How to present and defend commission and the transaction management or broker fee
Pre-Game Ritual
Know your seller (their motivations, likes, dislikes, tactics, hot buttons). Know what you want to accomplish.
Know your strategy (your approach, skills to use, tactics, mentally rehearse). Know your “drop-back” positions.
Know your “enough” (when you will walk away).
Do they know the price of your service up-front? (It helps if they do - Prelist Book)
Shift their focus from “Cost” to “Results”
Use “Calendar Process”, pre-listing packet, and “Sweet 16” listing questions. Are they motivated to move? Do they have a gap?
Your mission is to get them there on time.
Show them their odds.
Show them their odds with you (demonstrate added value).
Show them what you do to sell their home, i.e. your marketing plan.
Possible Commission Dialogues (S = Seller ; R= REALTOR®)
S. What is your fee?
R. _____%, and let me show you how it works. We pay _____ % to the broker who sells your house.
We use _____ % to market your house. I’ll show you a list of things we do to market your property with the ____ %. There are really two fees. Our fee to do all the marketing I’ve shown you is_____ %. Now, what we need to decide together is how much of a fee we want to offer to brokers to encourage them to sell your property. Most of them will sell your home for _____ %. Will that be OK with you?
That’s really up to you. You have two choices. We can do everything I’ve shown you for a fee of _____ % - some of my customers choose to go this route. Or, we can offer some additional marketing and incentives for a fee of_____ %. Many of my sellers prefer to go this route because it improves their odds of selling. Which program would you prefer?
TSW! (This Stuff Works!)
Follow the 16-Step Seller Process and you will seldom have commission objections. When you do, here are seven Ninja favorites to handle them.
ο The Original Ninja, Jimmy D.’s humor: “Six versus Five”.
Magic Words – “Fair and Honest”
Where the money is invested on your behalf.
Do you believe there is a predetermined price for your home or do you believe there is a price range based on market dynamics?” (Focus on the importance of marketing and negotiation.)
Integrity – “Who do you believe will be the best a protecting your price?” How quick was he/she to cut their fee? How quick will they be to cut your price?
Baseball Analogy – Getting under contract in this market is just 1st base. Are you looking for a REALTOR® and company that can get you to home plate or just to first base?
Commission Guarantee.
Persistence -80/20
Commission Objection Role Play
Note: The following dialogue is a transcript of a Ninja Selling class Larry Kendall taught at the Denver Board of REALTORS®. Larry did a role play with the class where the class played the role of the seller (S) and Larry played the role of the REALTOR®.
S. Will you do it for less?
R. No, that’s what it will take to get you where you want to go on time. How important is it for you to get into your new home on time? You’ve seen the odds? Do you really want us to give it “first rate” effort or a “second rate” effort?
S. I want a first rate effort. I just don’t want to pay any more commission than I have to. Will you do it for less?
R. How much less?
S. 1% less.
R. Let’s see (figuring) that’s about $2,000 on our $200,000 asking price. Assuming we can get you close to that amount, you’ll walk away with $61,000. Are you saying that’s not enough?
S. Well, $63,000 is better.
R. Are you willing to risk the $61,000 to try and make an extra $2,000?
S. What do you mean by risk?
R. You’ve seen the odds we face, right?
S. Right.
R. You need to be in San Diego in less than 90 days?
S. Yes.
R. You’ve said you want a first rate effort, right?
S. Yes.
R. Well what would you like to cut out of the marketing? We could pay the selling brokers less to sell your house than the other houses in the market. Do you think that would be in your best interest?
S. Probably not.
R. We could cut back on some of the advertising. Which things would you like to cut out?
S. I really don’t want to cut anything out. I guess what I’m really saying is, will you work for less?
R. I really can’t work for less. Number one, it wouldn’t be fair and honest to my other sellers who are paying me to get the job done for them - and they are facing the same odds you are. More importantly, it wouldn’t be fair to you. I can see you and your family are really excited about this move. It’s the dream of a lifetime, and I want to give it our best shot to get you there - not cut corners.
S. Well, Joe said he would do it for a total of 5%. If you’ll do it for that, I’ll list with you.
R. How do you feel about Joe’s odds of getting you there on time? Did he show you his odds?
S. No, but he did show me how much money I would save by listing with him rather than you.
R. Do you feel your odds are as good with Joe as they are with our firm?
S. I don’t know. The odds are probably better with you.
R. Did Joe show you any references you could check out?
S. No.
R. Are you willing to take the risk with Joe?
S. Maybe.
R. What is Joe cutting out of the marketing?
S. What do you mean?
R. Is he going to advertise?
S. I believe so.
R. Is he going to do brochures?
S. I don’t know.
R. Is he going to offer a cooperating commission to other selling brokers?
S. I believe he is, but I’m not sure.
R. Is he going to put your home in the MLS?
S. I think so.
R. What’s your “Plan B?”
S. What do you mean?
R. If we are sitting here two months from now and Joe hasn’t sold your house, what are you going to do?
S. Well, I’ll probably be calling you to come over and bail me out. But I don’t think that will happen. Will you do it for 5%?
S. Who would you rather work with, Joe or me?
S. I would rather work with you but Joe is cheaper.
R. So it’s strictly a matter of money?
S. Yes
R. Who do you think will do a better job for you?
S. You will
R. Who do you think will be a tougher negotiator on your behalf to get you the highest price - me or Joe?
S. You probably will be.
R. How quick was Joe to cut his commission?
S. Pretty quick.
R. How quick do you think he will be to cut your price to a buyer?
S. I don’t know. It concerns me.
R. Who do you think will net you the most “walking away” money?
S. You probably will.
R. Even with my higher commission?
S. Yeah.
R. You will still net more?
S. Yeah. Probably will.
R. So, can I be your REALTOR®?
S. Yeah, but I just worry I may be paying more than I have to. How do I know you’ll get the job done.
R. Number one, I don’t get paid until I do get the job done. Number two, I’ll guarantee my service to you. When we are done selling your property, if, for any reason you don’t feel I’ve earned my entire fee, you let me know and I’ll refund you the difference between what you paid me and you would have paid Joe. I’ll write the guarantee right here in the listing agreement. Will that work for you?
S. Yeah, that sounds good. I feel good about working with you.
How to present the $800 transaction management fee:
We are at an office that provides top level service to ensure all things are covered. This helps to protect you from liability, and we do this by having a full time person oversee all transactions to make sure we are in compliance.
In order for us to provide a high level of consistent service, we have a team of professionals working on your behalf throughout the process to ensure things are handled proactively. Unlike other brokerages, where the fees pay for a hot air balloon, we pay people to provide great service
We pride ourselves in being effective negotiators. More regularly than not we are able to get the sellers to offset this cost for you by affectively negotiating title insurance costs, transfer taxes, escrow fees and other expenses. Or even more simply, we write a small closing cost credit into the contract to have the seller pay it directly. A good tactic would be to write two into the contract, and push for one. For example, Seller pays transfer tax + seller pays $1,000 towards recurring and non-recurring closing costs. Remember, transfer tax is usually split, so for a $350k purchase, transfer tax is $1,473. When seller pays all, that is a $722 savings for the buyer, add a $1k closing cost credit and you are now $922 ahead than with another realtor and still paying the $800 if we got both pushed through. Here's the math again:
$1k credit + $722 transfer savings -$800 transaction management = $922 in total savings for the buyer client
Objections:
If they say, “isn’t that your job?” You can say, “it’s fair for you to be concerned that I should be handling all things in exchange for the commission, I take my job very seriously and smooth transactions are what we strive to achieve. I’m sorry, [enter name], but I am in a commission only career with no salary and no health insurance, and in order for me to create a living wage for my family after we pay licensing fees, self employment tax, association fees, insurance and other business expenses, I need to do at least 2-3 transactions per month. In order to achieve this, I am always talking with and helping at least 50 people in some stage of a purchase or sale decision. This means touring buyers around town, answering phone calls and texts 7 days a week, interviewing for listings, promoting listings, promoting myself, networking and prospecting, attending inspections, performing diligence and negotiating transactions. In doing all of this, it’s not a surprise that sometimes things fall through the cracks with other agents and brokerages. Accordingly, we have hired licensed professionals who are trained and specialize in transaction and risk management such that you are more protected, and I have the time to focus on helping you and enough others to achieve your goals so I can support my family. Does that sound fair?
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