Some of your clients may have an unrealistic view of what real estate agents do after watching real estate “reality” TV. They may view you as a “door opener” and may push back during discussions about commissions. While it would be easy to become irritated during such talks, understand that your clients are simply ignorant about what real estate agents do. Here’s some advice on explaining real estate commission rates to potential clients.
It’s important to note that you may have more discussions justifying your real estate commission following the NAR lawsuit settlement. After all, those outside the industry will have read headlines proclaiming “the end of 6% commissions.”
Be prepared to discuss the basics of the lawsuit and the resulting settlement. Explain that the way buyer’s agents’ commissions are advertised has changed, but the settlement terms did not address the commission percentage earned by real estate agents.
Download this discussion between industry leaders for more advice on navigating the NAR settlement. For more information, browse these settlement resources.
Explaining Real Estate Commission to Your Clients
If you are a new agent, it’s imperative that you prepare a presentation for potential clients. Here’s how to explain and justify your real estate commissions during your presentation.
1. Offer transparency on how real estate commissions work
Your clients may have little understanding of how you are paid for the services you provide. You may even have to explain that you do not receive a regular paycheck and that your income comes entirely from commissions.
You’ll also need to explain how the commissions of listing agents and buyer’s agents are not always “married.” In some cases, a seller will agree to pay the commission of both agents, but this isn’t necessarily true.
Finally, explain that agents must share their commissions with their brokerages (and Uncle Sam). Explain that your commissions pay for your time and business expenses.
2. Provide a comprehensive breakdown of the services you provide
If you look up images of real estate agents, you’ll see photos of professionals pointing to attractive features of a home or handing clients keys. You must dispel the myth that this is all real estate agents do.
To do so, some listing agents share a list of services they provide, such as the following:
- Conduct a Comparative Market Analysis (CMA) to determine the best listing price.
- Analyze market trends and local data to set a competitive price.
- Offer staging advice or arrange for professional staging.
- Recommend repairs or upgrades to increase property value.
- Coordinate professional photography and videography, including drone footage if applicable.
- Arrange for a pre-listing home inspection, if desired.
- Develop a comprehensive marketing plan tailored to the property.
- Create a timeline for the listing process, including open houses and showings.
- List the property on the Multiple Listing Service (MLS).
- Write a compelling and accurate property description.
- Create and manage online listings on real estate platforms (e.g., Zillow, Realtor.com).
- Develop and manage social media marketing campaigns.
- Design and implement email marketing campaigns to target potential buyers and other agents.
- Create a virtual tour or 3D walkthrough of the property.
- Arrange for professional signage, including “For Sale” signs and brochures.
- Distribute printed marketing materials, such as postcards or flyers.
- Network with other agents and host broker open houses.
- Organize and host open houses.
- Coordinate private showings, ensuring the property is presented in the best possible light.
- Provide feedback from showings to the seller.
- Review offers and help the seller understand the pros and cons of each.
- Negotiate on behalf of the seller to get the best possible price and terms.
- Provide guidance on counteroffers and contract contingencies.
- Assist with the preparation and review of all contracts and legal documents.
- Ensure compliance with local laws and regulations.
- Coordinate with the buyer’s agent, attorneys, and title companies.
- Schedule and attend the home inspection and appraisal.
- Address any issues that arise during the inspection, negotiating repairs or credits as needed.
- Handle any last-minute negotiations or adjustments before closing.
- Ensure all contractual obligations are met.
- Work with the title company and other parties to ensure a smooth closing process.
- Review the final settlement statement with the seller.
- Arrange for the handover of keys and final walkthroughs.
- Assist with any post-sale issues or questions.
Explain the time and effort involved in these services, including behind-the-scenes work. Emphasize the costs associated with these tasks and how much they may spend if they sell the property themselves.
A logical client will be intimidated by this list of services typically provided by a real estate agent and will be happy to pay you the commission you deserve.
3. Explain why YOU are the best person for the job
Once you have explained how real estate commissions work and what a client gets for their money, turn the discussion to why YOU are the best real estate agent for the job.
Explain the extensive knowledge and expertise you offer. Perhaps you have lived in the community your entire life and can help your buyer client understand the local market. You may have overseen hundreds of transactions in your career and have a deep understanding of marketing and pricing strategies. Highlight your network of contacts, including other agents, lenders, inspectors, and contractors.
Highlight any additional services or unique strategies you offer (e.g., staging services, professional photography, virtual tours). Explain your commitment to client satisfaction and how you ensure a smooth transaction process.
You need to overcome the discomfort people sometimes feel when speaking about themselves. Present yourself as a qualified professional who deserves whatever commission rate you request.
4. Highlight your track record
Some of your clients want to see data showing you are worth your commission. Provide statistics on your past transactions.
For listing agents, this data may include the following:
- Number of transactions completed in the past year
- Breakdown of transactions by type (e.g., residential, commercial, luxury homes)
- Average listing price vs. selling price in the neighborhood
- Comparison of your average days on the market vs. the market average
- Your average sale-to-list price ratio vs. the market average
- Number of views, clicks, and inquiries generated from online listings
- Social media engagement statistics (likes, shares, comments, etc.)
- Email campaign metrics (open rates, click-through rates)
- Customer satisfaction rates
- Referral rates from past clients
- Percentage of listings that resulted in a successful sale
For buyer’s agents:
- Average savings achieved for buyers compared to initial listing prices
- Percentage of offers made that were accepted by sellers
- Client retention and referral rates
- Average time taken to find and close on a home for buyers
- Percentage of accepted offers that successfully close
- Data on previous transactions involving similar properties
Hopefully, this data will reinforce the value, expertise, and peace of mind you bring to the transaction.
5. Share testimonials and reviews from previous clients
If you aren’t leveraging client reviews, you should be. Show live versions of review websites to show you have nothing to hide. Include testimonials or references from past clients in your presentation and offer to share the contact info of pre-chosen clients.
6. Address client concerns head-on
As you gain more experience justifying your real estate commissions, you’ll become better at addressing client concerns. Until then, practice overcoming these issues with others in the industry.
Provide clear, confident responses to these concerns, reinforcing the value you bring to the transaction.
7. Emphasize your negotiation skills
Strong negotiation skills are critical for real estate agents. Explain to your clients that negotiation skills can often offset the cost of commission by achieving a better final deal. Share an example of a time when your negotiation strategies resulted in significant client savings or benefits.
Enroll in Colibri Real Estate School’s Real Estate Negotiation Institute (RENI) to become a better negotiator. RENI offers two certifications for agents: Certified Negotiation Expert (CNE) and Certified Buyer Agent Expert (CBAE). Our livestream courses are convenient and affordable and will teach you to maximize profits at every point in the real estate transaction.
Prove your worth as a real estate agent by attending RENI. Schedule your training today.
Key Takeaways
- Clearly explain how real estate commissions work, including how commissions are split, and the services you provide that justify your fee.
- Provide a comprehensive list of the services you offer and the expertise you bring to the table. Highlight your market knowledge, marketing strategies, and negotiation skills to demonstrate why you’re worth the commission.
- Use data points like your success rate, average days on the market, and client satisfaction metrics to back up your claims. Share testimonials and reviews from previous clients to build trust and credibility.
- Be prepared to discuss common client concerns, especially concerning recent industry changes. Offer confident, clear responses that reinforce the value you provide throughout the transaction.
