What to do if a seller asks you to lower your commission

Question

If a seller asked you to lower commission, how would you respond?  Is there ever any reason to agree to a commission cut?

Jay Hinrichs · Answer

commissions are negotiable.. I have negotiated them lower and negotiated them higher ( much higher)  depends on what it is and current market conditions.

although in reality most agents working for a broker are not allowed to negotiate or if they are very little.

its once you become an independent broker working for yourself that your free to negotiate.

in our market there is defiantly pressure... downward.. 7 % used to be somewhat common... then of course you have the nationwide 6%  that is common.. now in our market 5% is more common and on high end properties you will see 4%  ...

now I sold land.. it started at 10% and had been 10% for years then as the decades rolled on.. it dropped to 6% as well.

I specialized in remote rural acreages as I was cutting my teeth in the industry.. I charged 15 to 25% to sell those... they were all double ended as the properties were very difficult to find.. you could not put them in your GPS  LOL.... very few agents know how to sell rural ranchs and land.. so you can dictate fee's somewhat... seller would go for the local cheaper and after a few years on the market I would get the listing at my higher fee.. always took 1 year listings sometimes two.. but I know I would make a nice lick once it was sold.. ANY I would only list land deals were the seller could or would owner finance.. as financing is dog tough to impossible for most.. and cash buyers narrows the field too much.. I wanted to make money not spin my wheels.

Mike Cumbie · Answer

Hi @William Plymouth

That varies on what the property is and my relationship with the client. Now if the property is a big ticket item that I can still market properly for less, then maybe. If the seller bought this one from me and is buying another one through me when this sells, sure we can have a conversation. If it is a standard house and our first date, I can't just jump into bed yet. I usually go over accomplishments and what they get. "I sold 3 in this neighborhood over the last 3 months, here are the addresses and the prices we negotiated to sell for". "As you can see they all sold within 2 weeks, One for at 94% of asking, 1 at asking and one over asking". "If you drive around your neighborhood you will see 4 houses still on the market over 60 days". "Look at their asking prices and marketing". "I would love to sell your house, but in order for me to do it properly I need to cover my expenses and with this property I can do that at X% or flat price."When you start out you are going to have to market one way or another. Either a whole lot of money in advertising, a whole lot of time in running around or cutting commissions. The one that has the worst effect is cutting commissions. Because these same people will be your referrals later in your career. You can guarantee if you cut your commissions they are going to tell uncle Joe when they tell him how great you were "And he cut his commission down to 2.5% for us". Guess what Uncle Joe will be asking the minute he sees you "Hey I know you did it for them at 2.5% since I am a referral do you think you could do 2%"? You are back into that same conversation again. At some point you have to stand your ground or lose money.Good Luck!

Craig Jackson · Answer

Always respond professionally, don't make on the spot decisions, tell them you will need to speak it over with your broker and get back with them, go speak to your broker and ask them how to handle the situation, that's what brokers are for. Sometimes they are willing to reduce their % to get the deal, especially if it's a substantial purchase.

In my opinion there could be reasons to lower the commission

1. If the seller and buyer are close but unable to reach an agreement on a deal.

2. If the market conditions are not good this could allow the seller to break even on a property instead of taking a loss. So again to make the sale this would be a good reason to take a cut.

For both of the above part of something is better than all of nothing.

3. Many realtors or brokers just get the listing, list it on the MLS, and do nothing more, but most times you don't know till after the fact.

4.If you are just starting out and looking to get your foot in the door as a realtor in a hot market saturated with reputable realtors.

5. If you the realtor has made an error on the listing or during negotiations.

Russell Brazil · Answer

If I agree to lower my commission that easily, why wouldn't you think is give your money away as easy in negotiating with the buyer .

Jake Thomas · Answer

I know I am late to the game on this thread but wanted to give my $.02. My market is insane and people keep leaning to FSBO to sell their house. They are selling as fast as a FSBO as with a Realtor and the house is selling regardless. On top of that we have about 3,000 licensed agents and maybe 1,500 active listings at any given time so the competition for that is also tough. To compete I sometimes need to reduce my commission to get a listing. Listings are far less work than working with a buyer so I have no problem reducing my side to get the listing but will never short change a buyer agent. They always get 3% and I will take the hit. Clients are rarely calling me so I am calling them and they get 30 calls a day from 6 or 7% agents so when you say 4 or 5% they stay on the phone. I am not one to make 30 calls a day but rather 1-2 and get a listing. I do an open house and sometimes get lucky and get both sides or gain another client from the whole transaction. I am not a discount agent but to get my piece of the market share I do what I have to thrive in this market.

Agents that won't take anything less than 6-7% will likely be a thing of the past in the near future. Those days are numbered and the new generation moving into houses isn't standing for it as much.

Charlie Garner · Answer

when asked.

1. Pause

2. Restate the question "So Mr. Smith what you are asking is, can I cut my commission?"

3. Isolate - "Aside from my commission how do you feel about everything else?"

4. Question - " Which part exactly do you feel like I don't offer enough value to you to collect my asking commission?"

5. Answer the question - this is the last resort.

6. Re-close

Charlie MacPherson · Answer

It depends on when and why the request is made.

Up front, while working to get the listing, I start with my commission a little high and leave room to reduce it.  For example, I start at X%.  They ask for Y% less.  I compromise at X-1/4% or X-1/2%.

I do review the services I provide and sell value before discussing commission.

There are a couple of statements that I keep in my pocket:

1.  I need to have enough commission to pay the other side.  If I drop the commission as you ask, I'll only be able to pay the other side Z%.  There are some agents who will avoid showing it with commission so low.

2. When going after an expired listing with a lower commission: I'm really not trying to be a wise guy, but how did that discount work out for you?

Now when the request comes late in the deal as a result of things getting wrapped around the axle, I've taken a cut to hold a deal together.

I recently represented a seller.  We had his house under agreement with another house he was buying contingent on the sale of first.  It was a total of almost $800,000 at 2.5% - close to $20,000 in commission.

His current home didn't appraise and he was going to get over $30,000 less than the contract price.  In order to hold the deal together, I did give up a small bit of commission - roughly $2,000.

In this case, I think it was worth it - but that has to be the exception, not the rule.

David Ferrette · Answer

I am confused why so many agents quickly say NO to this question.  You  will say YES to 3% commission on a $300k home for a $9k payday but you will say NO to a 2% commission on a $900k home with a $18k payday?

Casey Mericle · Answer

@William Plymouth Offer to take an option on the property at whatever price you have to discount. You may have to clear it with your broker first. You may also have to subordinate to a loan, which is fine to do.

Record your option, this step is crucial. One day your buyer (who asked you to take less) will need to get that option released to sell or refi. You will be contacted asking for a release of your option.

Relay that the option can be released for your commission amount (plus interest of course), and smile that karma is alive and well in the universe.

You want to do an option because options are taxed once they are exercised (or on the backend). Other types of vehicles that you might use would be taxed upfront, and you wouldn't want that since you didn't receive all of your money upfront.

What to do if a seller asks you to lower your commission

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