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The case for (not) charging a higher commission

Last week, I talked about defending your commission by presenting yourself as a rare pink diamond instead of a crusty old rock from the pawnshop.

If you’re a highly skilled and experienced agent, who consistently delivers outstanding results, shouldn’t you get paid more than the “average” agent? Certainly, but it should be through increased demand for your services and improved efficiencies – not by charging more than one deal at a time. I mean, you could charge more, but is it really worth it?

Big picture thinking is how much you make in a year. Small picture thinking is how much you make on an individual transaction.

Let’s say you charge a little more to 10 different clients, enough to make up one full extra commission. You do a great job for all 10 clients, and they all still recommend you to their friends, but now it’s with a caveat, “He’s great, but he charges a bit more.”

You’ll never know it, but that caveat was enough to prevent two potential clients from calling. You think you’re one commission ahead, but actually, you’re two behind. And the missed opportunities snowball from there.

Besides, the public should expect a high level of service to warrant a five-figure expense for a single transaction, don’t you think? I want my clients to say I was worth every penny, and then some. I want to confidently tell my clients that I charge only the average rate, but I deliver results miles above average.

This is a hot topic for me right now because I’ve recently heard about a mega team where the new agents have to sign a contract (I’ve seen it) agreeing to a commission split of 30/70 (30 per cent for them and 70 per cent for the team leader) if they charge “only” the typical prevailing rate in their market.

To “earn” the “full” 50 per cent split on a $500,000 property, the commission earned on the seller’s agent portion is over 84 per cent higher than the prevailing rate!

This percentage goes higher and higher on more expensive properties, crossing the 100 per cent higher threshold at $800,000. Essentially, this means that the seller is now paying three full commissions – one to the buyer’s agent, one to the seller’s agent, and one to the seller’s agent’s boss – the greedy mega agent who is doing absolutely nothing. If only the sellers knew that the famous mega agent cares so little about their listing, he’s probably not even aware of its existence.

All commissions are negotiable, but in my opinion, charging this much is an obscene abuse of the public’s trust. Do you think these mega team agents tell their clients the “standard” rates charged by the majority of their competitors? I think not.

And by the way, who do you think is willing to pay these outrageous fees? I’ll tell you who:

Honest, trusting people who don’t know any better, including the elderly and immigrants.

The sad irony is that the folks paying these ridiculously high commissions probably actually believe they’re getting more for their money. But despite the flashy advertising and misleading promises, the listing agent they’re dealing with is most likely inexperienced, unskilled and poorly trained.

The mega team is charging more money for an inferior level of service compared to any high-integrity, highly skilled, individual agent (or small customer-service-focused team). Think about how you would feel if your parents or grandparents were taken advantage of in this way.

I’ll tell you how it makes me feel. My blood is boiling as I write this, and if you know me, you know it’s not going to end here in this little blog post. Stay tuned…

Hold onto your integrity. It’s worth a thousand times more than charging even a tiny bit more on a single commission.

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