3 Ways to Make More Money Without Selling More Homes - [Part 2]
3 Ways to Make More Money Without Selling Homes - Part 2
If you recall from Part 1 of this blog series, we discussed the importance of collecting administrative / transaction processing fees and how to get it done with relative ease.
In this next blog, I’m going to share how you can increase your per transaction commission whether you’re working with sellers or buyers.
Much like collecting transaction fees, you need to believe that you are worth the fee you are collecting and negotiate with confidence when it comes time to talk commission.
Failing to do that puts you at a huge disadvantage when justifying your fee.
Once you’ve decided (and yes, it’s just a decision) that you are worth the fee you are looking to collect (and yes, you are worth it), the rest lies in your execution strategy.
Here’s what you need to do to make more money working with sellers and buyers without selling more homes.
Listing commissions are continually under fire from discount brokers, weak agents and sellers who just won’t seem to budge on their price and your fee.
Throughout history, even as home prices have increased over time, real estate commissions have either gone down a bit or stayed the same.
In fact, when things are tough financially like in the early 1990’s with the double-dip recession and the early 2000’s with the dot com bubble, you’ll see commissions take an even harder hit than normal.
Even now, with the market screaming at breakneck speed and there being fierce competition among tons of agents, commissions are taking a beating.
Despite all this, you can still collect a competitive fee for yourself by doing the following:
1. Demonstrate mad value. Unarticulated value is unappreciated value. You must demonstrate to sellers that you bring mad value to the table in helping them get their homes sold.
Where most agents fall short is spending too much time on talking about features: marketing, professional pictures, customer service, and not enough time talking about benefits, driving up demand to get more people through the home to get the seller more money.
You must connect the dots for sellers on what you offer and how it can benefit them in reaching their goals. Failing to do this means that sellers don’t see the value you bring to the table.
This, unfortunately, is the kiss of death.
You MUST show them what you do, how it’s different from what other agents do and ultimately, how it benefits them in the long run.
2. Don’t be a chicken. Many agents give up on seeking a full commission before they even ask for it.
This is extremely unfortunate because the only time the answer to any question is a definite “No” is when you don’t ask it. Otherwise, you always have a fighting chance.
Always, always, always ask for your full fee on every listing presentation. To keep yourself honest, print your listing agreements with your full commission and transaction fee already entered into the appropriate sections.
And absolutely, don’t be afraid to close and ask for your fee when the time comes.
3. Stand up for a fee. Once you take the initiative to present your full fee, negotiate to keep it.
If you do a good job during your listing presentation, you should have gained a large number of “micro-agreements” from your seller prospects between the time you sat down and the time it came to discuss pricing and fees.
Micro-agreements include agreements on your ability to get more people through the door to get the home sold for more, on the fact that they’re open to listing their home with you if you can meet their goals better than any other agent and on all the things you do that other agents don’t do to get their home sold fast and for top dollar.
If you get pushback from sellers when it comes to your commission, you can refer back to these micro-agreements to defend your fee:
“Mr. and Mrs. Seller, you agreed earlier that having a strong budget to find buyers online was a key factor in finding the buyer who will pay your price for the home, correct? In order for me to do the best job of online lead generation, I can’t reduce my fee. Does that make sense?”
Whatever you do...don’t roll over. Stand up for your fee.
4. Offer a guarantee. At the end of the day, it’s not about your fee...it’s about what the seller puts in their pocket.
If you don’t believe me, ask any seller that leans back on your commission request:
“Mr. and Mrs. Seller, what’s more important to you, my fee or the amount you walk away with?”
Some sellers will be wiseguys and say both, but we all know that the bottom line is what’s most important.
And to that end, it’s why you need to get the seller to focus on it by first doing a net sheet for them and second, by offering a guarantee instead of reducing your fee:
“Mr. and Mrs. Seller, are you more concerned with my fee or how much you’re walking away with? [Let them answer]. Great. So let’s do this: we’ll list your home at $XXX,XXX and if I can’t get you that amount, I’ll (reduce my fee, sell it for free, pay your closing costs, etc.). That way, you get what you want and I can earn my fee. Plus, if I don’t get you that amount, I’ll lose, too. Does that work for you?”
Don’t say a word and let them process it. Then close for your fee and get the paperwork signed.
Remember, get them to focus on the bottom line and not your fee. Then, keep them focused on it and offer a guarantee.
It works great.
Just because the listing agent on a property your buyers want to buy can’t negotiate their fee doesn’t mean you have to take only what’s being offered.
You see, commissions are considered to be closing costs of a transaction.
As a result of that, because your commission is negotiated with your buyer, your buyer can ask for any shortage in your commission to be paid as a closing cost by the seller in a transaction.
Armed with what I’m going to show you here, you have the ability to earn a higher fee on just about any transaction in which you represent the buyer.
Here’s you make it happen:
1. Sign your buyer’s to a buyer agency agreement. In order to negotiate your fee properly, it helps to have a buyer agency agreement signed an in effect...well before you put an offer in to buy a home.
Yes, it still works if you get the agreement right before the offer, but it’s more effective if you do it when the buyer meets you for the first time.
That way, you can manage the buyer’s expectation well ahead of time and let them know how your fee works when it comes to buying a home down the road.
Plus, it really takes the focus off your fee and on them buying a home because you’ve discussed it well before they make an offer rather than at the time they make an offer.
Lastly, it gives you a lot more credibility with your buyer prospects when it comes time to negotiate your fee (when necessary) as part of the transaction. You don’t come across as a money-hungry agent who’s more worried about their fee than their client’s results.
2. Demonstrate mad value and don’t be a chicken. Same thing applies here. Give your buyers many good reasons to work with you and make sure your fee is worked into the paperwork before you present it.
The good thing about working with buyers and your fee is that you’ll be asking the seller to pay for anything that doesn’t get covered by the fee the listing agent is offering:
“Mr. and Mrs. Buyer, my fee is X% and a $XXX transaction fee. My fee gets paid out of the transaction when you buy a home. If there’s a difference between what we’ve agreed upon for a fee and what the seller is offering out, I’m going to ask the seller to pay it as part purchase and sales agreement. Are you okay with that?”
Since the seller is picking up the tab for any fee differential, the buyer doesn’t usually have a problem.
That said, you can’t be a chicken. You must ask for it.
3. Negotiating your fee as part of the offer. It’s coming, so you need to be ready.
There’s a transaction you’ll be part of where the listing agent will be offering out less than what you’ve negotiated as your fee with our buyer.
When this happens, you first have to remind your buyer of your prior conversation regarding the fact that when there’s a shortage in your fee that you’re going to ask the seller to pay the difference.
Once you gain your client’s agreement, you then ask for your fee in the form of a closing cost in the purchase and sales agreement:
“Seller to pay $X towards buyer’s prepaids, closing costs, escrows and/or points.”
Now, if you’re in a competitive situation or if your buyer needs every penny of the closing costs you’re asking for, then don’t ask for it.
However, if neither of these scenarios are present, then ask away.
For instance, let’s say the buyer needs $3,000 and the difference in the fees leaves you short $1,000, then you would ask for a total of $4,000 and direct the title company/closing attorney to allocate that amount to your company on the Closing Disclosure.
Whatever the difference is between what’s being offered out and what you’ve negotiated on your buyer agreement is the amount you’ll seek. Be sure to ask for it in a dollar amount and not in a percentage. You don’t want the seller and the listing agent having to do the math.
You want it to be easy.
Collecting a higher commission is one part psychological and one part execution.
You need to believe that you are worth the higher fee and feel strongly enough to take action and ask for it as part of your daily sales efforts.
The surprising thing is that you’ll get it - even some of it - more often than not simply by asking for it.
Be on the lookout for the final installment of this three part series where we’ll discuss how to collect vendor income.