Be Transparent: How to Have the Commission Conversation

The DOJ-NAR probe brings to focus that we should be educating consumers on commission from the get-go. Here’s how to approach the conversation.

You’ve heard the rumblings of what’s going on between the U.S. Department of Justice and the National Association of Realtors (NAR). 

At the heart of the matter is who gets paid and how in a real estate transaction — and how the consumer is educated about this financial arrangement. My passion for education runs deep, which is why I developed a real estate education school for new licensees called HAVEN Academy. 

We cover topics such as business planning, budgeting and lead generation. We also review all the legal forms and make sure they understand the disclosure principle of “know the knowable.”

And that leads perfectly into the next topic we cover about how to discuss commissions. Even before the DOJ probe, I trained all our students in the HAVEN Academy to attack the gorilla in the room on every appointment.

If it’s a listing appointment, that typically means discussing commission costs. If necessary, I encourage them to go further than the percentage discussion and show their commitment to professionalism and transparency by explaining how and why they are paid by commission, breaking down who gets paid what out of the total commission amount.

When meeting with a new buyer, the gorilla is typically their fear of purchasing a lemon or how financing works. I encourage buyer’s agents to be very proactive with all costs associated with the purchase, including commission.

We all know it’s a complicated arrangement and can sometimes be hard to explain. But that doesn’t mean you should avoid it. In fact, I’m a big advocate for taking the time to explain the value real estate agents bring to the table.

This speaks to transparency, something we should all strive for in our business and personal relationships. Transparency promotes trust; trust enhances credibility, which in turn enhances reputation.

As real estate professionals, it is our duty to get out in front of the conversation and actively educate our clients about the tremendous value and expertise we offer.

But the real key to the commission discussion is a consistent value proposition that starts at the brokerage level and flows down to the individual agent’s unique value proposition. Here are some key talking points that help articulate the value of a real estate agent and provide proof points for commissions.

• NAR documents that sellers who work with a real estate agent get more for their home than if they sold it themselves. While homeowners often have a good understanding of the sales in the neighborhood market, they rarely have all the information. Being able to interpret the activity in a market, days on market, price reductions, canceled and withdrawn listings tell a far more detailed story of the market and help a seller avoid typical listing mistakes.
• I always told my sellers, “Now we have an accepted offer, the hard work really begins.” Navigating disclosures, investigations and potential delays for lending, appraisal and occupancy takes a complete understanding of the transaction process.
• In today’s low inventory landscape, having a real estate agent who can network within their office and real estate community as your advocate is really important to getting that first look at a new listing. As well as access to cutting edge multiple listing service apps, neighborhood data and immediate notifications is critical.
• Negotiating the best price is just part of the deal. Getting a great price but having to relocate on someone else’s schedule or ending up responsible for all the repairs can cost time and money, let alone stress an agent can help you avoid.  

Choosing to work with an agent isn’t about choosing service over cost. There have always been alternatives to using a full-service agent, and today’s market is no different in that respect.

Three decades ago, buyers and sellers openly questioned commission costs in the same way they are today. The DOJ probe adds a little more focus on the subject, but the discussion with your clients is still the same.

Great service, professional guidance through the process and open, transparent communication are still the keys to your building trust and enhancing reputation. They also happen to remain the keys to your success. 

Gavin Payne is the broker-owner of Better Homes and Gardens Real Estate HAVEN Properties in San Luis Obispo, Morro Bay, Paso Robles and Santa Maria, California. Connect with him on Facebook.