CHEAPER DOESN’T ALWAYS MEAN better when it comes to selecting a real estate agent, but convincing sellers of that can be difficult. High-profile real estate coach and trainer Josh Phegan explains how to determine your worth and then how to get it.
YOU KNOW the market.
Your number of sales is on the rise.
So are the prices you’re selling them for.
You’ve delivered a solid listing presentation to your next potential vendor.
And then – silence. Silence.
You start to feel a bit uneasy; your stomach does flip-flops and you know the question is coming.
That dreaded question.
‘How much is your fee?’
You take a deep breath, quickly say ‘2 per cent’ and mentally prepare to defend your rate.
It’s a situation most, if not all, real estate agents can relate to. Defending your fee is something every real estate agent will have to do at least once, if not many times, in their career.
When you consider selling their home is likely to be the biggest financial transaction in a vendor’s life, it makes sense that they query a real estate agent’s fee.
Vendors want their home sold as quickly as possible for the highest price and the lowest cost to themselves. What they often fail to realise is that obtaining their first two desires often depends on how much they spend on an agent.
So how do you know what you’re worth and, more importantly, how do you convince vendors you’re worth every cent?
In setting your fee you first need to analyse your market and work out the size of the pie from which you’ll be taking a bite.
In a large market with oodles of properties being bought and sold and a higher average sale price, you can elect to be a volume agent with a lower fee. What you lose in having a lower fee you can quickly make up by the sheer volume of properties you sell.
In a smaller market with fewer transactions and a lower average sale price you need to set a higher fee.
When you set your fee you need to focus on your strengths and what sets you apart from other agents. Ask yourself ‘what do I bring to the table to justify my fee?’ If you don’t stand out and stick in a vendor’s mind for the qualities you bring to the sale, they will line you up against other agents and pick the winner based on price.
Some people see good value in a Kia, while others prefer a Ferrari. You’ve got to show why the Ferrari is going to cross the finish line first every time.
Vendors will be happier to pay more if you solve an important issue for them. This is where using the SPACER acronym can make you the pick of the crop.
Safety Vendors hate risk. If you can show you’re a safer option than your competition then you’re worth more.
Performance Vendors hate not selling their property, or underselling it. If you show you have a strong track record for performing at the highest level then you’re worth more.
Appearance Vendors may like to sell off-market or be seen to be selling with a prestige brand.
Convenience Show vendors how you can ease the pressure on them. This might be a shorter selling period or selling without an open home inspection. Pitch to their desires.
Economy Make sure your best attributes stand out. In the absence of difference, vendors will shop on price.
Reliability Vendors need to know the agent they engage will deliver the service they deserve. Show them you’re dedicated.
If you deliver your message well and pitch to a vendors’ deepest needs and desires, the fee shouldn’t be an issue. But if they can’t see what makes you different from and better than other agents, the issue of how much you charge will be raised frequently.
I suggest you learn to present your fee at the end of your listing presentation and gloss straight over it.
Rather than starting at the fee you want and leaving no room for negotiation, use a pivot pricing method where you start at a higher fee and give a ‘discount’ to the fee you’re prepared to work for.
If the worst comes to worst and you must defend your fee, there are four steps to help vendors understand your worth.
Fee approximation. Explain that agents in the area charge between 3 per cent and 1.5 per cent and while you’re not the most expensive or the cheapest, you are the best value.
Percentage difference. Put the figures into real terms your vendor understands. A .5 per cent discount on a 2 per cent fee is actually a 25 per cent cut in your fee. Ask your vendor if they would be happy to take 25 per cent of their asking price. If they wouldn’t accept that why should you have to?
Dollar difference. If the difference between your fee and that of another agent is $5,000, drop your fee and add the $5,000 to the reserve or asking price. If you’re as good as you say you are you will obtain the higher price.
Performance. Match the other agent’s fee and then have a performance clause that gives you 10 cents for every dollar you obtain over an agreed price.