Handling the commission discussion
The conversation about commission can occasionally be contentious, even when an agent is with a client for every step in the purchasing process. Consumers who have spent time looking online for homes may argue that the information they found there is readily available, or they may forget about the many things the agent has to do beyond find properties and show homes.
Bezanes encounters those situations frequently.
“Obviously, they must be dealt with diplomatically. I assume the confidence that I am the real estate expert and if you would be so gracious as to give me an opportunity to represent you, you’ll find the value of having an advocate that’s going to negotiate for you. … We earn our commission in that negotiation,” he says. “We’re not just a placeholder. Most of the data shows that if they were on the sell side, when you have an agent they’re going to get the best price for you. Or if you’re on the buy side they’re going to negotiate the best price for you.”
Neuschel recently detailed how her commission breaks down for a seller who rehabs homes and puts them on the market. The seller had been surprised by the size of her commission, while his own profit margin was narrow even after spending months working on the property.
“I took the commission that the seller has to pay and broke it down into four levels: buyer’s agent, seller’s agent, buyer’s brokerage and seller’s brokerage,” she says. “Then I took my fee and estimated what my marketing expenses were, not even counting my time. Then I factored in the taxes. This was a $400,000 house, and he was shocked by how little I was making. He had also forgotten that half of that commission has to go to the buyer’s side. He totally got it.”
Sometimes the consumer becomes determined to act on his or her own. Homeowners may decide that they can simply list their homes to sell on their own. By doing so, they limit the potential market for their property and their likely profit. They also don’t have a network of other agents who can bring clients to them or the expertise to successfully negotiate the price they want. Hess tells her clients everything that she can do for them as well as all the reasons for hiring an agent, including market knowledge and impartiality.
“I tell them that historically, the National Association of Realtors data shows that for-sale-by-owner properties typically sell for 15 to 20 percent less than what comparable listings sell for through the MLS with an agent representing them,” she says. “Having the ability to jump on an interested buyer is critical. We have never missed a showing on a listing because we always have two people on it. One of us is always available to show a home.”
In the end, it’s Hess’ proactive approach that appeals most to clients and truly emphasizes the importance of having an agent in their corner.
“We are asking ourselves every day what we can do to help our buyers, whether it’s helping them find that dream home that up to now has eluded us or maybe creating inventory where none exists.”