Saturday, April 13, 2013

How do you respond to "cheap" real estate clients?

We've all experienced the "pain" of paying out an average of 6% commission to the selling and buying agents when putting our homes up on the market. On a $300,000 home, that's a cool $18,000 that you're handing over for services rendered. For the real estate agent reading this article, I'm sure you can recount plenty of discussions with prospective clients asking for you to negotiate your commission. What do you tell them? How do make the case that your services are worth the price the seller will pay to you and your agency?

There are many approaches that can be taken, but let me suggest one. It's not about the 6% commission, it's about the difference between your 6% commission and the next lowest rate. In other words, it's impossible to sell a house for free as even a For Sale By Owner (FSBO) will have associated costs. For arguments sake, however, let's say the client is deciding between your real estate services at 6% and a competitors services at 5% -- a difference of $3000. The client likes you and your real estate marketing plan, but would rather keep the $3000 extra to themselves! With the understanding that you're no longer debating over a $18,000 commission (double-sided), but over a $3,000 difference between you and your competition, your pitch might sound something like this:

     "I can appreciate where you are coming from understand you're doing the smart thing by researching various real estate agents to help you sell your home. I'm just glad you gave me the opportunity to show you how I (my team, etc.) can serve you better! Tell me what it is you like about what I (my team) has to offer vs. other real estate agents you may have interviewed?" You will likely hear things such as your sales record, recommendations, your marketing package, average days on market, personality mesh etc, to which you may respond: "I would agree with those things. We (I) work very hard to be the best in this market and the things you have mentioned like shorter days on market, the recommendations you were given and our superior marketing plan are among the reasons why we are the best at what we do. Since we are the best at what we do, and serve you with a superior product, we command a modestly higher commission to do so in order to justify our expertise as well as cover the additional expenses associated with effectively marketing your home. So, Mr. and Mrs. Client, wouldn't you agree that you could potentially pay $15,000 in commission to a sub-par agent, or only $3,000 more for the quality, experience and expertise that you deserve from someone who would like to partner with you to sell your home?"

Many real estate agents are familiar with this approach and yet when it comes time to photograph real estate they shop for the cheapest rate or take their own photographs that do not show well to prospective buyers. We have had agents at various real estate conventions inquire about our services only to shy away when they discover that our superior real estate photography, virtual tour and real estate video services come at a price modestly higher than the run-of-the-mill competition. After all, at Colorado Virtual Tours, with non-contract real estate photography services starting at $150 and the next-best competitor starting at about $110, we're really only talking about a $40 decision. Wouldn't you agree that you could pay $110 for real estate photography for a sub-par photographer, or only $40 more for the quality, experience and expertise that you deserve from someone who would like to partner with you to sell your listings?

Tim Ray
Colorado Virtual Tours and Vantage Point Imagery, Inc.
http://www.coloradovirtualtours.com
http://www.vantagepointimagery.com


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