PROTECTING YOUR INCOMEAug 14, 2017
A Floyd Wickman Team blog by Mike Pallin The client says, “Your fee is too high.” Also known as, “Will you cut your commission?” A variation on, “How much commission do you charge?” Even though those are four different sentences, essentially your client is saying, “You cost too much.”
Let’s take them one at a time. First, how do you answer, “Will you cut your commission?”
If you have ever heard Floyd teach this dialogue, you already know the answer, and it is, “No.”
Said with a smile on your face and a chuckle in your voice. Half the time, he will turn to her, or she will turn to him, and say, “Well, honey, it didn’t hurt to ask,” and that will put it to rest.
By the way, if they ask you to cut your commission, do you ever? Here’s Floyd’s answer. “I would sell someone’s house for free, if they needed it, and I have. But I never cut my commission just because they asked me to.”
A polite “No” works half the time. The other half of the time you need a back-up answer.
- If you think of it, you probably don’t want me to cut my commission, because if I’m so weak I can’t even protect my own income; how strong could I possibly be to help you protect your equity?
- If you knew for a fact that by discounting the commission you would actually net less than if you paid a normal commission, you would probably insist on paying a normal commission, wouldn’t you? For over 30 years, the National Association of Realtors has kept track of List Price to Sale Price ratio for standard commission sales and discounted commission sales. At a normal rate, homes have typically sold for 98% of list price. At a discounted rate, they sell for 93% of list price. By saving 1% on the fee, you are costing yourself 5% of your equity. Which is more important to you – how much commission you pay, or how much you net?
- If I said yes to 1% less now, that would be like I lied to you about my normal commission, and I don’t lie. I think that would be the worst way to start a business relationship, don’t you? Here’s what I’d rather see us do, as long as that 1% is so important to you. Let’s raise the price 1% and I’ll work a little bit harder, instead of starting off on anything other than the truth. Fair enough?
Or words to that effect, because the attempt to handle hesitations will get you further than any particular words you use. What does “the attempt to handle” mean? It means don’t start an argument. Ask questions instead. Make sure it’s the only issue. And show them something that illustrates, backs up or proves your point.
Let’s take the question, “How much commission do you charge?” The answer depends on when they ask. Up until they are sold on you and your company and the right price, the commission is irrelevant. Set it aside with a phrase like this, “I am willing to work for whatever commission you and I can agree on, and that will usually be determined by how much you want for your home, and how much time you can give me to get you that much. Let’s take things one step at a time. When can I see your home?”
If the question of commission comes up after they are sold on you and the right price, assume a normal or standard commission while doing your Estimate of Net.
And remember, commissions are negotiable both ways, up and down. Whenever they are asking you to go above and beyond, either to get a quick sale, or an above market price, or sell something for market value as-is, when as-is is not move-in condition, that gives you the right to ask for at least 1% more than usual.
Finally, let’s address what your client means when they say, “You cost too much.” If you are hearing this on a regular basis, the problem is not your fee, it's your presentation. You haven’t created enough value. To explain what creating value means, let me refer to a classic Floyd Wickman principle of selling.
Ask a list of prepared questions in a progressively gutsier order before you look at the house, before you put on your presentation and, especially, before you talk price. Ask. Listen. Take notes. Show them that you care about them. Empathize with their problems.
Your presentation should be designed to persuade and convince them that you have the best solutions to their problems, but you can’t solve problems they haven’t admitted.
The kind of problems you want them to acknowledge are the kind that will cost them money, time or lost opportunity if left unsolved. The textbook of selling (Spin Selling, by Neil Rackham) calls this problem stacking.
If all you promise to do is get their house sold, you actually do cost too much. (in their mind, getting their house sold just means finding a buyer, which looks ridiculously easy these days.) But if you are solving problems which would cost them more than you charge, you have created value.
You can do the right thing at the wrong time. If the question of your fee comes up before you need to handle it, set it aside. If it comes up after your presentation, take a deep breath, settle in and handle it.
If you like what you’ve read, this is just the tip of the iceberg. To find out more about The Floyd Wickman Program and the Wickman method of dialogue selling, go to www.floydwickman.com.
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