The Coming Wave of Discount Brokers
1:54 Minute Read.
Discounting commissions is nothing new. Decades ago, my first brokerage focused heavily on getting new buyers through discounted listing services. During the Great Housing Unpleasantness of 2008 when nothing was selling, it seemed reasonable to charge a flat fee upfront to list properties. At least that way, an agent earned something for the work they performed.
As technology moves forward, it continues to nip away at traditional business models. Rather than fight progress, I’d encourage you build your business where the future lies. Do a FlexMLS search. About 15% of the listings are offering lesser commissions to buyers agents than we’ve seen in years past. And who knows how much is being discounted on the listing side.
But, before going off and doing something rash like changing your entire business model, listen to the experience of someone who’s been there.
“This is a know you, like you, trust you business.
If they know you, like you and trust you, they will call you.”
Like an addict admitting their history, I confess:
I’ve done 7% commission, giving myself 4%, 3.5% and sometimes 3%.
I’ve done 10% on vacant properties.
I’ve done 6%, both with 3%/3% split and 2%/4% splits.
I’ve done 4% with $500.00 flat fee on the front end.
I’ve done “List with me and sell for free.”
I’ve done a “menu of services.”
I’ve done flat fee.
Actually, over the years I’ve offered almost every commission plan there is. And here are the 5 facts I’ve learned about discounting commissions that I will gladly share with you:
Lower commissions doesn’t equal more clients. You’d think clients would rush to your door when you advertise deep discounts. Truth is they don’t. Most discount brokers don’t last long and most don’t flourish. There is a reason for it. To build a successful discount brokerage, you need to spend a truckload of marketing dollars. However, discounted fees prevent agents from spending much on advertising efforts. It’s a vicious cycle.
Lower commissions doesn’t equal more referrals. There is a type of person that seeks out discount services. They’re not bad – they’re just different. In my experience, they’re not the “happy–talky” kind of people who love to gush about how great their agent is. They fit more easily into the accountant type – more quiet and solitary. Don’t expect to build your referral business through them.
Lower commissions doesn’t equal less work. Do the math. Suppose you want to earn $100,000 this year. You can handle 5 high-end priced properties. Or, you can handle 16 average priced homes. Or, you can handle 50 properties at a discounted rate. Which agent do you think has more free time?
Clients who pay less still expect more. Offering a discount means somewhere, somehow there are a few services you will not offer that others might. If you are charging significantly less than other agents, are you still going to offer staging management? Professional photographer? 360 videos? Client’s expectations must be clearly and carefully guided. The more you give, the more they will ask for. It takes a strong agent to clearly set boundaries with clients.
I love flexibility and admire strong negotiating skills. I don’t get freaked out when agents take listings with creative commission structures – it’s within our brokerage’s policy. But here is the fifth, and probably most important point:
Great salespeople win clients – no matter what they charge for their services. The price of any product or service is the LAST thing we sell. Before we talk about the price, we sell ourselves first. Afterwards, we sell our company and then our services. Once a client is sold on those matters, price is simply the final hurdle to getting signatures. Good salespeople pace with clients and clear their objections throughout the presentation. Having a problem listing properties? Price is seldom the issue. Go back and improve your listing presentation.
I’m not here to tell you what to charge clients for your services. You know what you’re worth. And you know if you possess good selling skills. However, I will offer one piece of advice: No matter what you charge clients, work at winning them with YOU, not your fee schedule.
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