thoughts on selling commissions

Thoughts on Selling Commissions

Real estate selling commissions are always debated. Some say they are way too high and others don’t mind paying them as long as they see the value in what they are getting.

And that is the main point of contention I see when it comes to commissions.

There are those who believe houses sell themselves. That may have been true up until April of 2022, but we are in April of 2023, and even though prices are beginning to rise, there are houses out there that are sitting for months on end.

It’s laughable when agents try to justify their commissions because they have the best marketing.

Let’s face it, we (realtors) basically all do the same thing. Some just have a knack for doing it that tiny bit better and that can be the difference between a 5% selling commission and a 3.5% commission.

What about negotiating? I see a lot of agents boasting about their negotiating prowess. They even took an online course to become a certified negotiation expert (CNE).

It’s great they’re doing things to improve themselves, but at the end of the day, it’s just another “advantage” they have to sell themselves to home sellers.

I’ll be the one to point it out, their “negotiating tactics” during a red-hot seller market were to simply undervalue a house, get dozens of offers, and simply have the seller sign the offer that was the highest price.

The listing agent had no idea what the house was worth, but that didn’t stop them from advertising that they negotiated the highest selling price in the neighbourhood. Until the week after when the next house sold for more…

“Free” staging is another term tossed in the mix to justify commissions. To me, the word free diminishes the true value of good home staging; and I emphasize good.

I can stage a house, but believe me, the difference between my staging and hiring a professional home stager is the difference between you, the homeowner, selling for an average price or making tens of thousands more than the average selling price.

But therein lays some of the commission contentions; some homeowners want everything included in a rock-bottom commission rate. They want to have their cake and eat it too.

This means the real estate agent, who coordinates and pays upfront for photos, videos, floorplans, virtual tours, aerial drone footage, and online ads, begins to look at the costs involved, compares it to what they’ll make after all is said and done, and has to make cuts somewhere in order to make some money.

How much should an agent make from their selling commission?

Now we come back full circle. They need to be able to justify their commission rate.

How?

By demonstrating the value that they bring to you, the home seller.

A good realtor brings more value to a home seller with their ability to sell for more than the average selling price, and they do this by better preparing a home for sale than most other agents.

Like I said earlier, most of what agents do is pretty much the same.

One thing I learned in the restaurant service industry is that it’s all about the presentation.

A beautifully plated chicken dinner prepared by a trained chef at Aloe will be more expensive than one served at Milestones prepared by a line cook.

Some agents are just better at preparing a home for sale than most because they pay for excellent professionals to help them, and help a home seller get more.

Too many times I’ve seen houses under-sold because of shitty photos, or none in some instances. Some homeowners are short-changed because none of the houses’ main features were highlighted.

Ad copy, or listing descriptions that read like “Welcome to this sun-filled and open concept house in a great child-friendly neighbourhood, minutes to downtown! Walk to everything the city has to offer. Great schools and parks nearby! Come see it before it’s gone!”, does nothing to point out why it’s a great house.

It’s just fluff.

Meaningless drivel.

Again, with all of this being said, there are some home sellers that no matter how much value a good agent can bring to the table, are simply too focussed on the selling commission. Even if the agent had shown them why they charge what they do and justify why their selling service brings more money for the seller, those types of sellers will never waiver and go with the agent that offers the lowest commission but still has photos and staging in their repertoire.

There was a conditioning that went on during the boom, and a race to the bottom for selling commissions ensued because a listing was guaranteed to sell.

In this market, where homebuyers are squeamish and strapped for money, great photos, staging, and virtual tours aren’t enough.

Buyers are looking for value. Value doesn’t mean the least expensive house, they are looking for a house that won’t be a money-pit. They want a good house that they can simply move into and live their life.

I wonder what the value of an agent who has the ability and connections to have a house prepared in that way would be.


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