Fee Defence

Setting your fee is one of your most basic decisions for your business, and is often the hardest. This task is complicated further when your competition includes fee discounters. Clients will often ask you why you charge more than another agent they have spoken with. You need to be clear about why you charge the fee you do, and what your services are truly worth.

You justify a higher fee than other agents by providing a level of service that is demonstrably better. If the customer can’t see a difference between you and your competition then they won’t be willing to pay you more. But if you can prove you deliver the higher value then you can command a higher fee. First you have to know what you are worth and believe in your own worth at that price.

Many agents set their fees according to an evaluation process they learned when they started out. The degree of success your principal maintained informs your own expectations now. For example, if the principal you learned from was a successful agent you probably learned to set your fee according to what you are worth and stand by it. However, if the agent you learned from was a poor performer you may have learned to charge less or lose business. Your own success rate also sets your ongoing fee standard.

There are two mindsets that drive your expectations. Scarcity mode is defined by insecurity arising from insufficient backup funds as well as diminished confidence from failed transactions, lack of sales and minimal listings. When you are in scarcity mode you feel desperate so you lower your fee hoping to secure business. What you don’t realize is that your lowered fee actually devalues you in the eyes of your customer, and you are even less likely to gain their business.

Abundance mode is assured by a sense of security based upon financial worth as well as a demonstrated ability to complete transactions, negotiate sales and list high numbers of properties consistently. In abundance mode your self confidence is high, and the idea of lowering your fee doesn’t make sense because you know you deliver a level of service that warrants the fee you have set.

When Australia put the D Regulation in place and lifted fee limitations, many agencies began to compete primarily on price. However, competing on price alone instead of quality of service effectively lowers standards of performance and results for everyone. You simply cannot realize higher earnings by lowering your fees.

The way to command a higher fee percentage is to provide value to customers. It may seem that service levels in real estate service are too intangible to define, but it actually is not difficult to prove your worth to your customers. Using a tactical approach in your listing presentations, you can readily produce visuals and case studies that quantify your services and success rate in relation to your competition.

You must mentally put yourself in abundance mode in order to effectively negotiate fees. Set realistic expectations for your clients using the fee approximation close. Start by defining the average range of fees in the current marketplace, show your position within that range of fees and put a dollar amount on your proposal relative to their estimated sales price. Next, bring up any objections they might have before they do. Explain how a discounted fee actually lowers their sale price and document the success rate your agency has proven in realizing the best possible prices in property sales. You thus defend your fee by demonstrating the overall value of the service you offer in relation to other agencies.

Your goal is to learn how to become an effective negotiator by delivering your listing presentation from a place of absolute certainty of success. Achieve this and you will consistently command and receive the fee that you’re worth.

I hope you’ve enjoyed today’s Coaching Tip, and I look forward to seeing you here again next week.