SALES CLINIC

Prove your worth
Overcome Commission Objections
Show sellers that they’ll make more hiring you than they’ll save with a cheaper commission.

BY WALTER SANFORD

Fair profit is a real estate salesperson’s right. If you provide good service and sell homes effectively, you’re entitled to a fair return. If you don’t have enough money to live or to keep your business operating because you’ve reduced your commission, you can’t provide clients with outstanding service.

Caving in quickly resolves commission negotiations, but that can cripple your income. You can keep your commissions by learning how to show clients the value you bring to the table. Begin by confirming that commission negotiations are the last stumbling block to signing a listing agreement. For instance, you could say, “Mr. Johnson, is the one percent separating us on commission the only hurdle we have to signing the listing agreement tonight?” If he says, “Yes,” convert the percentage into a dollar amount. For example, on a $200,000 home, a one percent commission cut increases the sellers’ net to $2,000.

Ask the sellers, “If I can prove I can add a value greater than $2,000 to your net bottom line, will you sign a marketing agreement at the usual and fair commission rate?” If the sellers agree, as they usually will, you’ll need to prove that there’s a $2,000 value you can add. That’s actually quite easy. If you’re lucky enough to be better than the average real estate salesperson within your local board or association, proving you beat your board’s average list-to-sale ratio by one percent or more will in itself increase the seller’s bottom line by an amount larger than the commission reduction.

The conversation might go something like this: “ Mr. Johnson, the average list-to-sale ratio at the Long Beach Board of REALTORS® is 96 percent. Since my personal list-to-sale ratio over the last 24 months has been 97.5 percent, I beat the average board statistics by 1.5 percent. Because of my excellent marketing, my large budget, and my negotiation abilities, this 1.5 percent translates to an increase in your net bottom line proceeds of $3,000.00 on your $200,000 home. This would more than compensate you for the commission reduction you previously requested.”

Maybe your list-to-sale ratio isn’t 1.5 percent above other salespeople at your board. In that case, you may be able to demonstrate that you are giving the sellers additional marketing exposure—such as virtual tour or extra open houses—that should help their home sell faster. Demonstrate that a quicker sale will save them one or more mortgage and utility payments, which will probably equal the value of the 1 percent commission difference.

Another way to prove that you can save the sellers $2,000 on their net bottom line is to demonstrate how your team alliances will help them save money. Perhaps you’ve developed a package of services, such as home inspection and appraisal, and can offer sellers a better rate on these necessary services.

You might also mention that your favored relationship with a home inspection company, can allow you to get their home inspected immediately, giving sellers time to make needed repairs. By having the time to do the work themselves or bid out the job to several vendors, sellers can get the work done for less. And with a home in prime condition before buyers see it, they are also likely to be able to get more money for the property. Finally, remind sellers that due to your alliance with your team members, payment for the inspection won’t be due until the property sells or expires.

Don’t cave when negotiating commissions. Show sellers how you can add value in ways that will more than make up for any requested reduction in commission.

Related Articles:
For more advice on defending your commission, click here.
Seven Tips for Getting Paid , Laurie Janik, October 2001.

How To Reach Walter:
Walter can be reached at 815/929-9258; at 559 S. Washington Ave., Kankakee, Illinois 60901; at walter@waltersanford.com; or at waltersanford.com.

Previously by Walter Sanford:
The Vacation Presentation
Are You Ready for an Assistant?
A Mature Approach to Niche Marketing

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