent and the managing broker felt was reasonable.
So many things happen during the length of the deal that have little to do with marketing and open houses, but most sellers don’t know that. They think this is a walk in the park for us. They think the realtor shows up, takes pictures, makes a cute website and BOOM, property is sold. You have to show them the process of the deal so they will understand what exactly it is they are paying for. Check this scenario out...
Seller- I don’t know...I think 5% will do. I just think that this market is hot and it will sell superfast so 6% seems a bit much. I mean that’s a difference of $_____. You see what I’m saying, right?
You- Well, first of all, getting a buyer might seem like the easy part but finding the IDEAL buyer out of a stack of offers is an art. I can understand where you’re coming from so I think I should offer some clarity with the commission in order for you to see why the standard is 6%.
...then detail all the steps that happen within a typical deal. Once you outline the amount of labor that goes into selling their home, they will have a harder time debating your commission. Since you’re a practicing agent/broker, you already know the steps but in order for you to articulate on the deal, be clear on that list.
Staging- Preparing the home in order for it to appeal to buyers is the first step in marketing the property. "Buyers must be able to see themselves living here. Therefore we must minimize any personal effects and clutter. Let's turn your home into a commodity".
Marketing- This will involve a photographer (which comes out of your budget/commission). You or your firm will be building a webpage. You will write content for the page and create collateral/brochures to issue to buyers.
Open Houses and Showings- Don’t be afraid to point out how you are skilled at showing property (verses the other brokers or the seller her/himself). You’re the Vanna White of property tours! Don’t give away all your secrets, just imply that this is a talent you have. I recommend sharing a story of a listing you sold in the past that was a huge success story.
Negotiating Skills- When you discuss the pricing strategy, you’re setting the stage for how the negotiation will go down. Offer clarity to the seller that there are many aspects to a deal that need to be factored in at this stage. The buyer will make requests at this time that are complicated. They will want a certain closing date, maybe a new water heater...etc. Make it understood that you can manage this stage with grace and stability.
Law- Owners can sell their property on a multitude of websites but once the contract comes into play, they are at a loss. Unless they plan to hire an attorney or they are an attorney, the contract is intimidating. You know this domain so take advantage of it by mentioning the contract drafting portion of the deal and how necessary the broker’s role is during this stage.
Inspection, Objection and Last Minute Drama- An inspection can lead to requests from the buyer and some of them might be more than the seller should agree to. You can explain how you navigate these scenarios with finesse in the seller’s favor. This is another area in which you can tell a story or give an example of a deal that was sailing smoothly and it hit a hurricane right before the closing. These happen a lot and a skilled broker is necessary in handling them. You’re not creating fear though, people can see through that and you are better than playing games. You’re just stating the real possibilities they haven’t considered and when they realize that they don’t want to handle them, because it sounds like a nightmare, the 6% commission starts to make a lot of sense.
Once you’ve covered all of these, it doesn’t hurt to say something cheeky like, “And after closing, I’ll set you up with a Wine-Of-The-Month subscription.” It’s hard for someone to argue your worth when you lay it all out in front of them and then offer them wine.
If they mention another broker who visited them and offered a substantial cut in the commission, question the validity of that broker. This conversation will lead you to eventually saying, “In real estate, you definitely get what you pay for and a bargain basement broker will give you a bargain basement experience.”
At the end of the day, don’t let your greed keep you from getting the listing. If they stand firm with an amount that you can live with, agree to it and move on. What matters is that you clarify the value of your service before you negotiate it. Sellers often want to feel like they’re getting a deal so showing some flexibility doesn’t hurt. Whenever you negotiate a fee lower than 6%, I recommend a stipulation where they will pay a marketing fee. Therefore, if the deal goes south and never closes, your marketing costs are covered.
Take Action: On a piece of paper, list your attributes. Tap into your confidence and truly boast about yourself. Embellish what you think your best qualities are.
My list would include: Fast on my feet if the deal goes south, high energy, aggressive negotiator, sense of humor and so much more. Now list the things that are not your strong suits; your weaknesses. My list would include: Not detail-oriented, bad at math, lacking patience, and maybe a few more.
This list of attributes will be mentioned in your next pitch. You can either list them one after the other or pepper them into the conversation. Cover at least three things on the list and at some point mention how much you love what you do or how much real estate excites you. The list of weaknesses is your guide on what you must work on. Working on your strengths isn't as impactful as working on the weaknesses.
Realtors tend to deflect the spotlight away from themselves and aim it at the firm they work for, but the seller is choosing whether or not to work with you the person, not you the representative for _____ firm. They want to know what skills you bring to the table and they also need to feel a personal chemistry and security. It’s essential you show them how awesome a person you are. The pitch is literally your moment to present yourself and the perks of communicating with you for a month (or potentially longer), so shine a light on yourself!
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