Sunday, July 29, 2012

How to Negotiate Commercial Real Estate Commissions

two business men talking in street
Prepare for commission negotiations and choose the right time.

Many commercial real estate clients will try to get a commission reduction from you as the agent or realtor as part of the listing and marketing process.  In many cases you may feel that the commission reduction is the only way the client will give you the listing; your grounds for thinking this will simply and only be because the client asked for the discount.

Here are some tips from our bulletin for you.

Stop Everything!  

Stop!  If this is what you think, then stop everything before you agree to any reduction!  Consider the facts of the matter.  Do you really need to devote your precious time on a difficult listing in a tough market, and then only get paid a fraction of the normal fee?

If you are a top agent and the client knows that you are, then discounts and fee alterations will be out of the question.  Concentrate on the value that you take to the client and help them understand what that value really is in terms of results and time to them.

The fact of the matter is that a commission reduction will do nothing to help the client sell or lease their property.  On that basis you should remind the client of the priorities in their listing decision.

  • Do they want a good result, or do they want a cheap fee and potentially a less committed agent?  
  • Do they want something that could stay on the property for some time and potentially get very stale?

Here is a statement for you that will trouble many a client and help put their focus in the right perspective.

‘Mr Client, I understand your request for a fee (commission) adjustment.  That being the case I am certainly able to assist as you ask; in doing so I will need to adjust our listing and marketing approach from ‘exclusive’ to ‘open’ listing.  The time commitment in marketing a property is significantly different between the two listing methods.  Would you like to take the ‘high road’ or the ‘discount road’ in the marketing solutions for your property?’

Top Agent in Command

Show the client that you are really a top agent with a real command of the market.  When you do this correctly, they really have no choice; you are their best solution and the fee is then a secondary decision.

Comprehensively tell the client of the alternatives that you offer in:

  1. Market coverage
  2. Personal action
  3. Inspection strategies
  4. Listing timing
  5. Competition properties
  6. Competition agents
  7. Time on market

To be the best agent for the property you really do need to show it in all respects.  If the client still asks you for a commission or fee reduction you are probably not selling your skills and relevance enough.

Here are some tips from our bulletin for Agents this week.