John Bendall owner of Re/Max Classic Group offers ways to justify your hard earned commission.

1.) List all of the activities necessary to help a client sell or buy a house in our area. I have used a list with over 300 things that a Realtor does in a transaction. It is a powerful statement and also works on FSBO’s.

2.) Show pie charts about how small the commission really is to any one agent. A hypothetical 6% commission being split in half between the listing and selling brokers. Then it is reduced by the cost of your desk fee and average advertising expenses (use whatever percentage applies to you), lets say a 1/2 goes to expenses leaving me with only 1.5%percent of the commission before taxes.

3.) Explain how much tax you pay on your net income. Don’t forget that most of us pay federal tax plus self-employment tax and then add our state tax. (Say the total is 40%) This means that an agent only receive less than one percent of the sales price of a house after taxes to feed my family and put a roof over our heads.

4.) Don’t quote other brokers’ commissions. When a prospective seller asks you how much you charge to sell a property only quote your half of the fee, which is generally 2.5-3%. If the seller chooses to pay about the same or more to the broker who brings the buyer, that’s his or her choice but none of your business. Once people recognize that each broker only gets half of the listing fee it reduces the resistance substantially.

5.) Remember that most clients want quality first. Studies show that only 15% of all consumers make a buying decision based primarily on lowest price, 85 are concerned about quality more than price, and five percent want to pay a premium price because it connotes prestige and possibly higher quality. So sell the quality of your services to the 85% who will appreciate it.

6.) Develop a marketing plan that brings you more clients than you need. An effective marketing plan enables you to pick and choose your clients. Obviously, the first clients you want to eliminate are pure price shoppers. Also, rejecting those who don’t value your services implies that you are a special and unique agent who is in high demand. Exclusivity also implies higher quality.

7.) Show clients the thickness of a closed transaction file. It always amazes the public to learn how much work is actually involved in putting together any real estate deal. Explain that each document is there to protect the client’s interests and to help meet their needs. Be careful not to violate any past client’s privacy by showing sensitive documents but just seeing the volume of paper should be sufficient to show that you do more than merely put a for-sale sign on a seller’s house or drive buyers around to earn your fee.

8.) Never quote your commission until you have diagnosed the client’s need. Just as a doctor would never prescribe treatment without doing tests to determine the cause of an ailment, a real estate professional should not quote a fee until he or she finds out the scope of the work to be done. Obviously, helping clients conduct an IRS 1031 exchange is more work than a straight sale and a short sale is more complex than a standard one. You may wish to charge a different fee depending on the amount of work and expertise required. Also, if you quote your fee at the beginning it focuses your whole relationship on cost rather than service.

More than ever, we must explain the value of our services to prospective clients. Remember that most people assume that we get paid 6% or more and do almost nothing to earn it so you might as well deal with the misimpression right away.

Remember, it doesn’t take any special skill or training to be the cheapest agent on the block. Sell the value of your services to those clients who appreciate it and send the rest to someone who can’t justify his or her commission

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