There is a major difference between “charging a commission” and “charging a fee.”
The difference, though, is in perception.
Both terms refer to a monetary consideration being paid out to a professional for a job done. In real estate, the end result is a completed transaction. Upon completion, a commission is paid out to the professional acting on behalf of either the buyer or seller; the size of commission based on the size of transaction.
It is because of this moving-yard-stick nature of how commission is calculated that real estate professionals are put into a position of defending their value.
An example of this would be, “did the real estate agent work harder or longer for a house listed at $500k than one listed at $1M? If the answer is no, then why did they earn more money on the sale of the $1M home?”
But maybe it did take more time and money.
The problem is how commission is perceived, and it can work to overshadow the value proposition of the real estate professional. Commission implies that a cut is being taken. A fee implies a set cost for the service provided.
Both lawyers and accountants provide services that are considered integral and nonnegotiable, charging fees. Real estate agents and stock brokers, as well as travel agents before them, all charge commission for their work, and suffer the reputation of being expendable in the eyes of consumers.
All are licensed professionals, but while the former are seen as providing increased value, the latter are seen as decreasing the return on investment (ROI).
It isn’t as simple as altering the language of a contract. Rather, the perception must shift in the mindset of the home shopper, away from a real estate agent who “takes a cut” and towards one who “provides a service.”
For perception to change, action must be taken.
Value must be recognized up front, demonstrated in a proactive and honest manner:
- Walk the home shopper through the entire process (from home inspections to mortgage approvals) and any foreseeable obstacles (seasonal differences, interest rate changes, etc.)
- Describe how you will put their home in the best position to sell (through varied marketing approaches, the specialization of each team member, etc.)
- Show them your history of success and why you’re suited to handle their specific needs
- Communication is key – keep your clients informed during the entire transaction
Stop taking a commission, and start emphasizing the value of your fee.
Remember, you are a professional.
So what do you think? Post a comment below!