When To Reduce Your Commission

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As a real estate agent, the question to reduce your commission can be enough to make you want to run away screaming.

Many real estate coaches and guru’s will tell you to absolutely never ever do this. I have even posted in the past about not making this a practice. However, there are times when this is not only appropriate but absolutely necessary.

When Should you Reduce Your Commission?

Building a repeat and referral business is what we all strive for. Let’s face it, working with someone who has come recommended is what we all want when paying for services. Think about how you came in contact with your mechanic, lawyer and even hair dresser. They were referred to you. Not only does it make a transaction or situation go smoother due to familiarity, in a lot of cases the hard questions have already been answered. When building this type of business there has to be some give and take. Do you have someone in your circle that refers you a lot of business or has done many deals with you? Giving them a break on commission at some point is a nice courtesy, or thank you. Not saying that you should come right out and tell them you will be cutting the commission, but if they ask or if you feel it would be a good idea, do it.

** Disclaimer. In some provinces, states and countries it is against regulations to offer reductions in certain scenarios and as incentives. Be sure to check with your registrar before following this advice so you do not get yourself into any trouble **

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 You are offering more then one service.

If a client is both buying AND selling with you, or doing multiples of each it may be absolutely appropriate to reduce your commission. Again, this doesn’t need to be the speech you have when you walk in the door. Because afterall, they are already working with you. Again, a great way to thank long term and high referring clients that use you for multiple reasons throughout their real estate journey.

To get a deal done. Now HOLD ON… Hear me out here!

Fast forward to the day you are negotiating a deal on your clients dream house. You have spent countless months looking for homes and nothing has seemed to fit. This IS THE HOUSE. You can’t even imagine the devastation they will face if they lose it. You’ve exhausted all of your negotiation energy and the other side will just not budge. If you don’t come together on something there are other buyers pounding the door down to get their shot. Enter, an offer to reduce your commission. Reducing your commission to bring a deal like this together could mean more for your career then you can imagine at the moment. You’ve become the hero of an otherwise impossible situation and made your clients the happiest people on the planet. And what do happy clients do? Refer you more business. That’s what.

This strategy should never come out  of desperation for a deal but rather out of quality service.

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There are many other forms or variations of these scenarios that would fit the mold of a commission reduction as well. It’s kind of a “go with your gut” thing. However, I will side with the guru’s on the fact that this should never become a practice or overall business strategy for any real estate agent.

When Should NEVER reduce your commission

Again, there are many successful business models out there in the real estate game. And afterall, this is a game. There are reasons we have the ability to negotiate. As a rule of thumb though ( in my opinion ) there are times when it really isn’t appropriate to reduce your commission. It’s just not good business.

To undercut and get the business

Don’t be that guy. We are all here to make a living. Respect is reciprocal. And the reason you are here worrying about this is because when the trend of undercutting began. It starts with this guy will do it for this much, so I’ll do it for this much and before you know it, you’re writing a cheque at the end of the deal.

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Which leads to the number one, and MOST IGNORED commission reduction mistake. And when you should absolutely NEVER EVER reduce your commission.

If it will cost you more then you make

Yes, competition is real and necssary. Just don’t fall in the trap of wanting the deal so bad that you reduce your commission so far its costing you money. By knowing your cost per listing for each and every listing you know where you stand and how much you will need to charge to make a living.

After all, that’s what you are in this business for to begin with isn’t it?

Is the commission conversation a hard one for you? Tell us about it!

Don’t forget to share this post with someone you think it may help.

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