Last week, I talked about defending your commission by presenting yourself as a rare pink diamond instead of a crusty old rock from the pawnshop.

If you’re a highly skilled and experienced agent, who consistently delivers outstanding results, shouldn’t you get paid more than the “average” agent? Certainly, but it should be through increased demand for your services and improved efficiencies – not by charging more than one deal at a time. I mean, you could charge more, but is it really worth it?

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Big picture thinking is how much you make in a year. Small picture thinking is how much you make on an individual transaction.

Let’s say you charge a little more to 10 different clients, enough to make up one full extra commission. You do a great job for all 10 clients, and they all still recommend you to their friends, but now it’s with a caveat, “He’s great, but he charges a bit more.”

You’ll never know it, but that caveat was enough to prevent two potential clients from calling. You think you’re one commission ahead, but actually, you’re two behind. And the missed opportunities snowball from there.

Besides, the public should expect a high level of service to warrant a five-figure expense for a single transaction, don’t you think? I want my clients to say I was worth every penny, and then some. I want to confidently tell my clients that I charge only the average rate, but I deliver results miles above average.

This is a hot topic for me right now because I’ve recently heard about a mega team where the new agents have to sign a contract (I’ve seen it) agreeing to a commission split of 30/70 (30 per cent for them and 70 per cent for the team leader) if they charge “only” the typical prevailing rate in their market.

To “earn” the “full” 50 per cent split on a $500,000 property, the commission earned on the seller’s agent portion is over 84 per cent higher than the prevailing rate!

This percentage goes higher and higher on more expensive properties, crossing the 100 per cent higher threshold at $800,000. Essentially, this means that the seller is now paying three full commissions – one to the buyer’s agent, one to the seller’s agent, and one to the seller’s agent’s boss – the greedy mega agent who is doing absolutely nothing. If only the sellers knew that the famous mega agent cares so little about their listing, he’s probably not even aware of its existence.

All commissions are negotiable, but in my opinion, charging this much is an obscene abuse of the public’s trust. Do you think these mega team agents tell their clients the “standard” rates charged by the majority of their competitors? I think not.

And by the way, who do you think is willing to pay these outrageous fees? I’ll tell you who:

Honest, trusting people who don’t know any better, including the elderly and immigrants.

The sad irony is that the folks paying these ridiculously high commissions probably actually believe they’re getting more for their money. But despite the flashy advertising and misleading promises, the listing agent they’re dealing with is most likely inexperienced, unskilled and poorly trained.

The mega team is charging more money for an inferior level of service compared to any high-integrity, highly skilled, individual agent (or small customer-service-focused team). Think about how you would feel if your parents or grandparents were taken advantage of in this way.

I’ll tell you how it makes me feel. My blood is boiling as I write this, and if you know me, you know it’s not going to end here in this little blog post. Stay tuned…

Hold onto your integrity. It’s worth a thousand times more than charging even a tiny bit more on a single commission.

13 COMMENTS

  1. I wasn’t sure what to think of this article at first so I have been tossing it around since it was published, and time always clears up a lot.
    It is not uncommon for us as humans to interpret things in our best interests, and so the extra time to think helps me to see both sides.
    I think, maybe, what you are saying is that if two companies sell the same product but one employs great service and the other doesn’t, why not just charge the same amount since both are selling the same product? If we are both selling the same product, shouldn’t good service be expected? Did I get that correct, Ted, or did I misinterpret?
    That does make sense and is definitely worth considering.

    That said, I have always tried (I don’t always succeed) to provide “better” service, and I think in our business, the service is very much the product or at least a big part of the product being purchased. We get paid for the service, not the house, and so I think it is also valid to argue that if we deliver a superior product we should be paid a superior price.

    I guess maybe the bottom line for each of us is to determine if our business model is best served by a higher fee or a similar fee to the market.

    One side comment, I am not sure I would be proud to be the lowest priced product in the marketplace, nor would I feel proud to be offering other agents in a co-op system lower fees than they offer me if I am asking them to provide similar services as they expect of me. It may be legal, but ethics is a higher standard than the law.

  2. Ted this is just your opinion on the subject of commission!

    As a single agent and non team player, I know I’m worth more and I never worry about what I’m missing out. Why worry about the business you don’t know of, when you can focus on working for the ones willing to pay you for the value you bring to the table.

    I don’t care what others and teams charge for commission, that’s their business model and it works for them. No, I did not read your previous article about the rare pink diamond, but I am comprable to it! I must admit that I’m bit crusty now though.

    Truth be told, I may not get those two extra deals you speak of, but because of the commission charged I can only get that one extra deal, which is worth my while, with less aggravation and a better net.

    Not all of us are motivated by quantity; some of us just want quality. I take NO prisoners.

    • Yes, Rod. How you work(ed), similar to how I worked my whole career… meaning as a sole operator (with only backup strong personal administration, seeking only to have pleased clients and other agents coast to coast and beyond (referrals both coming and going; most years as many as 35)… netting referrals such as what I sent to you when my sellers were moving to your area.

      Other agents loved to (MLS) sell my listings because they knew they could rely on me to dot the i’s and cross the t’s, even if they hadn’t done. Never ever embarrassing them. Maybe they worked differently than I did, surrounded by their team. Goal accomplished for my sellers: sold sign on the lawn, and then buyer contract in hand, I was ready for another round.

      It was okay for some agents to call me singularly old-fashioned, but it worked for nearly four decades for me. My life changed remarkably when the big “C” impacted my family life, and family always has to come first, when all is said and done.

      Stay well.
      Cordially,

      Carolyne L

      Sent from my iPhone.

  3. Well said Ted! I agree that especially in this strong sellers market where just about every home is selling quickly and above asking price, there is especially no need to take advantage of these trusting souls. Now thirty years plus in the business I can say I have helped my clients over the years and value the relationships I’ve built with them. As we know repeat business and referrals is what will keep you in the business despite market conditions. Oh yes and you don’t have to constantly try to drum up new clients.

  4. So, those who “charge less” are very happy to take a robust cooperating brokerage commission only possible because of those who charge more. Hypocrisy at its finest.

  5. Great article Ted. Sound advice.

    This money-grab by greedy Realtors just goes to show they believe in the mercenary doctrine as espoused by a U.S. Senator of the Democrat Party persuasion (Harry Reid: now retired) thus: “Never let a crisis go to waste.”

    Scum bags.

    Keep the articles coming!

  6. Thanks, Kim! To be clear, I’m definitely NOT advocating for lower commissions. If you do a great job for your clients, you deserve to be paid well for your hard work. Please refer to my previous article.

  7. I Absolutely AGREE Ted! Thank you for an article that finally makes sense! I’m sure I will be one of the only Realtors who agrees with it, unfortunately. Great Job for your boldness! Our small team charges a fair commission that comes in lower than most other Realtors. We do it because we are in a sellers market and it is a bit outrageous for the time invested.
    Other Realtors do use this against us and try to convince the seller that no one will show the home with a bit lower co op commission. Untrue. We are seeing the commission come down in our City even the Realtors that once bad mouthed our structure have lowered their commission. It’s quiet amusing to be honest!

    • Offering a lower buyers commission is a scum move. I followed many properties that have lower co-op commissions in this market. Many have sat on the market for much longer and some ended up with a much lower selling price than comparable sales. If you’re going to cut your commission as you feel you’re not worth that much, that’s fine, but don’t cut the commission of the buyers agent. Some buyers agents are showing upwards of 100 properties and have done dozens of offers and their clients budgets keep getting out bid. For a listing agent to lower the co-op agents value isn’t right in any market. Realtors are the ones that will eventually price themselves out of the industry to the Uber’s and Zillow’s of the world. Just because you don’t hold value doesn’t mean the agents showing your properties don’t give value. The hot market doesn’t last forever and agents will avoid agents who undervalue them. All the small and mega teams offer the full 2.5% in my area in the GTA. I see the 1 to 2.25’s more in smaller communities further outside the GTA on cheap properties, makes no sense to me. I offer services instead of commission cutting, which nets a higher sale price for my clients.

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