Part 1 of a two-part column about commissions
I am often asked about commission-cutting, more than any other subject in this industry.
When I’m asked about what this brokerage or that brokerage is doing, I tell them I can’t really comment, due to certain acts that govern commissions. You can look them up, it’s not my job here to tell you!
There have always been agencies and sales reps willing to do “commission-dectomies”. In today’s business world, it takes all types to make our world go around. Does it diminish our profession? I’ll leave it to others to comment on that. The consumers, in the end, must be made aware that there are many ways to meet their needs. For the past 30-plus years that I have been hanging around, I have seen it all and then some.
Today, there are reduced commission brokerages, facilitator brokerages and “no-frills” brokerages that will put a listing up for a nominal fee of $150 and charge a nominal fee to negotiate the transaction.
When the marketplace is “hot”, these types of brokerages thrive. But when the marketplace cools, many disappear.
Within the next few paragraphs, I will attempt to assist those salespeople who simply cave in at the sellers’ demands for lower fees than what you are charging. (Note: not the “average” or the “normal” – that’s no-no!)
You have to be able to defend the commissions that you charge for the services you offer. I suggest you have a number of referral letters from satisfied buyers and sellers alike in your presentations.
Here’s an off-the-wall idea that I picked up recently from an agent in Massachusetts, who went one step further than the normal referral letters. She invited 30 of her past clients to a cocktail party. On the invitation, she told them the reason for the party was to thank them for their past business and that if they wished to, there would be a videographer there to take their testimonials about her services to them. She posted the videos on her website.
Sell value, not what you’re charging, for commissions. “You pay a higher price for quality, but quality pays for itself,” says an advertisement of the past by General Motors.
Another way to illustrate to the consumer that you are worth every cent of what you charge is the Guaranteed Service Plan. Some agents have come up with a Guaranteed Sales Plan as well.
Guaranteed Service Plans have been around forever. All an agent has to do is to guarantee his services for the duration of the listing period – and if he doesn’t perform, with 48 hours written notice to correct any deficiencies, the seller can cancel the agreement. To further enhance this, the broker could sign the agreement to give it some additional clout. By the way, it’s better to guarantee three to four services than to guarantee 20!
The Guaranteed Sale Price is an area that the faint of heart should never enter. You have to have the financial backing in order to go into this type of promotion. Either you have to have a good credit rating at your financial institution, or a friendly mortgage broker that will assist you in the bridge financing if the property doesn’t sell during the tenure of your agreement. I can’t give you a hard and fast rule of how to handle this service format, but I can give you a rule of thumb that I used in years past. Usually, I would deduct my commission from the asking price and then factor in at least 10 per cent off the price for carrying charges if I did not sell the property in the listing time frame.
Guaranteed sales plans are not for everyone and different rules and regulations apply to each province. Seek out the proper wording in a Guarantee Sales Plan for the seller, in order that you give them the best of both worlds – an offering from the public that they can accept, or yours, in the event no offers are forthcoming.
If you can develop a solid pre-listing package, it will assist you in getting the commission you are charging.
List all the services that you provide, but concentrate on four major ideas: Sell your property at the highest possible price, in the shortest possible time, with the least amount of inconvenience.
And make sure the client is so happy with your services that they will refer you to other clients. Concentrate on those and offer other services as well, especially those that set you apart.
Try telling the client that “our marketing can get you more $$” — This does not mean that some agent charging less will not be doing the same, but maybe not the same methods that you are offering, or to the same extent.
Show the potential client what your particular office sold in the last quarter and how close to asking price it came. Show that your office sells, for example, one per cent more than the average asking-to-selling ratio. That may mean an additional $1,000 or $1,500 more to the seller than the next brokerage would get.
The most important thing: don’t sell yourself short! Build your presentation on credibility, availability and sale-ability.
Stan Albert is celebrating his 35th year in real estate, and is a committee member with TREB and RECO. He is a registered trainer/consultant, and is now in his ninth year with Re/Max Professionals in Toronto. Email salbert@trebnet.com; (416) 232-9000.
Discuss this article in the REM Discussion Forum.
Stan Albert, ABR, ASA is a consultant with Re/Max Premier in Vaughan, Ont. He can be reached for consultation by email. Stan is now celebrating his 45th year as an active real estate professional.
