There is probably not a real estate professional out there who has not been asked this question at least once in their career. This is a question that has always befuddled me. I’m not talking about the gratuitous service we do for family and close friends from time to time. I’m talking about the occasional acquaintance or complete stranger we are meeting for the first time who assumes for some reason we should work for them for less than we would another client.
I know none of my loyal readers could be guilty of this infraction, but perhaps you know someone who is. Here is how it works. Let’s say you (the client) arrive at work as normal on a Monday morning. As soon as you arrive at your workstation, your boss comes and asks if you would mind working the next several weeks or even months for a percentage of your usual pay. You will still be working the same number of hours and your workload will not change. Also, you will be expected to turn out the same amount of quality work in the same timely manner. How would you respond?
This scenario would likely not occur in a real world situation because wages are usually agreed upon prior to hiring. But, play along with me here. If, by chance, you did agree to your boss’s terms for fear of being replaced by someone willing to work for lower wages, what would be your first thoughts? After you are finished with all the nasty name calling going on in your head, you probably start to wonder where you are going to cut back on expenses to avoid having to dip into your savings to allow for less take-home pay. Why would it be any different for a real estate professional when asked to cut his/her commission to get a listing (or a buyer)?
Back in the days when I worked the general brokerage scene, I was asked to cut the commission rate a few times, but I never discounted my rate. In full disclosure, I don’t think I ever got a listing when I refused. But, that’s beside the point. Perhaps it’s different in your area, but in my area most agencies discourage their agents from taking a reduced commission.
In a situation where an agreement is reached for a lower commission, the agent–not the agency–often takes the brunt of the reduction. To get the property sold, the listing agent must pay marketing and advertising costs out of pocket, spend numerous hours on the marketing and advertising, and will probably always be available at 10 p.m. to take your calls about the status of your listing. Depending on the selling price of the property, the agent may not recoup enough in commissions to cover the out-of-pocket expenses associated with facilitating the sale. And taking into account the agent’s time, the agent could very well experience negative earnings. Does this seem fair in a workforce where we trade our time for dollars?
So to all you potential buyers and sellers out there, please think twice before you ask an agent to cut the commission. You might say, well mine is going to be an easy sell. The agent won’t have a lot to do. I ask if you have ever had a day when work was a little less stressful and the workload was lighter than other days? Did you get paid any less for that day?
To all you agents out there, especially the hungry new ones, I encourage you to give a lot of thought to the consequences before you entertain the idea of cutting your commission. I know how it feels to be new in the industry and eager to get some sales and experience under your belt. But remember you will have out-of-pocket expenses to cover. More importantly, do you want to unwittingly gain the reputation of being the “Cut Rate Agent”?
Note: This article in no way implies the existence of any “industry standards” regarding commissions or agency agreements with its agents.