The Art Of Negotiation: How To Boost Gross Profit Margin As A Realtor
It’s safe to say that few, if any, realtors want to receive calls or emails from sellers looking to negotiate agent commission fees. Varying between five and 17 percent, real estate commission is one of the highest costs associated with property sales. So, it’s understandable that many sellers would be happy to pay a lower commission, even if only a third of them try to lower their agent’s fees.
Often, even the best realtors won’t budge when faced with negotiation requests, as they’re concerned about their own profit margins. But it doesn’t need to be this way. As a realtor, you can use the art of negotiation to give your client what they want while still managing to boost your gross profit margin.
Be Open to Negotiation
We’re tempted to say that commissions being 100% negotiable is one of the industry’s best-kept secrets. While realtors are aware of this, most sellers don’t know that negotiating real estate commission is legal throughout the U.S.
Even if the prospect of negotiating a lower commission fee with the seller is something you would prefer not to do, it can be in your best interest. After all, you would prefer to accept a slightly lower commission than lose business to a competitor. Plus, receiving a slightly lower commission doesn’t mean you can’t score in other ways, ultimately boosting your gross profit margin later. Let’s take a look at how you can do that successfully.
Negotiate With a View to Lowering Your Expenses
As realtors know, you incur various behind-the-scenes expenses when selling someone’s property for them. Among these expenses are things like association dues, gas, home staging, licenses, marketing (print, social media, etc.), MLS listing fees, office expenses, parking, photography, taxes, and videography.
Sellers who have done their homework know that they can use these associated expenses in their negotiations with you. Even if they aren’t aware of those expenses, you can mention them in your negotiations with sellers looking to reduce commission, going as far to suggest that you would be willing to offer them a lower commission if they’re prepared to contribute toward lowering those expenses.
As a realtor, you don’t need to handle all those expenses yourself. If your client is happy to take on some of them, you can save time and money. This allows you to direct the time and energy you would have spent on those services into other tasks or into your dealings with other clients, which could result in another sale in which you earn your full commission.
For example, the seller might be happy to cover your gas bill and parking fee when those costs are linked to their sale. They might also be happy to arrange for photographs and videos that you can use instead of you taking your own photos or videos of their property, and/or to handle as much of the social media marketing as they can manage.
More Negotiation Tips
Your negotiations with sellers to reduce realtor commission fees don’t need to be based entirely on lowering your expenses. When you know how to calculate profit margin, you know that it’s all about revenue. Your negotiations could lead to generating revenue from other sales. Let’s explore a few more tips.
Ask them to buy a house through you: If a seller wants to buy a house or other property in the same area, offer them a lower commission or a buyer’s rebate if they agree to purchase their next property through you.
Offer a lower commission if you find a buyer not working with an agent: If you find a buyer who isn’t working with an agent and enter a dual agency, you can earn listing and selling fee commissions. As attractive as this sounds, it can also increase your liability, as you need to be neutral to the seller and the buyer. If you don’t handle something correctly, the buyer and the seller potentially could sue for damages.
You can avoid that scenario by acting as a transactional agent who only assists the buyer and seller with paperwork. Accepting the role of transactional agent and offering a lower commission to the seller means less work and fewer chances of bigger headaches later.
Ask them to make it easier for you to sell their home: When dealing with a seller who wants to negotiate a lower commission with you, consider lowering your commission fees if they make it easier for you to sell their home. The faster you can sell it, the less time and effort you need to put into trying to get it sold.
Some of the things you can ask them to do is to list their home at the correct price (a price that will see it sell quickly rather than sit on the market, i.e., asking them not to overprice their home), to have their home staged professionally so that it looks good in photos and videos and on show days, and to be flexible about scheduling show days (ask them to install a lock box so you can have easy access to their house keys if they aren’t at home when you want to show a prospective buyer the property).
Offer a reduced commission if they want to sell on the off-peak market: If the seller wants to sell their home on an off-peak market, offer to reduce your commission, even if the reduction isn’t as low as they were hoping. Off-peak markets aren’t the best time of year for realtors or sellers, and it makes sense to retain a client rather than see them choose another realtor with a lower commission.
Ask the seller for promise referrals: Let your client know that you’re happy to lower your commission fee if they promise to refer family, friends, and others in their wider circle to you if any of those people want to buy or sell real estate. While there’s no way of ensuring that your client will follow through, there’s a good chance that they will if they’re happy with paying a lower commission fee.
Negotiate To Win
As you can see, negotiating a lower realtor commission fee with a seller doesn’t need to mean a loss for you. Use the above tips for leverage in your negotiations and boost your gross profit margins in other ways.
