Negotiating fees with clients is a necessary part of your business. It is much easier to set your fees and justify them if you are confident of your worth. Ask yourself what you are doing relative to your competition that sets you apart as a client’s best choice. What are you worth in your marketplace, and why?
You should know how your competitors set their fees, how market regions differ, and how much some of your competition may be undercutting you. How is it that some agents may charge as much as 4% on a sale, while others charge as little as 1%? Where should your own professional worth be set on that kind of scale? It may seem like the difference between, say, 1% and 2% is small – but in reality 1% is half of 2%. That’s a 50% difference, not just 1%. Your client would not agree to sell their home at 50% less than it is worth – why would you agree to accept half of the fee you should command?
First, understand that the less time spent negotiating fees, the less of an issue it has to be and the more quickly you can move forward with the sale of the property. Make your case for your fees quickly and convincingly.
You know what you are worth, but if your client can’t see the difference between what you and your competition offer, then they won’t want to pay you more than they could pay elsewhere. So how do you demonstrate your value to your client?
Before even mentioning your rates you should be able to demonstrate why, if all fees were the same, your client should choose you over any competitor. What would make you the better choice if money was removed from the picture? One example would be to demonstrate your access to buyers – as in, how many potential buyers you can produce to see the property – by documenting recent open for inspections, total number of buyers you meet there, and how many of those buyers you can send through the client’s property even before marketing begins.
Keep in mind that clients are driven by two simple concepts: Convenience and Safety. How quickly and easily would they like to see their property sold, in minimal time and at a great price? And can they trust you to handle their sale capably? This is where your track record comes in, because it is solid evidence of what you have done successfully over time – your sales percentages, list and sale prices, days on market, marketing costs, your auction bidding record, etc. You can also compare your records with your competitor’s records to demonstrate how much time and money you will actually save your client as opposed to what they would likely lose by choosing a discounted fee elsewhere.
Make sure you have solid current tactical documentation, because that could make a 25% to 50% difference in the fee level you can justifiably command. It could mean an extra quarter of a million dollars a year for learning how to successfully negotiate for the fee level you deserve.
I hope you’ve enjoyed today’s Coaching Tip. If you have ideas for other topics you’d like to see as a Coaching Tip, please feel free to email me: josh@joshphegan.com.au.