So how do agent’s come up with their commission rates? It is a reasonable question and it deserves a reasonable answer. On a very rare occasion, you might hear an agent say something like,
“We charge the standard rate.”
Broker’s have complained for years that they lose sleep every night worrying about their agents saying exactly this. Why? Because there is no, and cannot be an actual standard rate. For an agent to even say this is a Federal violation and implies Price Fixing and Restraint of Trade. For this the broker and the agent could get fitted for an orange jumpsuit. Don’t know about you, but I find very few people actually look good in orange.
Ok, so who then determines the amount or the rate of commission for the sale of Real Estate? Two Answers: it is negotiable. Second answer: the client and the agent by agreement. So then how is it typically negotiated?. Let’s start out with a cost basis. All agents pay about the same in marketing costs. So why will one agent “do it” for less than another? Therein lies the difference. Do What? One agent’s services can be significantly better or more effective than another who will do little more than jam a sign in your front lawn. At this point, it comes down to negotiation. Many agents are highly skilled at this and this is ultimately where the rubber meets the road. Let me say this, if you keep asking an agent to reduce his commission before he/she has actually listed your property and they concede each and every time, DO NOT HIRE THEM!. Those simpletons cannot even negotiate for themselves all that well, and you are going to hire them to do it on your behalf? Sure they will charge less, but because of their lack of skills in this key area, what are the odds of them leaving a lot of YOUR money on the table? When you hear the term discount broker what do you think they are discounting? It won’t only be the price. Even if they started out 1% or .5% lower, I’ll bet you what you saved doesn’t come close to what you lost, not just in time and aggravation, but in the actual dollars the market would have blessed you with if you had a great negotiator.
So then, let’s understand what a negotiation actually is. Many are confused by this word and think it is synonymous with capitulation. Here’s an example. Let’s say your agent quotes you 7%. You ask them to do it for 6%. If they say yes, the agent hasn’t negotiated; they simply capitulated. If they came back and said “no” or they gave you an alternative amount of say “6.5,” they are negotiating. I would be very hesitant to hire an agent outright just because they rolled over when I tried to squeeze them a little. So for all the brokes out there who are pushing and punching their pillows to get some sleep, I say, Wake up! Wake up and train your agents to understand the laws on Anti-trust. Wake up, and come up with a better plan to train your agents to become the best negotiators they can be, not only for their clients but for themselves as well as.
Once you do that, take two melatonin and go back to sleep.
I suppose I could have just told you that “you get what you paid for.”
Check out our blog at:brendan.husvarre.com
Hey, I wrote the book on Real Estate, literally.”
Author Brendan J. Cunningham is a New York Licensed Associate Real Estate Broker, lead of the Platinum Team at HusVar Real Estate, as well as an accomplished writer, Shakespearean trained professional actor, and podcaster.
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