Some people relish the opportunity to wipe the slate clean in the new fiscal year, while others are demoralised by the idea of going back to zero after a frantic dash to ensure a strong finish to the financial year that was.
What has not changed since July 1, are the market conditions.
It is still complex out there, with conflicting factors creating a minefield to navigate.
Prices are up in many cities, with some even seeing new peaks.
Buyers are out in force and the RBA decision to pause rate rises this month may give house hunters extra confidence.
However, we are still seeing trepidation from potential sellers and this is reflected in lower than desired new listing numbers.
With stock turning over more freely than it did several months ago, agents are finding themselves scrambling for listings and this is creating competitive behaviour, which doesn’t always play out in our favour.
We’ve explored the damaging effects of having a scarcity mindset, that being when there’s a perceived lack of resources.
It can cause an over-fixation with that factor and create a ‘must win at any cost’ type of approach.
Our reptilian brain engages, and in an effort to protect us from pain or failure, we start overreacting to the threat of losing listings and start cutting potential risks.
This turns up time and time again in agents sacrificing their professional fee.
Let me explain how to understand if your fee is really the problem and how to demonstrate your value proposition to protect your commission.
Step one: understand what the sellers are really saying…. or not saying
Often vendors will find it confronting to give feedback to an unsuccessful pitching agent, with some opting to give no feedback, leaving the agent to be notified by the dreaded listing alert.
Alternatively, agents will frequently be told that they were unsuccessful due to their fee being too high.
However, often this isn’t actually the case.
Consider this, if it was really just a matter of who had the cheapest fee, but all else was equal, why weren’t you given the option to negotiate your fee?
It’s much easier for a vendor to advise you weren’t chosen over dollars and cents rather than the painful truth, which may be that you actually weren’t as good as the other agents at the listing table. Ouch.
Conversely, when they do contact you to advise of a better deal, what they are usually telling you is that they actually DO want to work with you and they’re just trying to get the best deal for themselves.
It’s important to understand that when you get this type of call, you are generally in the box seat and you need to act with control and confidence.
Step two: always negotiate in person
If you are presented with this scenario, it’s important that you manage the process in person (where possible, of course).
You need to be able to ultimately make the decision whether you walk from the listing or choose to negotiate your fee.
If you’re on the phone, you relinquish that power and weaken your position.
If you receive a call similar to what has been described above, create an opportunity to get face to face ASAP.
Step three: once you’re face to face with the sellers, get them to confirm that you are their agent of choice.
This can feel quite difficult, but there are ways to do it.
Language like, “I understand you’ve had some other agents out and you are weighing up your options, however, if we were all free, which agent would you choose?”
In most cases, by virtue of the fact that they have A) called you and B) allowed you back into the property, it’s you.
But it’s important that you get that confirmation from them.
Step four: defend your fee
Now that they have admitted you are their first choice, you can insert dialogue, case studies and arguments as to why you’re worth your fee.
They have obviously identified your strengths similarly to previous clients and reassure them that you will provide them with a premium service and result that is commensurate with the fee you’re requesting.
To test whether you have won at this point, simply insert a closing question like, “Do you feel comfortable to move forward?” or “Would you like me to move onto the paperwork so I can get working for you?”
It’s important to try this as there will be a percentage of sellers who will be compelled, understand that you are a better negotiator, respect your stance and want to get to work.
Those who still have some dissatisfaction will press on. The important thing is that you attempt to close and move forward.
Step five: navigate the pushback
If the vendor pushes back and restates their desire for a better fee you have two choices – you can walk away, or you can begin negotiating.
If you opt for negotiation, there are some rules to follow here.
Many agents make similar misjudgements at this part of the process, or even earlier when confronted with a competitor’s lower fee.
Most agents do one of three things when told they are being compared to a lower fee.
Firstly, they feel compelled to beat their competitors’ fee to win.
So where they may have quoted 2.2 per cent and their competitor comes in at 1.8 per cent, they go below that 1.8 per cent in order to absolutely secure the listing.
The second typical behaviour is that they opt to match the competitors fee.
Lastly, there is a form of negotiation where an agent may offer a half-way option, for example, “How about if I did it for 2 per cent?”
The crazy part about this is that, in a way, they aren’t actually negotiating with the vendor here, they’re actually negotiating with the irrelevant party at this stage – the other agent.
Understand what the vendor is saying.
They like you more than the other agent, but are trying to improve their financial position.
They may not actually be asking you to match the other agent’s fee and certainly not beat it as they think you are better = worth more.
Step six: begin negotiation
It’s important to create distinction between your fee and your competitors’ fee by stating that you cannot work for what they have offered.
You can support this with dialogue along the lines of, “You obviously see greater value in me than my competitor, which is why we are having this conversation”.
Then it’s important to ask the sellers what they think is a fair fee for your service.
In many cases agents are pleasantly surprised that vendors will willingly offer them a higher price than they would have expected.
This price then begins your starting point for negotiation.
So for example, you offered 2.2 per cent, your competitor offered 1.8 per cent and your vendor has suggested 2 per cent may be a fair price.
At this point you move in 0.1 per cent increments until you reach an agreement.
Step seven: acknowledge the discomfort
It’s important that you don’t shy away from the challenge of following a process like detailed above.
This is an opportunity for you to demonstrate your skills as a negotiator.
You can use dialogue such as, “I know this is uncomfortable, but if I can’t defend my own pay, how do you expect me to defend the absolute premium price for your home?”
As with every new process, practice makes perfect.
Try this on your colleagues or family members to get it right.
It’s also difficult to defend your professional fee if you ultimately don’t believe in yourself or the strength of your presentation, so take the time to review your value offering regularly.