Cut Your Fee or I’m Not Closing? Never
J.D. Parker Aug. 5, 2013, 2:55 p.m.
I’ve heard this line more than once in my career.
At the beginning of my career, it would upset me and make me nervous, and I would fear that the deal would collapse. Now every time I hear it, I smile and get excited. The logic behind the shift in my attitude is that if someone is not serious about making a deal happen, he would reject the offer. When a seller asks for my fee, I know she wants to make a deal and I’m within striking distance of crossing the finish line.
When I was a young agent and I had a large fee hanging in the balance, I was always nervous that the deal would not close. Most days, I would punch the price into a calculator and come up with the potential fee and then gaze out the window thinking of how to spend those unearned commission dollars. Some of my less forward-thinking agent friends at the time would even go out and spend those unearned dollars in advance of closing; needless to say, the majority of them are not in the business anymore.
The first time I got that dreaded call—“Hey J.D., I would take the offer, but you need to cut your fee in half”—I remember my heart skipping a beat. I froze and wasn’t sure quite what to say, and then I just blurted out the first thing that came to my mind: “NO!”
Just about every time, this fee-cut tactic is a hollow threat from a client just trying to squeeze a couple more dollars out of the deal for himself.
Generally speaking, sellers ask you to cut your fee in a transaction during the following stages:
- Signing and negotiating an exclusive listing agreement
- Extending a listing agreement or reducing the price on a property
- Marketing the property and negotiating with offers
- Signing a contract of sale
- While the buyer and seller are under contract as due diligence is being removed
- At the closing
If you are not prepared to handle this conversation during any one of these critical events in a transaction, by the time you are done the deal, your fee has been whittled down to nothing.
Now there are times to cut your fee—I can’t say that there are not, but generally that should only happen when you as the agent make a mistake on a transaction.
My favorite six responses to clients coming after my fee:
- That’s not possible
- I appreciate that you want me to make less money, but this is not a brokerage issue, and I did my job
- Don’t do the deal then; I’ll find you another buyer
If you deviate from these responses or kick the can down the road in this conversation, most clients will interpret this as weakness and will chip away at your fee.
I always get agents rationalizing that they want to take a small fee cut just to make the deal, but when you add this up over the course of a year or a career, millions of dollars are just given away because agents fear they will not make the deal.
I had a seller the other day ask for a $3,000 fee reduction on a $140,000 commission. Do I really believe that a seller is not going to close a sale over $3,000 on a $2 million property?
Well, I’m here to say: stay strong and don’t cut your fee. If a seller agreed in writing to pay you a certain percentage of the sale price, and you did your job and got her the highest price while taking the risk and working on 100 percent commission, then expect her to honor it.
Can you imagine if you got near the end of your surgery and told the heart doctor you want him to take half of his normal fee, or the jury is out of the courtroom deliberating and you started negotiating your lawyer just before she finished her job? Real estate is a profession, and if someone asks me to represent him and protect his interest, I expect him to honor the commitment he made to me in writing.
I can honestly say that in all my years of working in the real estate profession, I have never lost a deal because of my fee.
Just remember, when someone asks for your fee, smile, take a breath and know that she wants to make a deal. Stay strong and you’ll soon arrive at the finish line.