WHEN SHOULD WE NEGOTIATE THE COMMISSION?

Always negotiate the commission at the point of sale NOT at the point of sign-up.

You can’t possibly know how much commission an agent is worth until you see what they do for you. It’s their performance that counts more than anything else.

And, of course, performance on your behalf.

Tragically, the high point in the relationship between most sellers and most agents is at the time the sellers list with the agent. From then on, it’s downhill all the way as the agent bombards the sellers with negativity, with lower price estimates, and demands to reduce the price. All this is part of the typical real estate conditioning process. It’s not just stressful, it’s infuriating.
But not all agents behave in this manner. The best agents make the point of listing the low part of the agent-client relationship. From then on, they keep getting better. These are the agents likely to get you the highest price. If so, these are the agents who deserve the highest reward.

It’s impossible to adequately or fairly rate them when you first sign-up with them. You can only rate them once you see them in action. And you see the results they achieve for you. Good result and a high price, well, maybe they deserve a higher commission. Poor results and a low price, that’s when you push them down on the commission.

Don’t you remember back in your school days when you would sit for a test? You only got your mark when the teacher saw how well you performed. The most common question that schoolchildren ask after a test is: “How did I go?”

The same should apply with a real estate agent. You can’t agree to pay somebody based on their promises. Surely you should be paying based on their performances.
And you can’t possibly judge them properly until you hire them. That’s how you test them.

Don’t try and push them down on their commission before they start work. That removes their incentive. Scott Kim is an agent who’s happy to be paid only after he performs. Yet if does a superior job he hopes (expects) to be paid well. He often says to sellers who want to cut his him commission at the time of the listing: “I’m like a runner in a race. You’ve backed me and you want me to win. So you wouldn’t walk to the starting block and wack me in the shins with a hammer.” Scott says some sellers laugh. But all get the point. And he’s quick to add this promise: If I can only perform to the low standard of my competitors then it would be unethical of me to charge you higher Commission then they charge you. I am expecting high commission getting you a higher price than the other agents could possibly get you.

The best part about hiring an agent such as Scott Kim is that you don’t pay him anything before you get to see how he performs. Most agents want money in advance. Even if they fail you may still have to pay them thousands of dollars for needless expenses.

If you feel you have met a skilled and competent agent, then wait and see how they perform before you before you decide if they’re worth the commission they would like to be paid.

Scott Kim says this to his sellers: “Almost all agents expect the sellers to trust them. Yet agents are ranked the least trustworthy people in the nation. I believe I’m worthy of your trust so therefore I’m prepared turn the usual procedure upside down. Instead of you having to take the risk and trust me, i will take the risk and trust you. Let me do my job and then you will see if I’m worth the commission we normally receive.”

It is better to say to agents, “We are happy to pay you a big fee if you get us a big price.”

And then you should write on the agent’s ‘Listing Agreement’ the words that Scott Kim and other trustworthy agents have already had printed on their agreements: “THE AGENT AGREES THAT THE COMMISSION IS NEGOTIABLE UNTIL THE POINT OF SALE.”

Of course, technically, it is negotiable at any time before the home is legally sold. But when it’s clearly printed in writing, the agent knows that if they do anything less than a superior job, they will not get their maximum requested/desired commission.

So, not only does the agent now have a better incentive to do well for you, the agent also knows if they don’t do well, they don’t get paid as well.

Plus, this printed clause also makes you as the seller feel safer. The agent cannot later claim that you agreed to the original commission amount written in the selling agent agreement. Some agents try a terrible bluff by saying that the commission printed on their Listing Agreement cannot be reduced. That’s nonsense. Real estate commissions are always negotiable no matter what the agents tell you.

If you want an agent to do their very best to get you the best price, let them know that you are willing to pay them a high fee for a high result. What could be fairer than to see how an agent performs and to see how well they negotiate on your behalf and see the final price they manage to get for you – and then decide on the amount of their commission.

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This is an Excerpt from Neil’s latest book “EVERY QUESTION YOU MUST ASK BEFORE YOU SELL YOUR HOME”. To pre-order the full book, click on the cover below.