5 Ways to Justify Your Real Estate Commission to Clients

Ellie Brooks

Written By Ellie Brooks

Published 07/25/22
5 Ways to Justify Your Real Estate Commission to Clients

Homebuyers and sellers are eager to minimize their real estate expenses. Sellers want to retain as much of their financial gains on their home as possible, and buyers are loath to part with additional funds after paying for a down payment, home inspection, and other expenses.

If you’re a realtor, you have almost certainly encountered a client who asks a reasonable question: Are real estate commissions negotiable? The extent of your experience and the competition in your area may make you amenable to negotiating real estate commissions and fees, but you can also make a respectful case for why your commission is fair.

This article will provide some helpful tips on how to manage clients who want to negotiate real estate commission costs.

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Are Real Estate Fees and Commissions Negotiable?

Yes, real estate commissions and fees are subject to negotiation. As a realtor, it’s your choice whether you want to lower your commission to accommodate a client or remain steadfast on your rate.

If you have limited experience in the industry, it might be worthwhile to offer a lower rate. It’s important to build up your client base and establish a history of successful transactions early in your career. Negotiating real estate agent fees with your client can lead to favorable reviews and referrals, which can certainly pay off in the long run.

You may also consider dropping your price if you compete with several other agents in your area. If you play hardball, you run the risk of a client leaving you for another agent.

That said, you do deserve fair compensation for the work you perform as a real estate agent. If you’re forthright about the work you perform and you offer some other incentives, you can persuade your clients to see your commission as fair.

How to Negotiate Real Estate Commission

1. Describe your job and responsibilities in detail.

Many clients—and especially first-time homebuyers—are not privy to the extent of work you do as a real estate agent. Prepare a list of the specific tasks you complete to buy or sell a single home. You can also estimate the number of hours you spend on each task. Here are some of the responsibilities you can highlight:

  •        Communicating with homeowners, brokers, and agents
  •        Extensively researching properties and the local housing market
  •        Taking home measurements, conducting inspections, and making appraisals
  •        Interacting with loan officers and local authorities
  •        Drafting contracts and completing requisite forms
  •        Overseeing home listings and showings

Make it clear that you work hard and that your knowledge is specialized. This goes a long way toward justifying a commission of 5% – 7%.

2. Share your past successes.

If you have a track record of success as a realtor, show it. Sellers will be more inclined to pay a higher commission if they can expect that their home will sell for a high price. Likewise, buyers will likely agree to a substantial commission if you can save them money on the price of their new home. Make your clients understand that they are working with an agent who will get them the best deal possible.

3. Explain where commissions and fees go.

Many clients are of the mistaken impression that your commission goes straight into your pocket. Justify your fees by explaining how the commission is parceled off to various people and resources. You may have to split your commission with brokers or pay a substantial franchise fee. There are taxes and withholdings to consider, and expenses associated with marketing and business upkeep. That commission of several thousands of dollars starts to shrink quite quickly, and your clients may be sympathetic.

4. Offer testimonials and reviews from previous clients.

Let past clients make the case for your commission for you. If you have dozens of homeowners who rave about your skills and professionalism, you have an excellent case for why you are worth your commission. It’s easier to stand firm on your price when you have the bona fides to back it up.

5. Provide additional incentives.

If you don’t want to come down on your fees or commission, you can offer some perks in other ways. You could offer a deal on a future listing or provide home warranty coverage. A home warranty will ensure that appliances and systems are repaired or replaced if they break down from normal wear and tear, protecting homeowners from surprise out-of-pocket expenses. Coverage is especially beneficial to home sellers—a home warranty will often expedite a home’s sale and increase the property’s value.

How to Partner With Liberty Home Guard

Use Liberty Home Guard’s Realtor Portal to get started on acquiring warranty coverage for the properties you represent. You can also talk to our team by calling (866)-916-1576.

 

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