How many times have you, as a Realtor, been asked the question, “How much is your commission?”
How you answer this question is important and may set the stage for how future conversations around commissions go, both on the listing and selling side of the transaction.
The answer to this important and valid question, usually asked by a home seller or listing prospect, is something that should be explored very early into every listing presentation. The only correct answer is, “Commissions are negotiable.” Pretty much everyone knows that real estate commissions are negotiable and you may be able to differentiate yourself from other agents by putting it forward, up front, without being asked the question directly, as a term of the contract that can be used as a selling tool.
The direct and early addressing of what sellers think might be their greatest concern in the selling of real estate of any kind, will help you have a successful experience and fewer unknowns later during the transaction process.
The value of acknowledging the issue of how much sellers can expect to pay in commission, at varying price points, is also something to consider during listing negotiations. You will find that most sellers will be happy to pay more in total commission, if they’re netting a larger corresponding amount after costs.
It is also important to address the listing contract verbiage that states the seller agrees to pay a set commission for an agreed upon price. The contract also goes on to say that the same amount of commission can still be payable at a reduced, acceptable price, but who would choose that option without asking the agents to also take less, if the sale price is significantly lower than the list price?
The best time to negotiate a listing and co-op commission is not before or during the listing presentation. We are all clear how much the commission payable will be when the contract is fulfilled – it’s in the listing agreement. What isn’t in the listing agreement is advice on if or when the seller has leverage over the agents to reduce that commission, if they choose to accept a lower sale price. This is the best time to attempt to negotiate a lower commission and the only time that the seller has leverage over the agents to accept a lower commission in exchange for a lower acceptable price and a completed transaction.
Commissions are negotiable upwards too and may result in conditions that are ripe for putting more money in the seller’s pocket. If the seller can see how paying a higher commission could net them more after commission costs, they’ll happily sign a listing contact with a higher commission amount, with the understanding that the commission payable could be subject to negotiating a lower amount if their full list price is not achieved. After all, the seller probably is more concerned with how much they take home after costs rather than how much the total commission is. The bottom line is the bottom line.
Justifying your commission rate by attempting to promote the value of an agent and all that they do to market the property is not the right road to travel for this conversation. The co-op commission is not about how the agent’s activities create value for the seller, it is more about another marketing tool that creates leverage in the transaction and could help sell the property for even more money than the seller expected.
Jim Fannon, a 25-year veteran of the Niagara Association of Realtors, has always been willing to share how to take listings that offer higher commissions to the buyer’s agent, as a strategy to make listings more saleable and result in a better net for the seller. Contact him by email or call 905-934-1110.
