During my full-time real estate career, I was rarely asked for a reduction of my commission. There’s a good reason for this.

Early on, when I was a relative newbie, I’ll admit that I caved and negotiated a reduced rate on a few occasions. I regretted it every single time. Turns out, it’s the people who respect your value the least who are the most demanding of your time and also the biggest pains in the butt.

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If I could do it all over again, I would never give a discount, even if it meant losing a deal now and then. I’ve learned that if you turn away one pain-in-the-butt client, somehow you gain two super-nice ones!

If you keep this in mind, it’s hugely liberating when you can muster the courage to decline a marginal listing – one that you know is going to be a pain in the butt.

Think about it. You always know, don’t you?

The biggest reason I hardly ever got asked to reduce my commission is that I’d already sold them on hiring me long before the topic of commissions came up. Not to blast my own trombone, but purchasing a rare one-of-a-kind diamond is not the same as shopping for the cheapest rock at the pawnshop. Try asking for a discount on the perfect one-carat pink at Tiffany’s. The trick is to cast yourself as the rare pink diamond, not the ugly pawnshop rock.

Within my listing presentation, I don’t even mention the commission. I wait until we’re reviewing the contract, at which point I tell them the rate and then move on to the next clause. At this point, they’ve already decided to hire me and it’s a moot point.

The worst thing you can do is to make the commission a point of discussion.

If they ask, I just tell them I charge the exact same rate to everyone because I don’t feel it’s fair to run my business any other way. My rates are consistent, and so is the extremely high level of service that I offer to each and every client. I can say this with absolute confidence because it’s true.

Their response 99 per cent of the time is, “Okay, that’s fine. Thank you.”

If they persist, my spidey senses kick in, and I will politely suggest that there are plenty of discount agents they could hire, but of course, you get what you pay for, just like everything in life. Then I’ll explain how the commission works and how they need to ensure that the discount agent reduces their rate from their side only, not the buyer’s agent side.

Then I’ll ask them if a discount agent can’t defend their own value, do they really believe they’re going to stand up and defend the value of their property? Do they really think they’re going to get the equivalent level of skill, experience and dedication that they’re getting from me?

Do they really think that a discount agent will deliver anywhere close to the same sale price that I can?

What’s more important – saving a few pennies on the commission or a much higher net result?

I explain these things with a look of incredulous indignation. Then they apologize profusely, and I forgive them and move on.

It’s all about presenting yourself with confidence and authority and knowing in your heart that you actually are a rare pink diamond and not a cubic zirconia. Otherwise, it’s all fake, and I don’t do fake.

If you’re not currently a pink diamond, it’s easy to learn to be one. If you want to achieve massive success in real estate, stop accepting that good enough is good enough. It’s not.

“The best investment you can make is an investment in yourself… The more you learn, the more you’ll earn.” – Warren Buffett

20 COMMENTS

  1. I was surprised by the number of commenters on this post who seem to have completely misunderstood my message. It’s not about greed. It’s about hard work, dedication, integrity, and continuously working on your skills in order to deliver the best possible result to every client. And yes, to be paid fairly for that.

  2. In my crazy sellers market – where properties sell themselves in days for way over asking, there needs to be another dimension to the conversation – after all, consumers can read, live on the net, and know what is going on out there!
    Explaining the need to position the property in the market by pricing it to attract the right buyers, doing the front end work to encourage clean high offers, (pre list inspection, status certificate, stage consult) manage the showing process to ensure max exposure and protect all parties, evaluate and negotiate multiple offers correctly, ensure buyers can not only “overbid” but actually close the deal! Knowledge and experience – priceless!

  3. I got asked this question twice within last week by two different customers and surprisingly they named top Realtors in their respective cities who would give them cash back after closing. In my 15 years being a Realtor, I have never done that doesn’t matter who the client was. I respectfully refused to give cash back and told them I have principles and will do everything possible to protect their best interests but not at the cost of sharing my commission. They both have chosen me over the other Realtors they have worked in the past and received cash back. Don’t let anybody else set your standards.

  4. It’s interesting that agents routinely pay referral fees of 25% in order to get clients. I think that is a recognition that commissions are not merely a fee for service. There’s a premium built in that is far beyond the value of the work.

    • Gary:

      Well said.

      When working as an appraiser, I found most would confuse price with the underlying concept of value. Value is intrinsic. Price is whatever one wants to pay—often on impulse—and whatever one wants to accept—again, often on impulse. Thus, price is always in a state of flux. Underlying value is often overlooked, because it will only apply to one person at a time, being a purchaser for whom clear-headed thinking is a prerequisite to offering vs for instance, the rush to win in a bidding war.

      Correction is on the horizon. Stay tuned.

  5. Just this week I turned down a bonus from a client that thought I did an amazing job and wanted to pay me more. On another listing appointment this week I competed with a well-known lower fee price agency, and I walked away with the listing and didn’t budge on my fee. And a third client over the phone before we met wanted me to pay the staging cost and painting. My reply was “we will have that discussion when we meet”. He signed a listing with my usual full fee, and they will pay the staging and painting cost and further agreed to replace the outdated granite in the kitchen. There was a 4th one but they just signed, and no negotiating required. Negotiating your fee doesn’t mean you have to reduce your fee it just means you have to show you bring more value to justify your fee. My very first broker of record taught me that when a client wants to discuss fee that means they want to hire you. If you are confident in yourself and your service… “just say no” and move on in the discussion. It was good advice and works almost every time and like the writer above said on the rare occasion they insist on a lower fee, I let them go… more often than not they will be more work than it’s worth and they will drain me of my energy from the service I provide to my other clients that respect my service. And quite often they come back in the future and apologize and say, “now we understand”.

  6. Despite commenters criticism of the article, I think that the article made great points. Commercial “fit” is important in any business relationship – especially in the personal services professions. I also think it’s important for independent real estate agents to remember that each of us are independent business owners and have complete freedom to accept or reject a client representation assignment based on chemistry, level of competency, professional fees/rates, etc. What works in another practitioner’s business may not work in your business. Each independent practitioner has to choose their own business model and do what’s best for his/her business. The article touches on a subject that not only affects real estate practitioners, but other independent professionals (financial advisors, attorneys, consultants, etc) as well.

  7. TED – You state “The trick is to cast yourself as the rare pink diamond, not the ugly pawnshop rock.” Ted are you TRICKING you sellers and buyers.

    • Exactly what stood out to me “TRICK”. Not a person I would hire. And yes, houses do sell themselves in 24 hours and NO ONE is worth $50K for that. Lots of feathers being puffed here on how great I am.

      • David C – You’re RIGHT! Too many TRICKS and False Facts being given by some Realtors to consumers. For example this statement is from a website – “In Toronto and other cities in Ontario, the standard real estate commission is 5%, which is usually split equally between the buyer’s agent and seller’s agent”. The listing agreement needs a WARNING – REAL ESTATE COMMISSIONS ARE NEGOTIABLE BY LAW. THERE IS NO STANDARD REAL ESTATE FEE. SELLERS AND BUYERS SHOULD NEGOTIATE THEIR REAL ESTATE FEES BASED ON THE SERVICES PROVIDED BY THE REALTOR.

    • Hi David. It’s not a trick at all. The intended meaning of the phrase in this context was to “prove your worth”. My entire philosophy is all about being straightforward and honest, and I’m against all forms of trickery. However, I see now that I could have used better terminology to get my point across, which you (and perhaps others?) seem to have misunderstood.

  8. I agree with the point you are making about respecting value, choosing clients wisely and when to lead with fees. However, the impact of such messaging is always diiminshed and damaged when agents insist on using tired, old and untrue cliches to attack lower fees.

    “You get what you pay for” – Bernie Madoofs’ clients paid him quite well for his services, they didn’t get what they paid for. I sometimes shop at No Frills, I pay a lower price for name brand product than I would if I shopped at their mother store Loblaw, I get nothing less.

    “Then I’ll ask them if a discount agent..,” What exactly is a discount agent? Is it someone who charges less than you no matter even if it’s half a point less? Are you a discount agent to someone who charges more than you? Is a discount agant anyone who rebates and aren’t they the plurailty today? Is it not true that a couple decades ago fees (within the GTA) were 7% then 6% where it is generally stated to be 5% today and so by that standard pretty musch every agent, even you, would qualify as a discount agent to those who would look down their noses at anyone charging less than the 7% or 6%?

    It’s such trite messaging that helps to maintain the industry’s terrible reputation for greed. A novice shouldn’t be charging the highest fees and frankly a whole host of agents who have been around for decades and have loads of customers shouldn’t be charging the highest fees either.

    We need look no further than the court rooms and regulatory decisions to see that incompetence and greed reaches across all levels of fees not to mention all years of (non)experience.

  9. You state- “The worst thing you can do is to make the commission a point of discussion”. You also state that if they want to negotiate the commission “ I will politely suggest that there are plenty of discount agents they could hire” and “What’s more important – saving a few pennies on the commission or a much higher net result?”

    Real estate agents deserve a fair commission for their hard work, but sellers and buyers deserve to be advised by all Realtors that real estate fees are negotiable by law. Are you suggesting to your clients that you can get them a better price if they pay a higher fee? Can you prove to the consumers that if they paid a 1/2 % or 1% less than your fixed commission rate that they would get less for their property. Smart Realtors will negotiate their commission with consumers and should not inform the sellers and buyers that paying less will net them less. You should teach Realtors to be honest with consumers and not mislead them with false facts.

    • My neighbor boasted that he only paid 3k for his poured concrete patio when every other contractor quoted him around 7k.
      Needless to say he is now complaining to everyone about the shit job that was done.
      Sorry bastard have to live with his cheap work, and worse, listen to his wife nagging him to get it fixed properly.
      True story.

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