Should You Cut Your Fees to Get a Listing?
Let me start by saying, commissions are not set by the state of Texas. Every agent has their own fee structure just as we have ours. It's based on what I believe is fair to our clients, allows us to provide the top quality services we deliver, and will keep me in the business. It's very expensive to run a firm like I have.
Although I had to do it when I was starting out in real estate, I no longer just offer to reduce my fees on a listing presentation. However, if the seller requests it, I'll explain why we charge what we do. We're not just a sign in the yard, the MLS, and then on to the next deal. Then I'll weigh the plusses and minuses of a commission reduction. If it makes sense, I'll consider it. If it doesn't, I'll hold firm even if I know I'll probably lose that listing opportunity.
If I have to decline the listing opportunity, I'll always thank the seller for the opportunity to visit with them anyway and wish them the best of luck with the agent they chose. I'll also ask them to please let me know if things don't work out.
You'd be surprised how often I hear back from that seller later down the road. They'll tell me they wish they'd gone with me in the first place and we pick it right up from there.
Here are some examples of the times I've reduced my fees ...
When I Started My Real Estate Career - One of the hardest things for me to do as a new agent was getting listings. You'll probably experience the same thing. I didn't have a track record behind me in residential so how was I going to convince someone to trust me to sell their home? All I had was my enthusiasm and willingness to work hard which I tried to convey, but that usually wasn't enough. So for quite some time, after I made my pitch to get the listing I told the sellers right up front I'd cut my fees to the bone and why. Thankfully, some of them took me up on it and that literally started my career. Although I didn't make much on those sales, that literally kicked off my career.
When I Was Trying to Build a Track Record - Nothing is more deflating than having a seller ask "What have you sold" and you don't have anything to show them. They might like you personally and want to give you their business, but their home is probably the most valuable assets they own. Are they going to trust an agent who doesn't have much experience with listing it? Chances are, no, especially if it's a luxury home. Walking in with a presentation showing a portfolio of class A, luxury homes you've sold will immediately give you credibility. That alone might not win the listing for you. You still have to convince that seller you're their best choice, but it will get you in the running.
When My Listing Inventory was Down - There are times when I'm so busy with my listings I can't come up for air. I've got plenty of sellers who know my value and want to be a part of the buzz and marketing blitz we're always creating. They usually don't even ask me to cut my fees. But when our inventory starts to dwindle because we're selling our listings so quickly, I might take a different approach. If they ask for a fee reduction, I'll try to work with them, within reason. This is no different than a hot new car coming out that everyone wants and the dealership has a limited number to sell. They aren't going to discount the price on that vehicle. But the cars that have been sitting on the lot for months are where you'll get your best deals.
When I Was Running Low on Buyers - There's an old rule of thumb "Every listing you take should lead to two buyer transactions". While I think that's grossly exaggerated, there's no doubt listings usually will introduce you to buyers. They may or may not be the buyer for that particular listing, but they're out looking at homes. If they're taking the time to tour homes, it's usually because they're at least considering making a move and by staying in touch and cultivating that relationship, hopefully you'll be there when they're ready to make their move.
When I Really wanted a "Trophy Listing" - When I have the opportunity to list a "trophy home" (a home I really want on my resume of homes sold), I'll usually do what it takes to get the listing. Just because it's a very expensive home doesn't mean it's also a big money maker for me, but it doesn't matter. Sometimes I just have to look at trophy listings like "loss leaders". A loss leader is a product stores sell at a huge discount to bring customers into the store where they'll probably buy something else. BOGO's are a good example. I'll still spend the big marketing dollars to make sure that home stands out. I don't want to just list it, I want to sell it. I want other sellers of homes in all price points to see how I market my listings and think to themselves "I want that guy selling my home".
Defensive Warfare - I've now led my area of the MLS for the past 21 consecutive years. In 2021 I finished over three times over the second place agent. I don't know how many agents have ever accomplished anything like that, but it's a streak I want to keep going. If I get to the point I feel some another agent is gaining on me, I'll do what it takes to pull away again. I'll get more aggressive on my commissions to keep things rolling. It's as simple as that.
As a new agent, keep this in mind. When other agents are finding out you're getting listings by drastically cutting your fees, you might start getting pushback from other agents in your office or even the office manager. I saw it happen in our office with a new agent a long time ago.
How you run your business and what you charge to list a home is no-ones's business except your own. If that's what it takes for you to survive, go for it and if you're asked to stop doing it, find another brokerage. There are no set commission fees in the state of Texas and no-one has the right to tell you what you should be charging.
Now to the story I mentioned earlier about a listing I cut my fees on. I wasn't struggling, but my inventory was low and I needed to replenish it. Normally I wouldn't have reduced my fees on this particular home, but I decided if the seller asked, I'd try to work with them. They asked and we worked out a fee which was lower than my standard fee.
Coincidentally, at the same time I got into a conversation with an agent about her business. She was proud to tell me her policy is never to discount her fees. Ironically, she and I ended up competing for the same listing not long after that conversation.
I don't know if she ever offered to discount her fees on this listing opportunity, but I did because I saw the potential for future business. I sold that home, sold another home to the seller and also sold a home to one of their kids as well. I'll bet I've made five home sales with that family since then.
That agent's stubborness and short sighted principles ended up costing her a lot of money over the years. So who came out ahead?