Negotiating Price With Sellers

One of the most common questions real estate agents ask is how they can compete with other agents and discount brokers who offer a lower price. This problem, of course, isn’t limited to real estate. In virtually any industry you can think of, clients and customers want the job done better, faster and cheaper. If they feel they can get the same level of service cheaper, they’d be stupid not to go save a few dollars and go with the lower cost option.

Because there are so many agents out there, the problem seems magnified in the real estate industry. Home buyers and sellers see numerous agents competing for their business. They receive countless mailings, newsletters, magazines, emails and such clamoring for their business. Yet no one clearly explains how they are different than other agents. In such an environment where no one seems to have the competitive advantage, your prospects view your services as a commodity. The burden is on you to prove otherwise.

Imagine the scenario. You’re presentation has been going along smoothly until suddenly, the price issue comes up and the seller requests you cut your commission. What do you do? Here’s what you should not do:

1. Don’t get mad. The worst thing you can do is take it personally and get angry that the seller could even ask such a thing. They have every right to negotiate your fee - and should - so you should be prepared to discuss why you’re worth your fee.
2. Don’t criticize your competition. One of the quickest ways to discredit yourself is to start complaining about how other real estate agents do this or that or going on a tirade about how your competition won’t get the job done. Keep in mind that Article 15 of the Realtor Code of Ethics explicitly states that Realtors should not make “false or misleading statements” about their competitors.
3. Don’t tell them that if they don’t list at 6% or list with a discount broker, other agents will refuse to show their property. When you specifically state that “all agents charge 6%” or “other agents won’t show your property if you don’t list at 6%”, you are implying that the real estate industry violates antitrust provisions set forth by the federal government. 6% is not an industry standard nor is it set in stone. If it were, the federal government would have stepped in long ago.
4. Don’t explain that the commission is split four ways. You can explain that 3% goes to you and 3% goes to the buyer’s agent, but don’t get into the logistics of explaining that 1.5% of each goes to the broker. They don’t care. They want the highest price possible for their property, so if you get stuck in logistics, you’ll not only end up defending your commission, but that of the broker’s as well.
5. Don’t give in immediately. Sometimes, it seems like you could close the deal right then if you’d just knock a percentage off the price. However, if you are trying to win over a skeptical seller, caving on price immediately might raise doubts that you will negotiate top dollar for their home. If you’re willing to take less money just to get the deal signed, how will you react when it’s their home that’s on the table?

The best - and ethical - way to handle this situation is to explain the value they’re getting by going with your services - and by explaining that you’ll be willing to lower your fee but you won’t be able to do as much to market their home. Once your prospect sees the value you provide at the higher commission rate, they’re far more likely to choose that rather than the lower cost alternative.