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The real estate landscape is undergoing seismic shifts, especially in the wake of the recent National Association of Realtors (NAR) settlement, fundamentally altering commission structures.
The proposed changes, which still need to be approved by the court, will decouple commissions, remove them from the multiple listing service and require buyer’s agents to have a buyer-broker agreement in place before showing homes. These proposed changes have sent ripples through the industry, inciting speculation and fear-based chaos.
In these turbulent times, real estate agents face a critical choice: chase volume through discounts or reinforce the intrinsic value of their service and properties.
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In light of the NAR settlement, agents are at a crossroads. One path, marked by discounting, leads to a precarious future where value is compromised. The alternative, and the path I advocate for, is to focus on providing unmistakable value — both real and perceived.
This means elevating every aspect of the client experience, from initial consultation to closing, ensuring that clients understand and appreciate the unique value you provide.
Below, let’s look at a few case studies of businesses that took the discount route only to lose brand value and client loyalty. Then, we’ll look at what you can do now to avoid those pitfalls as the industry adapts to a post-commission settlement world.
Discount demise
Discounting, that seemingly sweet shortcut to competitiveness, actually opens a Pandora’s box of unintended consequences. It’s a path strewn with the hidden traps of brand devaluation and evaporating client loyalty.
This road, seductive in its promise of quick gains, often leads to the silent erosion of what matters most: your reputation and relationships in luxury real estate.
Robinson’s May
Consider the demise of Robinson’s May. The reputable department store, in a bid to lock horns with discount giants, started slashing prices, hoping to lure in the bargain hunters.
However, this strategy inadvertently stripped the brand of its market cache, transforming it from a cherished shopping destination to just another player in the discount game — a decision that cost it its very existence.
In the high-stakes world of real estate, this tale serves as a stark warning. Lowering the bar to compete on price alone can tarnish the sheen of exclusivity and allure that sets premium service apart.
Once the perception of value is compromised, it’s a steep climb to reclaim that lost status, often leading to a downward spiral reminiscent of Robinson’s May.
Pets.com
The failure of Pets.com stands as a stark emblem of the dangers of overreliance on discounts. Launched amid the dot-com bubble with much fanfare, the company heavily discounted its products in an attempt to capture market share.
However, this strategy eroded its margins and failed to foster a loyal customer base, leading to its infamous collapse.
This narrative warns the real estate professional against the temptation of undercutting prices to attract transient attention. In a domain where quality and trust are the cornerstones, short-term gains from discounts can sabotage long-term relationships and the reputation of your brand, turning potential lifelong clients into fleeting visitors.
Bed Bath & Beyond
The saga of Bed Bath & Beyond’s coupon strategy also serves as a cautionary tale about the seductive but perilous allure of discounts. The retailer’s iconic coupons, designed to draw people into stores, became a crutch that their customers wouldn’t shop without. This dependency eroded the brand’s profit margins and skewed customer perceptions, making it challenging to sell anything at full price.
JCPenny
The JCPenney “Fair and Square” pricing debacle highlights the dangers of trying to climb back after they went down the discount road. It teaches us that consistency in value, rather than price slashing, fosters client trust and loyalty.
Avoid the pitfalls
This is a moment for real estate professionals to reflect on their long-term brand and client relationship strategies. As the industry adapts to new commission models, maintaining a commitment to quality and value can set agents apart in a crowded market.
Here are eight tangible strategies and tactics to start implementing now to make your business bulletproof to future changes on how commissions are structured:
1. Master the buyer-broker agreement
Become an expert in explaining the buyer-broker agreement. Ensure you can articulate its benefits and protections so clients feel secure and informed from the start.
2. Adopt a client-centric approach
Transition from viewing interactions as transactions to treating everyone as a valued client. This involves understanding their unique needs, preferences, and motivations and creating a more personalized and engaged experience. Professionals build relationships that transcend transactions.
3. Craft a compelling buyer presentation
Develop a buyer presentation that stands out. Highlight your unique services, market knowledge and success stories. Use visuals and data to reinforce your expertise and the value you offer.
4. Polish your presentation scripts and dialogues
Refine your scripts and dialogues to ensure they are clear, persuasive and tailored to your market. Practice delivering them until you can do so effortlessly and with confidence.
5. Clarify compensation
Be prepared to explain your commission structure with elegance and transparency. Help clients understand how you get paid and the value you provide, reinforcing the worth of your services.
6. Optimize your workflows and follow-ups
Streamline your operational workflows and follow-up processes to ensure nothing falls through the cracks. Update your CRM tools to automate reminders and keep clients informed at every stage while reinforcing your value.
7. Emphasize your fiduciary duty
Make your fiduciary duty a key part of your value proposition. Explain how you put your clients’ interests above all else, reinforcing their confidence and trust in your professional integrity.
8. Maintain calm and professionalism
Adopt the stoic philosophy of focusing on what you can control and releasing worry about what you cannot. You can’t control the outcomes or aftermath of NAR’s settlement, the Department of Justice’s interest, or your brand’s or broker’s maneuvering, but you can control what you are going to do and how you respond to it.
In the current climate, resisting the urge to discount while instead investing in service, expertise, and the client experience is not just a strategy, it’s a declaration of value. It’s about showing clients that what they’re investing in is worth every penny — not because it’s less expensive, but because it’s unequivocally better.
Chris Pollinger, founder and managing partner of RE Luxe Leaders, is the profit whisperer to the elite in the business of luxury real estate. He is an advisor, national speaker, consultant and leadership coach.
