The Difference in My Commission is Smaller Than Your Next Price Decrease.

J Philip Faranda June 14, 2010

In two separate cases recently, I have had agents in my company attempt to list a home and lose the decision to another broker who promised a lower commission. In both cases, the homes were very expensive, and the homeowners justified their decisions based on how much they’d save if they paid 1% less in commission. 

Of course, in both cases, the listings were overpriced. 

By and large, the following is the summary of my coaching to these agents so that they get more listings to commit to them. 

Sub par brokers cannot sell on value or performance, so their only options are to cut their fees or promise an unrealistic sales price. This is sabotage. A lower commission is no savings whatsoever if the house does not sell. There is no savings. None.  

We charge our commission for selling the home successfully. If we don’t sell it, then the homeowner pays zero commission. None. So when we do sell it, we are worth every penny, because we brought in the most money the market would bear. 

If someone lists their home with a broker who does not have the revenue for a competitive cooperative commission to other MLS brokers or a strong marketing campaign, then the only way for the house to sell is to lower the price until the market is compelled to move. And that, my friends, can be a very, very low price. 

If on the other hand a home is listed with a broker with a comprehensive marketing plan with superior exposure and ability to attract the interest of multiple parties, the leverage on sales price is upward, not downward. If you have a $500,000 house and you pay 1% less in commission, that is $5000 “saved.” But if you have to reduce the price, it is probably at least $10,000, and probably going all the way to $475,000-or $25,000 lower- to get the job done. 

Therefore, a 1% “higher” commission is no issue whatsoever- if it doesn’t sell you don’t pay it. Moreover, if you are forced to rely only on price reduction after price reduction to sell, you are saving nothing- you are losing money, because I know of very few price reductions of 1% that make any difference. A price reduction that impacts is typically far higher than 1%, which not only nullifies a broker who cannot do anything other than discount, it makes the guy who charges more but gets the job done a bargain. 

Summary: Our fee is not an issue when we can show via our company track record that our listings sell for more, faster. That is savings. 

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