As many of you know, I'm hosting a free teleseminar this Wednesday on the topic of negotiating commissions. You can register for it here.
As agents are registering for the show, they're asking me lots of questions about their individual situations, which I don't mind at all! Keep ‘em coming!
I got a good one the other day from Melissa. Melissa finds herself competing against companies who provide minimal service for a minimal fee. Nothing wrong with that, mind you, it's a business model that has its place. But it can make it hard on those who offer full service for a higher fee, especially when the seller says those magic words "I need every penny out of my house to break even!" How do you persuade a seller that your services cost more because they're worth more?
I could probably write a book, or at least a chapter of a book on this topic (oh, yeah, I've done that!), but for our purposes today, let me share a little script I came up with in the shower this morning.
When the seller says something along the lines of: "I'm sure you're worth your fee, but I simply can't afford you," how can you respond?
Well, I don't believe you should argue with him. Arguing makes you look insecure and somewhat desperate. And it doesn't work. So don't do that. Neither should you put down your competition - that will only subtly criticize the seller's judgment; after all, he chose to consider going to minimum service route. But what if you say something like this:
"I hear ya and I understand. You have a tough decision to make. On one hand, you can pay this other company a much lower fee upfront and hopefully retain more of your equity. On the other hand, you can hire a full-service agent, whether it's me or someone else, and due to the increased exposure and marketing expertise, you might end up with even more of your equity. Either way, there's no guarantee that your house will sell for what you need it to. I'm sure you'll make the right decision. Do you have any questions for me that might help you in making that decision?"
The fact that you're sitting there in the seller's home means that he hasn't ruled out paying a full-service company. In fact, he probably wants full-service; he's just not convinced of its value. But if you first show him that you care about his situation and you trust his judgment, he'll probably give you the opportunity to persuade him. Just wait til he's ready...
RELATED BLOGS
Arguing will get you nowhere - try this instead!
The Power of Reverse Psychology
p.s. The Savvy Prospector is on Special this week! It's usually $249, but in honor of Real Estate Week, you can buy it for $199! Check it out here.
Subscribe to
The Daily Seduction
Tips & Inspirations to Generate Business from the Very Important People Who Know You
If the question begins with. . ." I,m sure you 're worth. ... "
I will stop them immediately and repeat what they said. . They are sure you are worth it ! . . . how can they go wrong then.. . I will suggest for them to trust their instinct, they have already realized that I'm worth the commission and just get started.
You're right--you CANNOT argue or you look defensive. I usually smile and say I understand, but they also should understand they will get what they pay for,
Then I offer to reduce my fee, based on what they want me to TAKE AWAY as part of the deal. Do they want zero ads (which the straight fee listing companies don't do--zero ads)?
Do they want to set up their own showings? Do they want to create their own flyers?
I don't think I've EVER had anyone say YES to that when it's put that way.
I think there is so much business out there that sometimes we need to realize that it's just not a fit and move on. I do make sure they know what I can offer and how to reach me....but also make it easy for them to call me and not feel embarassed if the limited-service doesn't work out.
If they are insistent on working with me, but at a reduced price...I will do a limited-service, MLS only listing. They can do the work, pay my Transaction Coordinator directly, and I will help them in much the same as the other services...but this is not my first choice..rather walk away. Only exception would be a referral.
Karen - what a great point - I agree 100% that you don't want to burn bridges and do what you can to be the go-to person when/if the house doesn't sell with the minimum servicer! I don't like doing minimal service either - I don't believe it works, so it's hard for me to accept the business. Not because I'm greedy, but because I truly think I bring value to the table. But it sounds as if you have a nice little alternative. Thanks for your comments1
Erica - Good strategy! Although I wonder (and I"m asking this sincerely) - is this approach as effective these days when most of our advertising doesn't really cost us anything? I spend very little hard cash on my listings, but I still knowl I bring a lot of value that wouldn't appear on a line-item bill.
Fernando - I love it! I don't think I could pull it off, but I bet you do it well!
I am not sure. And I do unbundle my services in certain cases. For example, I represent several builders. I charge them a flat fee for MLS entry only. They don't need me to write contracts or show houses or negotiate. They don't want me, in fact. They want to do it themselves. But they do need MLS entry to make everyone else aware the houses are for sale. So in that case, I charge a flat fee. But... they're getting what they pay for! And I have a chance at finding a buyer, with all my marketing.
Ps--just thought of this. DATA ENTRY takes time. Updating the websites takes time. They may be "free" advertising, but your time is not free. I know my admin spends hours submitting feeds to websites, creating postlets, craigslist, etc.
Absolutely - in fact, I"ve spent the last three hours getting my new listing on the market, so I agree, time is money. And I spend a lot of time on my listings!
Good Morning Jennifer,
That is a nice soft sell approach, and you have to go into that script with the attitude that "I AM worth every penny of my 6%" I think the soft sell is a much more professional way to do business.
Jennifer: Although I like your approach to this... I would probably do it a different way. From your dialogue... you mostly "explained" your position... and the only question to the client came at the end... when you asked them if they had any more questions.
I have found that most often... when I more or less "tell" or "inform" my client things... that what I have said tends to have less of an effect on them... and less "ownership" by them... than they would if I had asked them some questons... both open-ended and closed-ended... aiming at pulling out of them the same facts... as the ones you informed them of... or told them.
When they end up "speaking" those same facts back to me... they have "ownership" of them... which helps that info sink in much more quickly... AND deeply.
I might also ask them some additional questions about anything that would be "limited service" that they might or might not choose... like if they would go to a limited service hairdresser when they needed a perm or a color, or if they would go to a dental school when they needed a root canal. Usually after being asked a few questions like that... and finding themselves more or less agreeing with me about the short-comings of a "limited services" hairdresser or dentist... my original Realtor points begin to make more sense to them.
Sometimes this works... sometimes it doesn't. But... I usually... if nothing else... enjoy watching them do mind contortions in front of me... while trying to make answers to me... that really do not make sense to them. Take care... thanks for bringing up the topic.
Jennifer...
This should prove to be a wonderful discussion. I'm parking for it :)
TLW...ROAR!
Karen Anne - I agree with you and I probably should have been clearer that this isn't the be-all and end-all of the conversation. I assume that you would have been conversing with the seller about various topics, not just walking in and asking if he has questions. You made my point very well - better than I did! Thanks!
Rob - that's the other half of the plan - to have the quiet confidence that you are worth what you charge, without having to argue or defend!
Jennifer - I do not "compete" with a minimum service agent or company. We are two very different animals. If a seller has the savvy to do alot of the work themselves then they are welcome to avail themselves of whatever option they determine will help them accomplish their goal including using no broker at all. There are many reasons why people value my services and it is my job to explain that value. It is their job to evaluate whether my services meet their needs. If they do not require those services then we do not need to work together. It's really that simple. It's all about leverage. We leverage our time, experience and money to reach our goals. That includes me as well as potential clients.
I like the fact that many of us are now using "minimum service" or "reduced service" to describe these companies and agents. Discount brokers make it sound like the cost was less, but did not focus on the fact that the service was not the same.
Your best defense, if it is available to you, is the support of past customers who know what your worth is. I work in several subdivisions and find this to be invaluable.
Make sure the seller realizes all the he or she will not get by going the cheaper route. Often they do not realize that exposure on the internet can mean just via the IDX that your MLS uses. He needs to see that you (or at least I) also have sites I own and others I use that amount to over 40 total pages on the net. At the very least you can get him to ask the other agents to show exactly where the home will be marketed. When they see it will only be on one or two company sites and the MLS, but that you will have it on blogs, your own webpage, etc. you will get their attention for sure. Then even if he does list with a reduced service agent for a while, when it comes time to renew, he may very well give you a call to do the job the low priced company could not due with its limited resources.
Minimum service is based on I will put your home on the MLS, and though they don't say it this way, I will also give you all the liability in return. You would think in this troubled real estate time that franchises like Help-U-Sell would be doing wonderfully, instead they are in some cases regionally in the crapper. Maybe the internet empowered consumer is wiser than originally thought.
I don't think I would use a discount doctor or attorney. You get what you pay for!
Jennifer,
For me commission rarely comes up. I charge what I charge and sellers accept it. Why? Because I have already built trust and value. Most know how I work prior to calling me. I also agree that most sellers are either looking for a lower commission or not. They are two different animals.
The consumer without a doubt should be shopping qualifications instead of costs. But alas....they don't.
Hi Jennifer, Excellent advice really. Perhaps to follow that with some actual sold listings where the list to sale ratio was strong.
Jennifer you always have to sell your value, and people do need to remember that they often get EXACTLY what they pay for.
Love what Karen Anne said lol "But... I usually... if nothing else... enjoy watching them do mind contortions in front of me..." Seriously thought, and even then some people will choose the discount or the cheapest possible way, without seeing the value (maybe they have blinders on?). Then it just wasn't meant to be. ~Rita
I don't mind if someone evaluates all their options - in fact, I"d rather they do so that when they do end up with me, they're happy about their decision!
The problem with the "you get what you pay for" in our industry is that it's so often not true. And that's no secret to the general public. I've used real estate agents for my own properties and I've rarely felt I got good value for my dollar. So, perhaps it's safer to say that "you don't get what you don't pay for"???
I had a seller a few years back tell me the other agent would "do it for less" and then he said "why do you charge more and I answered confidently, "Because I believe I am worth what I charge!" He signed the listing agreement! :o))) Confidence will take you a long long way! Great post!
Great Post Jennifer...I need to remember some of these points when dealing with sellers.
Hi Jennifer!
I have been caving in my commisions lately, I feel really bad about the way the market is. I have decided to be a little more firm, and this is a great push in that direction. Thank you for the encouragement, I know I need all I can get!
-Lisa
I love the response from Erica "...Then I offer to reduce my fee, based on what they want me to TAKE AWAY as part of the deal. Do they want zero ads (which the straight fee listing companies don't do--zero ads)?
Do they want to set up their own showings? Do they want to create their own flyers?
I don't think I've EVER had anyone say YES to that when it's put that way..."
I will remember these ideas the next time I am posed this idea. Thanks!!
Jennifer -
As usual - great dialogue, no pressure!
Indeed, the cheapest usually not the best, net-net, in the long run. If the prospective client doesn't want to consider this, it might be time to move on!
DEAN & DEAN'S TEAM CHICAGO
Jennifer, I too do not agree at all with "you get what you pay for". There are many agents that charge less than I that are veryu good at what they do. It's just they have a different business model. There are also agents that charge more that suck. A potential seller needs to do their homework, interview agents and then pick one that meets their needs.
The public frequently sees us an interchangeable. We need to make sure we differentiate ourselves to them. All agents are NOT worth their asking price and that's a fact. Unfortunatly the public often doesnt' know this until they get a bad one.
Hi,
Just ordered your book yesterday..Cant wait to read it..Keep up the good work!
Manny
Jennifer: Fabulous! Your blog today felt like a personal pep talk. Appreciate it.
I concur with the thoughts already shared, and will add a little more to them. My company charges a standard 7% listing fee, which definitely gets people questioning me. We are the largest broker in our area, however, so we've proven our value through the years. I have people asking for reduced commissions on most listing appointments. Sometimes, I will just say "no, I can't reduce..." and move on without further explanation. Sometimes I will say that I will reduce the commission only if they sign an exclusive buyer's agency agreement with me to purchase their next home, or I may say that I'll reduce it for the first 30-45 days and then it goes back to the full 7%. (our % does go down as the home's $ goes up). With regards to why I deserve a higher commission, I will typically point out what my broker and I can provide in the way of marketing that other brokers/agents don't do. I ask them if they would like to handle all of the appointments, take off work for all daytime showings, negotiate the deal, handle all of the inspections and paperwork, etc. It gets them thinking about what we as agents truly do for them. I also remind them that I am assuming 100% of the monetary risk during the listing period; if they want to pay me an up front fee, maybe I'll consider lowering my %, but that hasn't even come up for me. Just some of my ramblings for now...
Thanks for the post!
Jennifer, I take a lot of Land Listings nothing under 7%,generally 10%, I have a reputation among the Land buyers and sellers that I am worth the commission I charge. My Value is simmilar to attorneys charging $200 per hour vs attorneys charging $850 per hour. The consumer understands the difference. Not all Sellers are meant to be represented by me. Just like there are agents who take 1% for selling a home there are others that charge 7% again there is a difference.
Great way of putting it when having the discussion with a potential client. This same logic works in other service-related businesses as well. Thanks for a good post.
Or...it's possible that Mr. Seller has every intention to use the minimum service company anyway but wanted to pick your brain (for free) so he could arrive at the proper price. At any rate, I don't believe that one size fits all. Each client and each circumstance is different, and a minimum service broker may be the perfect fit. You're right...the bottom line is that it's their decision, and any arguing will only make you look desperate.
One of the things I was taught in my Commercial RE Certification (and now, teach) is that if it gets to the point that a principle 'needs' to get into the broker's pocket to make a deal 'make sense', perhaps they shouldn't do the deal.
I have no problem whatsoever saying 'don't do the deal then' and letting them make the final decision. Mine is made. I'm not in business to lose money and my time/energy/resources/tools/value has already been calculated.
Unbundling services is one alternative. Just make sure the principle knows that if they are not paying you to do something, they must do it. I have had sellers come back a few weeks after we agreed that they would do their flyers, open houses or print ads for X reduction in commission "OMG I didn't realize it was 'that expensive/time consuming/creativity requiring'--do I really NEED to do this?". Hello. :)
Candice
Thanks Jennifer, for a great post helping with situation I personally seem to deal with frequently. Aloha - Yvonne
Jennifer, Your proof tha the agent who role plays wins. Loved the response.
I've had that experience and have never reduced my compensation. I think it has a lot to do with not only the value that the agent offers but also how the agent values himself or herself.
Commissions are starting to be a hot button as the home prices go down - sellers think that they should give a smaller commission - they are! x% of $150000 is less that x% of $20000
This is a great script. It gives the seller something to really consider when making a decision about whether a lesser commission will really be cheaper.
Great post. I can't wait for the call tomorrow.
Thanks for the article. I think it was well written and we could all use a little reverse psycology when it comes to knowing how to handle these types of situations!
Mike - Me, neither! I think it's going to be great. Glad you're joining us.
Christine - Yeah - that's what I thought - you can sort of spell out what's what without being critical of the other guy!
Kathleen - Yes, indeed!
Lana - I agree 100%. And that sense of self-worth comes from KNOWING that you know what you're doing!
Chuck - as long as the role-playing comes from the heart...
Yvonne - I'm so glad I could help!
Candice - I just don't like the idea of unbundling. I'm there to sell the house, not provide one service or another. If this particular property needs a certain set of services to sell, them's the services I want to provide!
Kelly - maybe, but that's no reason not to show up. I'm sure many a FSBO has hired an agent after being positive they wouldn't...
Maureen - you're right! I know it work on me!
Nice sript, always looking for new ways to say we are worth it.
I've offered both services for years. Flat fee MLS listings and full service. Experienced sellers and even other Realtors list with my flat fee MLS service. There typically isn't any convincing them to commit to full service. On the other hand, some marginally experienced sellers find out they aren't comfortable with the mls listing after a month or 2 and decide to upgrade to the full service. I explain that the big difference between the 2 services is with full service you get (1) my pricing and marketing strategies implemented (2) my negotiating and creative deal making skills, and (3) my assistance to make the SURE that the buyer ends up closing on the deal.
Loved your response and theory that if you are sitting in their home they are looking for a reason to use full service. I used to work for a discount Brokerage, but it turmed out that people who had higher priced homes wanted the sign on their lawn of a prestige Brokerage. I also found that people used the discount service to sell inexpensive homes but bought with someone else who they had a relationship with.
P.S. that discount Brokerage is ow out of business.
Wow... Another Feature! Congrats Jennifer...
Came back to check on the comments and Had to scroll WAY down...
Yeah, well... shucks... actually I was surprised at the utter lack of interest in the topic until that gold star showed up!
Nicely put. We rarely adjust our commissions at our company, as we are full service and offer many technology items others do not offer. All listings are manged on transaction point, each listing gets virtual tours, showcase listings on Realtor.com, and is posted to our company site, teh individual site and gets its very own site. Marketing the property correctly is what sells the home for the most money. We believe in our service.
You get what you pay for in real estate as with any other business.
Jennifer, I like the way BB explained it by shopping qualifications vs costs.
I agree. Clients get what they pay for. In this market it takes more than just putting it on the MLS to move it.
Hi Jennifer, I don't even compete with minimum service providers. I think you get what you pay for. Check out my latest post about a client advertising on Craigslist.
Thanks, Adri
Woops missed the seminar!
Jennifer,
Thank you for hosting this teleseminar. I found it helpful.
Great topic . . . sorry I missed your teleseminar. I offer full service, and provide excellent marketing for my clients. Would the seller work for a reduced salary, just because someone else would?
Thanks Jenn! Between you and all of the commenters (especially Erica - absolutely loved her suggestions), I have another set of tools to add to my bag of tricks when dealing with sellers reluctant to pay my percentage commission.
Thank you. In our market (good times and bad) that is certainly an issue we have to deal with. I will try to use your approach next time I face this issue. I also appreciated all the responses.
Be careful throwing around the "you get what you pay for." Several of our top agents in my market offer their services for a "reduced/below what most of us consider norm price." Call it whatever you wish but know your competition before stereotyping them based on their commission rate. One of the least expensive agents in our market has over 15 years experience as one of the top agents and his marketing plan includes more than almost any agent in our market.
When I am training new agents I hear this comment in each and every class and have to correct them. I explain that they need to learn the business models of these others brokers and to check themselves at the door... Is a new or even not very experienced agent worth 6% when a 15-20 year vet with 1500+ sales under their belt offering full marketing and the experience and knowledge of the market at 4%??? Just food for thought?
Bless you Sheri!!!! I agree 1000% but it's a very unpopular opinion! I was a discount broker for a few years and provided full service - and I was amazed at how hostile the other agents were toward me. I'm curious how your new agents respond to being told they aren't worth as much as experienced ones? I say that all the time and get slammed every time!
The teleseminar on commission negotiation was FABULOUS!!!! Thanks to everyone who showed up and gave us such wonderful feedback.
I like Sheri's post.
I unbundle my services when I have a reason to and that doesn't make me a DISCOUNT broker. I sometimes charge an hourly fee (like a consultant) if someone admits they want advice but don't want to list. I have a flat fee rate for builders who want MLS entry and nothing else.
There is room in this world for many models.
Hey Jennifer, great answer to a tough question. You just have to hope your potential seller client has all the facts to make the right decision for him.
Hi, Jennifer! I like your phrase, you don't get what you don't pay for. In this case, full time service. It's difficult not to argue sometimes since I know the kind of service they get from some discounters in my area. But this tack is worth trying for sure. Thanks!
Great post Jennifer! I agree 100%. Especially the "you don't get what you don't pay for".
When you can effectively paint the value of your services, the dollars will follow! Its an easy concept, but not one that everyone sticks to!