What is your time worth per hour? Your fee structure would reflect that amount. Just how does a working Realtor get their income up? Charge more? Get more people to pay them? Both? Some other answer?
A few years ago (late 2004 and through 2005) there was more downward pressure on real estate commissions than I’ve seen seen in the past thirty years. There were a lot of lower commission companies that started and there was a tremendous amount of media coverage about real estate commissions needing to go down. The “news articles” and that viewpoint are still being worked on today by the DOJ and the FTC, along with various professors, among others. It is vary easy for a working Realtor to find articles and opinions expressing the viewpoint that “you charge too much”.
Do you? Do you charge too much commission? Are your fees too high?
How would you find out if your fees were too high or too low? If you lost a listing “because you charge too much” would that be an indicator? How many listings would you have to lose before it was “true”? How about if you can’t pay your bills? Would that mean you aren’t charging “enough”? Or enough people? It is an interesting dilemma for a working agent. Back in the “old days” agents didn’t have this problem; the broker announced to their agents how much they would charge. That was it. No arguments, it was the broker’s decision.
Re/Max wasn’t the first “100% company”, not even the first successful 100% company – that’s Realty Executives. But they were most assuredly the first successful national 100% company and they are the company that set the standards nationally for all other brokerage companies – 100% company or not – working Realtors can pretty much charge whatever they please. Complete and total freedom for working agents. To fail. An individual agent at the listing table hears the seller say, “I will only pay ‘X’ amount of commission”. The agent is broke and needs a deal. This one thing alone has had a bigger impact on commissions than the internet, the Justice Department, the Federal Trade Commission and all the various limited service and discount companies combined. It is up to the individual agent. It is up to you.
So what’s fair? What is a “fair” commission for you to charge?
Please notice that I am not asking random people so we can get a consensus of opinion here on what they think is a “fair commission” for Realtors to charge. Nor am I suggesting you learn some scripts so you can justify to your customers or someone here how much you charge. I don’t believe you need scripts to “justify” your commission – at least not in the way most Realtors and the public seem to think of it. There is just ONE PERSON you do need to “justify” your commission to: you. End of list.
Does it seem right to you? Not, would you like more. Not, do you want more money. Just is it right to you. Different cities have different amounts and percentages that are considered fair or right. A neighboring community might – for no good reason – have a lower or higher typical commission. Price points enter into this, as well. What might be right for you – as a percentage – if you live in the Los Angles area could be very different than if you are a working Realtor in Ames, Iowa.
But it is what you consider “right”. Will you lower your fee if someone asks you to? If they ask nicely? If they demand it as a condition of doing business with you at all? How low will you go? What if the amount you charge is more than they are willing (or even able) to pay? Will you then do it for less? Under what conditions? Is the amount you say you charge sort of a gag – you kind of want that much but you don’t really expect anyone in their right mind to actually pay it?
When do you really decide how much to charge? Do you work it out in full and complete detail during a planning session – where you’ve set aside the time to work ON your business, not in it (with all the various “what if’s” considered)? Or do you have a vague idea that there are “times” you will take less and then you can just make the decision there at their kitchen table if they happen to bring it up. What if they simply won’t pay what you say you charge? Is it then alright to lower your fee? How low? How low will you go if they say they won’t pay “that much”? How low? That is your real commission number. The amount where you are totally willing to walk away if they won’t pay it. At that number (percentage or flat amount), they either pay it or they don’t hire you. Period. Is your walk-away number the same as the amount you say you charge? If not, why not? What successful business principle is being applied to advertise or promote a higher fee and then secretly accept a lower fee? When someone asks me how much I charge, I answer the question. I don’t need to see the house, find out their loan balance, get “further information” or first explain how wonderful we are. Do we have people who tell us they won’t pay that much? Of course we do. Every day. I mean that literally, every day. In fact, (this is probably true for any business) if you don’t have some people telling you they won’t pay “that much” either you aren’t charging enough or you aren’t talking to enough people.
Unless you are planning on building your business with a marketing strategy of: “no matter what we tell you we charge, we will take less, a lot less – have us over and see for yourself”, I don’t know of any advantage in saying you charge a certain price for your services to then routinely accept a lower amount. Just like you would tell a seller who says he will take less for his house, get it in writing so you can tell the world. I am not telling you to lower your fees. I am not telling you to raise your fees. I am telling you (most of you, anyway – there are a few who don’t need to hear this) to spend some time looking this over for yourself so you can sort it all out. Once you know what you are worth you won’t have any trouble explaining to your customers. But the funny part is once you really know you will seldom bother explaining it to anyone.