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How to Avoid Reducing Your Commission

Home Agents
By Mark Mathis, VP of Sales for Homes.com
January 28, 2020
Reading Time: 4 mins read
11
How to Avoid Reducing Your Commission

Insurance agent with couple looking through documents. The agent is holding a digital tablet. Couple are casually dressed. They sitting at a table at home and are looking a little happy and smiling.

In today’s economy, everyone is trying to pinch pennies. In real estate, one way sellers attempt to do this is by asking their agents to lower their commission rates. While many agents flat out refuse to do so, others have become more flexible or are unsure of what to do. In fact, over 80 percent of homes are not paying today’s standard 6 percent commission.

Since the rates have already dropped from 10 percent, agents are reluctant to renegotiate lower than the 6 percent commission average, and with good reason. There is often a great deal of work happening that sellers are unaware of. If your client asks you to lower your commission and you’re caught off guard about how to answer, here are a few tips to help you avoid any uncomfortable situations and keep the listing.

1. Show Your Experience
The majority of the time, when sellers are looking to avoid paying an agent’s commission, they’ll try to sell their home on their own. Remind sellers that by listing with an agent, they receive expert advice and experience to make sure they get the best results from their home sale. While other agents may have a lower rate, they’re likely trying to break into the market and may not be as qualified or knowledgeable as you. Let them know that, thanks to your experience, you’re able to evaluate a buyer’s ability to afford the property and negotiate in the seller’s best interest. Your job is to bring in buyers who are the best fit for the property.

In addition to this, because you’re a full-time agent, you can more easily close a deal. Share your recent accomplishments with clients who question your commission rate to remind them of why they hired you. For example, you could tell them how many homes you sold in the past month. You could also show them a comparable home you just sold to give them an idea of everything you do.

2. Remind Them What You Offer
Some clients may be unaware about why you have a commission fee and may believe it’s more like a tip. Let them know that they’re paying for all of the work you do behind the scenes, such as advertising the listing, creating social media buzz, conducting pricing research, compiling the best pictures, etc. If they don’t seem to be getting the message, you can say something like, “I would love to work with you, but in order to do so, I need to cover my expenses. With your home, I can do so at X percent.”

You can also show them statistics that prove agents get better prices, so the commission they pay is worth it in the end. Agents know how to competitively price a home to pique the interest of buyers. Not only this, but as an experienced real estate professional, you have the ability to put a listing in front of multiple buyers’ agents whose job it is to find homes for their clients. Without you, sellers are left trying to piece together the right information from the internet, which likely will not be as accurate.

3. Tell Them It’s Not Up to You
If you’re working within a brokerage, it’s very likely that you don’t have the option or the authority to negotiate your commission rate. Especially if you’re new to the area or to real estate in general, let your client know that you’ll discuss it with your broker and get back to them. Then, take it up with your team.

Another option is to let sellers know that, if you lower your rate, the buyer’s agent could be forced to lower theirs, as well. As a result, it’s likely that fewer agents will want to show the property. If fewer people see the home, it’s very possible that they won’t receive the offers they’re hoping for. Sometimes clients don’t realize that you’re not the only one affected by lowering your commission rate.

4. When There’s a Little Wiggle Room
While most agents will avoid reducing their commission rates, there may be some times that a lower rate is actually more beneficial. If the home is a luxury property or higher-priced, agents are often more willing to take a smaller commission to make a big sale. In addition to this, if the buyer and seller are very close to an agreement and lowering your commission could seal the deal, it may be worth it to reduce your rate. Finally, if an agent makes a mistake on the listing or during the negotiations, it could be worth reducing the rate to try to keep the transaction positive.

Some agents may feel more comfortable reducing their rate, but that doesn’t have to be the norm. Tackling commission concerns can be a difficult thing. If you are an agent who has questions or concerns, share them with your fellow agents in the Secrets of Top Selling Agents Facebook Group.

Mark Mathis is vice president of Sales for Homes.com. For more information, please visit marketing.homes.com.

Tags: CommissionsHomes.comListing Presentation
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Mark Mathis, VP of Sales for Homes.com

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Comments 11

  1. gail steinberg says:
    3 years ago

    We’ll, if you don’t fight for your commission, how quickly will you roll and not fight for your clients!

    Reply
  2. Paula Swayne says:
    3 years ago

    I like this article, but there is some incorrect information.  I have been in the business for 25 years and never in that time has a 10% commission been offered for a residential sale.  I do remember at one time that amount being offered for selling land.

    Reply
  3. Mark Vedder says:
    3 years ago

    I have also mentioned , especially to a seller who likes to negotiate with you, this thought….Do you want an agent who is willing to give away their own paycheck, negotiating on your behalf to get hard earned equity in a time frame and total terms acceptable for you?. 
          I agree with your tips on items to mention about all that we do. I also believe and talk about that my target market are the 1,000,000 agents nationwide who bring buyers to us. They are the experts who know what their clients are looking for and I will take time to talk with each and everyone that shows or has questions on your home. By educating and paying them well they look and feel good about showing your home and know I value them and their client and will help them by responding to their questions and concerns on your behalf. The number 1 historical customer complaint about Realtors is communication. 
         Hopefully this whole point covers part of how we earn the commission and paying out a fair fee is good marketing with a good rate of return for my client.

    Reply
  4. Matt says:
    3 years ago

    I take exception to the term used in the first paragraph – “Today’s standard 6% commission” – the purpose of the article is to highlight that commission is not standard and is negotiable among all brokers – as is per law. You do make some good points – the best is that clients don’t know all we do.  I’ve never had a client at the closing table argue the commission paid – because by then, we’ve proven our value. It’s all about giving your clients value and showing them the benefits of working with a professional. Read the NAR D.A.N.G.E.R report.

    Reply
  5. Ann Snortlnad says:
    3 years ago

    Just a reminder that there is no “standard commission rate” in real estate.  Thanks for the tips.
     
     

    Reply
  6. Mike Hofmeister says:
    3 years ago

    I would like to note the author does not say “standard commission,” but he says “average” commission. 

    Reply
  7. Dave C says:
    3 years ago

    Yes he does say Standard Commission in the first paragraph!  Selective reading…
    “In fact, over 80 percent of homes are not paying today’s standard 6 percent commission.”

    Reply
  8. Susan says:
    3 years ago

    ….in today’s economy? That’s a scary statement. Best economy in years, best interest rates ever?? Commission shouldn’t be in question unless you ask less for an oil change. 

    Reply
  9. Marie Cohen says:
    3 years ago

    I am always “amazed” that everyone refers to the “fee” for selling a home as “commission”.   In Georgia the Listing Agreement states the percentage charged as a “BROKER FEE”!!  I realize some REALTORS receive 100% of the “broker fee” but MOST agent/REALTORS do not.   The majority of “BROKERS” have a “compensation agreement” with the “broker representative”.  This agreement states the “commission” or “split” the agent/REALTOR will receive from a sale.  Most disbursement checks at closing are paid in full to the Broker and then the Broker pays commissions to the representative noted in the transaction.   In my mind to say commissions are 6% is incorrect.  The Broker Fee is 6% and the representatives commission is whatever the agreed upon split is with the Broker.   To ask a agent/REALTOR to lower their “commission” is taking money from their personal split — minus the cost of broker fees, taxes and listing expenses.  Not much left!!

    Reply
  10. Jane says:
    3 years ago

    “are not paying today’s standard 6 percent commission” is a violation of the Sherman Antitrust Act. 

    Reply
  11. Rachel Warren says:
    3 years ago

    We could get caught in the weeds all day here if we really wanted to but the point is that if you show your value, you shouldn’t have to reduce the amount of compensation the seller pays to have his house listed, marketed and sold. 

    Reply

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