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Note: This article is part of a special supplement to REALTOR® Magazine, “What’s Ahead for You?” published in April 2024.
Over the past three decades, I’ve witnessed remarkable transformations within the real estate industry. My journey began when I purchased my first house at the age of 22, back in 1990. It was a For Sale by Owner transaction, and when the appraisal didn’t support the price, I found myself negotiating the seller down. It sparked my curiosity about the intricacies of property transactions.
When I sold the house a few years later, I realized that my natural interest in real estate and drive made me a good candidate for real estate sales. I also realized the tremendous importance of the work. What we do matters. In 1995, just before the concept of buyer brokerage gained prominence in my Spokane, Wash., market, I obtained my license.
Today, approximately 80% of my time is devoted to residential real estate, and 20% revolves around commercial properties. This blend allows me to see both sides of the coin.
When I saw the details of the pending settlement that NAR signed in March, I recognized that it would result in even more communication with buyers and sellers about how compensation works. I’m fine with that; I love the ask. Throughout my career, my guiding principle has been to tailor commission structures based on the specific context and client needs. Let me share a recent experience that exemplifies this approach.
A couple who had purchased a property from sellers I represented reached out to me. They were buying a property from a friend and sought basic transaction assistance. I agreed to charge a modest fee to help the two parties navigate the transaction. Part of the negotiation was that the seller would pay my fee, and she agreed. In the end, I not only provided full service on the purchase but also secured the listing for the buyers’ house. During the appraisal process, the seller said she believed I had gone above and beyond, even suggesting additional compensation. My response was simple: Our agreement stood. The result? A seamless transaction that left both parties content.
My business thrives on repeat customers and referrals. I’ve come to realize that success isn’t solely about maximizing profit on every deal; it’s about playing the long game. As I continue my journey in real estate, I find joy in selling properties to the grandchildren of my original clients—the legacy of trust and service echoing through generations.
Be Prepared to Talk Compensation
Compensation discussions require a blend of transparency, confidence and adaptability. Here are some key points to keep in mind.
Understand your value. The first step is to quantify your worth. This involves understanding the market and your unique skills and making a fair calculation of the time you put into a buyer or seller transaction. Your experience, local knowledge and negotiation skills are part of this value proposition.
Have real-life examples. Successful compensation discussions often involve education. Use examples to explain how your services can save clients time and money in the long run. Highlight your track record of successfully closing transactions on homes that match clients’ needs.
Explain the value of cooperative compensation. When discussing cooperative compensation with sellers, describe the benefits. Explain how cooperating with other brokers, which can now occur only off the MLS under the settlement, can expand the pool of potential buyers and potentially lead to quicker sales.
Take lessons from commercial real estate. Residential agents can learn from commercial practices, where buyer and tenant representation is often compensated through a negotiated fee. This approach emphasizes the agent’s role in due diligence and the complex negotiation process.
Play the long game. Flexibility in compensation discussions can pave the way for long-term relationships. By showing clients that you’re willing to work within their budget while also standing firm on your value, you build trust and respect.
Know when to walk away. If a client insists on a commission or fee that doesn’t reflect the effort required, and you don’t see long-term value in compromise, it may be more prudent to say no and invest your time in clients who appreciate your value.
Communicate clearly and often. This helps build trust and avoid misunderstandings, keeps everyone informed about current market conditions, manages expectations and solves problems.
Consider risk. When you charge an hourly fee, the risk is primarily on the consumer. On the other hand, when you work for a percentage commission, the risk shifts to you. In either case, it’s important to have clear agreements upfront about fees and expectations.
Continually strive for transparency, fairness and open communication to ensure that all parties feel valued and respected.
Not All Agents Are Created Equal
The real estate industry attracts a diverse range of individuals. Some agents may struggle to articulate their value, especially if they lack experience or confidence or don’t fully recognize their worth. Your ability to negotiate your compensation reflects your skill when negotiating real estate deals. Don’t be afraid to communicate your worth clearly to prospective clients. But recognize that buyers and sellers have a right to push back, and know that inflexibility in today’s environment may not be your best response.
