Why you should negotiate your commission, not cut it

Your commission is negotiated when you take the listing, but after that point, it becomes “cutting” — and that is not what a luxury agent should engage in. Here’s why.

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I’m a firm believer in knowing your value and being paid for what you deserve. I certainly agree that many of us are fortunate enough to make a good living doing what we do. However, if you have spent years mastering your craft and always putting your clients’ needs first, all the zeroes in your commission checks are well-earned.

We all know that commissions are negotiable. The commission is negotiated when you take the listing. After that point, it becomes “cutting” — and that’s not what a luxury agent should engage in.

Have I ever cut my commission? Yes. But it was my choice — and in my 35 years, I can count those times on two hands.

When a buyer and seller are at an impasse on price, many of us have heard the tongue-in-cheek expression, “We are only a commission away from making the deal,” as if our paycheck contribution would seal the deal. That was never the deal to begin with.

If a buyer of a multimillion-dollar property needs a portion of your commission to close, they should not be buying that home in the first place. And if you acquiesce, you’re selling yourself short.

Negotiating vs. cutting your commission

It’s important that we differentiate between negotiating your commission and cutting your commission. Negotiating the compensation is done between the client and agent prior to signing a listing agreement. It’s based on expectations on the client’s end and experience on the agent’s end. This negotiated amount is what you, the agent, will be working for and will receive when the property closes escrow.

On the other hand, cutting is a unilateral action imposed by the client onto the agent prior to close of escrow — one that was not negotiated and expressly goes against what the client and agent agreed to.

There is no doubt that as a luxury agent — now more than ever — you need to be a staunch advocate for your clients’ needs and expectations. But you also need to apply the same mentality when it comes to your compensation. That is why it’s imperative to believe in who you are, what you are and why you do what you do. Your value is nonnegotiable.

How to be nonnegotiable

As a true professional, your clients deserve the best from you. In return, you deserve to be paid for what you do. That is why one of my work principles is that my value is nonnegotiable.

In order to have this nonnegotiable approach, you must identify what sets you apart from your competitors, also known as your value proposition. What differentiates you from other agents courting the same buyer or seller?

My value propositions are “skillful negotiating” and “strong relationships with other top agents in my area.” If you have a good relationship with other agents, deals become less adversary and lead to more win-win transactions for both buyer and seller.

Your value proposition might be that you have a design background, enabling you to stage a home to maximize marketability, or that your sphere of influence is vast, allowing you to expose a property prior to list to selective buyers who want to take advantage of pocket listings.

Another value proposition could be that you have exceptional people skills and cater to those clients who require constant communication.

Your value proposition should not be “I can sell your home for 2 percent.” Instead, it should be based on your knowledge of this ever-evolving market (especially in the current climate), your relationships with other top agents in your area, and your commitment to all aspects of marketing and diligence.

Set yourself apart

The reality of real estate today is that we used to have to set ourselves apart from other Realtors. Now, we have to set ourselves apart from “disruptors,” or the discount brokerages who want to change how we do business. But just like a concierge doctor believes his or her value is in service, time and knowledge, so should you approach your clients with this emotional posture.

Ensure when you are invited for a listing presentation that you focus on your history of success, your value proposition and your commitment to the seller’s goals. Discount brokers or agents who come before or after you will not be able to meet that expectation.

Generally, a discount broker’s only focus on offering a 1 percent or 2 percent seller side commission falls on deaf ears. The concept of discount brokers like Purple Bricks and others has been tested — and it failed miserably. Don’t follow in their footsteps.

Discount brokers focus on quick-in, quick-out deals. Luxury brokers focus on, and succeed in, exceeding clients’ expectations.

Spyro Kemble is a Realtor with Surterre Properties/Relegance Group in Orange County, California. Follow him on Instagram or connect with him on LinkedIn.