The Commission Question: What To Do When Asked To Lower Your Commission
Rachel Burris5 minute-read
August 15, 2019
Regardless of how long you’ve been in the industry, you’ve probably had at least one client ask you about your commission. Although some realtors and agents find that this question rarely arises, it’s safe to assume it will become a more frequent request as technology continues to disrupt the real estate industry.
Even though the industry is changing and clients now have more information at their fingertips (and thus more power), there’s no doubt you want to preserve your livelihood no matter what the real estate sphere looks like in another 5, 10 or 20 years.
So how do you handle the commission question in a way that protects your income and grows your clientele? Here are some thoughts to consider when asked to lower your commission.
Mulling Over The Commission Question
When potential clients ask you to lower your commission, it can seem like a dagger to the heart. They may just be asking about your commission, but it’s easy to feel that they’re actually questioning your worth.
Instead of getting worked up, the first thing you need to remember is that these clients are throwing a question at you, not a command. They want to find out if a lower commission is in the realm of possibility; they’re not saying they won’t work with you unless you reduce it.
Thus, it’s your job to begin an open dialogue with any potential client who raises the issue.
Find Out Why They’re Asking
While your first instinct may be to get defensive, it’s important you redirect the question to determine what the client’s motivation is for asking. Sometimes clients challenge commissions because they know someone who got a deal. But usually when clients inquire about realtors’ or agents’ commissions, it’s either because money is tight or they don’t have a full understanding of what real estate professionals do.
So instead of getting confrontational, you should try to learn as much as you can about your clients, their finances and their knowledge of the industry.
Listen To Them Carefully
Relationships between real estate professionals and their clients are built on trust. The problem with the commission question is that it can throw a wrench in the process of building trust if mishandled and ultimately steer the relationship in the wrong direction.
Clients want to know that they can put their faith in you and you’re not just looking to make some easy cash. When you ask your clients why they want you to cut your commission, make sure you genuinely listen to their answer with empathy.
Restate Their Concerns
When clients speak, they want to feel heard. Therefore, you should repeat their concerns back to them after your clients have finished answering your question.
When handling the commission question, John Grimes, a REALTOR® with Better Homes and Gardens Real Estate Metro Brokers, deescalates the situation: “I paraphrase their statement to make sure that they understand I’m hearing them. That often calms people down. People are desperate to be heard and understood.”
Grimes finds that “People tend to calm themselves when their aggression is met with professionalism because the contrast is uncomfortable.”
Acknowledging your clients’ concerns aloud will validate their feelings and make them feel as though you understand where they’re coming from. Furthermore, reiterating the issue will ensure you fully understand the problem and are both on the same page.
Address The Issue
If your clients’ problem is a monetary one, go through their finances with them and help them understand how much money they’ll potentially spend and earn at the close of the transaction. Clients tend to feel far more comfortable with commissions when they have a clear grasp of how much money they’ll be walking away with at the end of the day.
When the issue is that your clients don’t fully comprehend what realtors and agents do, you must walk them through the process. Your clients may think that your job begins and ends with listing their home on a multiple listing service (MLS) and putting a sign in their yard. You need to explain the value you bring to the table.
Either way, the discussion you have with your clients must clarify what your commission pays for, which means you need to articulate all of the services and expertise you provide.
Eve Henry, an accredited luxury home specialist and owner of Eve Henry Homes, explains, “I always take an expense sheet with me to every listing appointment showing exactly what I have to spend up front with no guarantees (pictures, videos, marketing flyers, ads, signage, open house material, Facebook ads, etc.). I then briefly explain that my brokerage takes a percentage.”
Demonstrate Your Worth
Even after you’ve gone through the ins and outs of your services and their costs, you may still need to back up your merit with evidence.
“I show my clients that I’m worth every penny by showing proof of my recent sales,” explains Russell Volk, a real estate agent with RE/MAX Elite in Bucks County, Pa. “I can show how much the house sold for vs. the asking price. I can show how long it was on the market. I can show various statistics that act as proof of the value I bring in a real estate transaction.”
By taking your clients through the properties you’ve sold in and around their neighborhood as well as all the transactions you’ve closed in the last 3 months, you can help build their confidence in you. The volume of your sales will help signal to your clients that you’re experienced and will be a valuable asset to them.
Providing your clients with testimonials from those you’ve previously worked with is another excellent way to help convince them of your worth. Testimonials help gain clients’ trust because they prove that others have trusted you in the past. Clients want to be reassured that you’re the right person to work with, and the best way to convince them is by having someone else tell them.
Make sure you’re not only knowledgeable about the industry but also about the people working within it. “I think that knowing your competition goes hand in hand with knowing the client’s motivation. You can use the stats against your competition and shine a light on what you are offering and what you can do for them,” says Jennifer Murtland, a REALTOR® with Team Synergi, eXp Realty.
When explaining the value they add for their clients, Murtland and her team pull stats on competing agents’ list price to sale price ratio, average days on the market, percentage of sales in the area and expiration rate. She explains, “Bottom line is to use the stats that work for you. You control the information.”
The commission question doesn’t have to be a point of contention. If you do your homework, pay attention to your clients’ concerns and explain your business clearly, it can be an opportunity to impress your clients.
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