In this fifth of my series on our industry’s fee structure, let’s look at this highly controversial subject from the perspective of perceived value.
After all your attempts to justify your usual fee seem to have failed, if your would-be sellers steadfastly demand a lower fee, maybe it’s time to bring up the non-monetary value of services offered.
Consumers are usually aware of the many obvious benefits offered by members of our industry, but in my experience, are typically unaware of the unseen. We pay sizable fees to provincial, national and local bodies that regularly lobby on behalf of our industry, and importantly, from which the public derives direct benefit. Think about our collective efforts over the years with respect to maintaining Canadian tax-free capital gains on home equity, eliminating municipal land transfer tax and numerous other issues. We’ve built, financed and evolved much of the infrastructure for the dissemination of information on the renowned Multiple Listing Service. And national and provincial real estate associations and legislated administrations are funded by realty agents – not taxpayer dollars.
You’re not a retail salesman awaiting the arrival of customers through the front door. You’re a self-employed entrepreneur who’s operating a small business. Accumulation of a great deal of experience permits you to offer valuable, objective, professional guidance. You’re an expert in your field who must make a profit and you should not feel guilty about doing so. Unfortunately, unless you have a solid relationship with your prospect, there will probably be another agent who is ready, willing and more anxious to take the listing at a reduced commission rate. But with what level of service?
It helps to understand your prospective seller’s motivation. Why are they insistent on a discount? Because consciously or subconsciously, they fear being broke and dying poor. Therefore, they take any opportunity to squeeze people for as much as they can. If you can get them to admit this and to see things from your perspective, you might be a step closer to their appreciating your value and respecting your fee. Here’s an allegedly true story of perceived value.
While he was quietly enjoying a coffee in his favourite café, a fellow patron recognized and approached the famous artist, Pablo Picasso. She was effusive in her praise of his work. Mr. Picasso thanked her and politely waved her off. Ignoring his wish for privacy, she persisted and asked for his autograph. Again, he demurred. When she refused to go away, he courteously said he preferred not to be disturbed, but she was relentless.
The woman asked him if he’d do a quick sketch on her napkin and offered to pay him whatever he felt it was worth. Realizing she would not be vanquished, he finally yielded, snatched the napkin from her proffered hand, did a small sketch, signed and returned it to her. The woman was vociferous in her gratitude and asked him how much she should pay him for his effort. “Ten thousand dollars,” he replied. Nearly fainting, she said, “Your price is much too high. It took barely a minute.” Picasso said, “Yes, madam, this is true. But it took me 30 years to learn how to draw like that.”
Let’s say you needed a serious life-threatening surgical procedure and had the choice of going under the scalpel wielded by an automobile mechanic, a newly graduated medical student or a highly credentialed veteran surgeon. Here’s the catch; the mechanic offered to do it for $1,000 and the graduate agreed to charge a third of the veteran’s fee. Any thought required here? I think not. Price would be no object. It’s somewhat an exaggeration, but it makes my point. Your potential fee may seem high to a buyer of your services, but you bring the benefit of accumulated knowledge, experience, skill, trustworthiness and enthusiasm into serving them. That’s worth a lot.
You should charge whatever fee you feel you’re worth. If you’re a newbie, just like an apprentice, maybe a discounted fee is more justifiable. On the other hand, if you’re a highly experienced and competent senior agent, your full fee is certainly well warranted.
To win the listing in a competition, if you’re hungry, you may feel inclined to cut your normal fee, or in lieu of a discount, offer cash back or pay for certain services such as the lawyer’s, stager’s or home inspector’s fee. I suppose if you’re immersed in a hot sellers’ market and know beyond a shadow of doubt that the property will immediately attract multiple bids, hence your expenses and time will be minimal, a lower fee could be rationalized. But in a balanced or buyers’ market, value added would arguably be perceived more favourably than cutting your fee.
But what exactly did you win in any case? A chance to invest time, money and expertise to market a property with the hope you can sell it. It’s roulette. Spin the wheel and you might win – or not. What is your worth? It’s a business decision and it’s your choice. In the next column, I’ll address the subject of fees from a buyer agent’s perspective.
[quote_box_center]“When your self-worth goes up, your net worth goes up with it.” — Mark Victor Hansen.[/quote_box_center]
Ross Wilson is a retired real estate broker with extensive experience as a brokerage owner, manager, trainer and mentor over a highly successful 44-year career. His book, The Happy Agent – Finding Harmony with a Thriving Realty Career and an Enriched Personal Life is available where print and e-books are sold, including the TREB, MREB, RAHB and OMDREB stores. Visit Realty-Voice.com.
