5 Ways Real Estate Agents Can Retain the Full Commission

dotloop

April 17, 2019 | comments

Effectively Demonstrate the Value of Your Expertise

Real estate agents dread when a home seller asks for a discount on their listing commission. But with a few simple tips, you can turn this potentially awkward conversation into the perfect opportunity to demonstrate your full value.

In an age of do-it-yourself online research, consumers have all the digital tools at their fingertips to compare costs of everything from car insurance and airline tickets to investment services. Indeed, many consumers view paying full price as an extravagance and negotiating the deal as the prudent, fiscally responsible thing to do.

So it should come as little surprise that real estate agents are reporting a significant number of their listing clients are asking to negotiate the commission down from the standard 6%.

While successful team leaders and coaches say that discounts can be an option, it’s not always what the client actually wants. The real conversation may be more about the experience, negotiating skills and strategic approach the agent brings to the deal that, in the end, will more than pay for the full commission.

The Millennial Mindset on Commissions

According to the Zillow Consumer Housing Trends Report 2018, 59% of millennials and 52% of Gen Xers find lower commissions or rebates “very or extremely important” in selecting an agent. Together, these two demographic groups comprise 59% of home sellers, with that share growing every year.

Competing brokerages offering a set discount, either as a reduced percentage or a flat fee, add another layer of downward pressure on commission rate expectations.

Perhaps feeding the negotiation conversation are millennials’ willingness to take on some of the buying and selling responsibilities traditionally left to the agent. According to the Zillow Trends Report, 32% of these 20- and 30-year-old adults take a more active role in photographing the home compared to their baby boomer counterparts (11%). Millennials (38%) are also more likely to post their home on their social sites versus boomers (10%).

But as Bernice Ross, industry expert and CEO of BrokerageUP training, and other coaches have observed, it’s not always in the seller’s best interest to pay their listing agent the smallest amount possible. The goal should be to get the most for their house in the shortest time possible. It’s up to the listing agent to educate them how they will accomplish this.

In many cases, agents can turn around the commission negotiating client’s mindset by employing a few simple tips.

How to Show Clients that Paying 6% is in Their Best Interest

Clients understand that certain professionals are worth paying more for their services. For an ongoing medical problem, they want to see a highly regarded specialist, even though it will cost them more out-of-pocket.

Likewise, airlines have no trouble charging 30% more for a non-stop flight, even though the passenger on the multi-leg flight will be sitting in the same seat and eventually arrive at the same destination.

Real estate agents are no different. According to the same Zillow Housing Trends Report that found younger home sellers want lower commissions, millennials (73%) and Gen Zers (84%) say they also highly value an agent’s negotiating skills and strategies.

Here are five ways agents can demonstrate to clients that paying the full 6% (or more) is ultimately going to be in their best interest.

1. Project Professionalism

Bryan Casella, leader of Team BC Real Estate at Keller Williams Pacific Estates in Cerritos, CA, notes that agents who project a vulnerable demeanor can sometimes inadvertently cue clients to ask for a discount. He references the term “commission breath” used to describe a vibe of neediness presented by certain agents. In other words, everything about them says to the sellers, “I need a commission. I need to make this sale.”

Casella recommends two ways of avoiding this perception. First, agents should take the focus off their own needs and avoid seeing clients simply as sales prospects. Instead, they should concentrate on connecting with them as people and how to help them achieve their real estate objectives.

Second, agents should exude such professionalism that the idea of asking for a discount would seem inappropriate.

“Does anybody ask a top doctor or lawyer for a discount?” reminds Casella.

Professionals have systems, processes and teams. They have a unique plan that only they can offer their clients. They’re punctual, and they treat their own time as valuable. Casella points out that professionals don’t just drop everything when they get a call. He says, “Professionals set appointments.”

Dotloop users can make a great first impression with prospects by using dotloop’s Messenger to send them a text message that links directly to a loop preloaded with their listing’s MLS, forms and agent listing agreement. The text linked to the loop opens the conversation and offers a natural progression to get the deal started.

2. Structure the Listing Presentation

Clients often ask for a commission discount because they’ve heard it’s simply the smart thing to do.

Jeff Cohn, leader of the top-selling team at kwElite and host of The Team Building Podcast, structures his team’s entire listing appointment around the fact that most sellers are going to ask them to reduce their commission. In fact, he estimates that about 80% of sellers try to negotiate the commission upfront. Therefore, he’s trained his listing agents not to address the subject of price until they’ve walked the property and given a customized presentation on their digital tablet.

“By the time we address the subject of fees,” says Cohn, “the home seller has seen that we will do so much more for them than any other agent they will talk to. We’ve addressed the real issue that prompts people to ask for a discount, which is to reassure themselves they’re getting a good deal.”

Because real estate teams work more efficiently when they’re collaborating on an end-to-end platform, dotloop created dotloop for Teams to bring all parties to the deal in a collaborative workspace where admins can “act on behalf” of agents, team leads get real-time visibility into multiple transactions simultaneously, and custom workflows allow agents and admins to submit for review quickly and easily.

3. Make the Client’s Concerns the Focus

According to Cohn, the two biggest concerns home sellers have is that first, they will net the amount they need from their home sale, and second, that they will somehow make it through the dual inconveniences of having their home on the market followed closely by the chaos of moving.

Agents can show clients long lists of the tasks they complete during a home sale, but with no frame of reference, this can come across as simply trying to justify their fees.

When Cohn presents what his team will do for clients, it’s a list of services that they can see will directly impact their two top concerns.

Cohn treats every home as if it were a luxury property by providing services like professional staging, a Matterport 3D tour and drone footage incorporated into a professional video. Additionally, home sellers get lifetime access to a company moving truck for local use and concierge service with a full-time admin dedicated to them.

Because of these extras, Cohn’s team is justified in asking for a 7% total commission and $1,000 for the concierge service. If the client balks, Cohn has trained his team to make sure they are discussing what the client really cares about — their net proceeds.

“When they bring up commission percentages,” says Cohn, “it’s just a number to them. But if I can show them in dollar amounts how our higher fee can be more than covered by getting a better offer, they feel satisfied.”

4. Educate How Commissions Work

Clients are often unaware of how the commission on a home sale is divided, including how it functions as an incentive for buyer’s agents to bring their clients.

Jay Thompson, real estate blogger and former broker, says that when a client says, “6% sounds like a lot,” they probably think their listing agent is pocketing the entire amount.

The agent can easily correct this mistaken assumption using a dollar bill and a pair of scissors.

5. Provide Social Proof

If home sellers can see that a discounted agent is likely to get them discounted results, they will be more likely to pay the full commission to get a better outcome. But for this to work, the agent has to demonstrate concrete evidence that they offer more.

Real estate coach Tom Ferry says that for a real estate agent to accomplish this, they must first track and measure the discounter’s numbers and then be able to present their own numbers as a comparison.

“You just always acknowledge that there’s going to be a Costco market and a Nordstrom’s market and even a Neiman Marcus market,” he says, “and you deliver this (higher) level of service and experience.”

Ferry adds that when clients understand the level of service they’ll receive, they will gladly pay the full commission.

One area where agents can shine in the eyes of millennial and Gen X sellers is by ramping up their online social presence. Consider millennials, who more than any other generation, use videos and social media sites to help sell their homes. Agents who present a full range of social selling tools, from website and social media to blogs and email campaigns, are more likely to capture the hearts and minds of these younger home sellers.

It’s also important that agents provide social proof of their services. More than ever, consumers are looking to their peers for confirmation on goods and services.

Thompson recommends that agents showcase their client reviews and testimonials in the listing presentation. “Play a video testimonial or two,” he says. “Slide over a piece of paper with past clients’ names, email addresses and phone numbers (assuming, of course, that the clients have given their permission).”

Discounts Are Here to Stay

The simple truth is that there’s an entire next generation of home sellers more likely to seek a commission reduction. So instead of just hoping the subject won’t come up, agents should take a proactive stance about when and how to talk about their commission.

A good salesperson makes the conversation first about the customer’s needs; second, about the unique value of his or her solution; and, finally, about price. After all, It’s much easier to discuss the commission when the agent has convinced the home seller that they are the magic ingredient that will push their house from “for sale” into “sold.”