In the face of ever-increasing discount brokerages, it’s understandable that sellers may question your commission amount. And they may even ask for a discount. As such, expect this topic to come up, and don’t be tongue-tied when it does. Be prepared to fully articulate the services you offer. Validating your commission to your sellers is part of the real estate business, and you want to respond in a respectful but confident manner when the issue comes up. Understand that sellers may tally up the numbers and conclude that your commission is excessive. As such, make sure you can prove your worth when it comes to commission.
Explain How the Commission is Divided
Selling homes is a group effort, so make sure your sellers understand how the whole of the commission is divided. Remind them that only a fraction of the commission goes to you. Explain that half of the commission goes to the buyer-side brokerage, and the other half goes to your brokerage, of which you receive a percentage. Your portion of the commission will be further reduced by costs such as photography, advertising, mailings, and so on. In addition, there are open house and car expenses. And let’s not forget your time. Have a log ready that documents the time you spend on an average listing. Once the listing sells, you may find you’re earning about $8000 on a $475,000 home, which is not an excessive number. If your potential sellers balk too much about commission at the beginning, it doesn’t bode well for a harmonious working relationship. There will be potential listings you need to walk away from if proving your worth becomes a constant hurdle. So know when you’re at risk for a chronically unhappy listing relationship and be prepared to walk away if necessary.
Make Sure Your Sellers Understand the Professional Expertise You Bring
Your sellers need to understand how much professional expertise you are adding to what is likely the biggest investment they have. You can do this by offering the following:
- A professional consultation with comparable sales and a market analysis
- Maximum exposure to the marketplace through MLS and your network of membership organizations
- Online exposure via a professionally produced website including professional photography, written descriptions, and complete property information
- Mailings, print ads, email ads, and social media leverage
- A Sellers’ Home Warranty that is transferable to the buyers for protection during the listing phase and after the sale
- Home Staging
- Open houses and showings
- Negotiating experience and skills: Highlight what these are and show how they can be used to make everyone feel like they are getting a “win-win.”
- Signage
Make Sure Your Sellers Know How Much Time You Actually Spend
If you haven’t already done this, begin keeping a log of your next listing. Keep in mind that the average time on the market for a home is about twenty-five days (according to Zillow). That’s an average of three open houses, plus numerous showings, perhaps as many as ten a week. In addition, there is the whole inspection process, plus follow-up showings. All of this is in addition to:
- Time spent figuring out what the price should be
- Time preparing a marketing plan
- Time spent negotiating a price with your seller and the buyer’s broker
- Time spent preparing the deal sheet
- Time spent putting together weekly reports for the seller
- Time spent at comparison open houses and tracking market inventory
- Time spent creating a property website
- Time spent at the listing appointment(s)
- Time spent monitoring the home showings
- Time spent performing your own showings
- Time spent qualifying potential buyers
- Time spent negotiating a contract
- Time spent reevaluating and consulting regarding price changes
Rather than dreading the commission conversation, you should look forward to the discussion as a way to highlight your abilities and services. These are skills and experiences you are proud of and have no doubt worked diligently to provide. Sellers need to know you will work hard for them, and supplying these details will increase their confidence in you. This leads to a productive relationship, and eventually, a productive sale. And that is the ultimate “win-win.”