Commission - Should You Negotiate Yours?

Today's U.S. Department of Commerce report that homes sales plunged to their lowest level in 16½ years and the year-over-year nationwide price decline of 13.3 (March 2008 vs. March 2007) is the largest since July, 1970 will no doubt continue to fan the flames of panic for both consumers and real estate professionals alike.

It is in this climate of sluggish sales combined with heightened competition amongst agents that I seem to find myself at philosophical odds with some of my peers. Yesterday, I presented a comparative market analysis to a prospective seller. Aware I was competing for her business, I had no idea it was against six to seven other agents. I give her huge credit for doing diligence, leaving no stone unturned in her search for the best fit. A referral from a past client, when we first spoke she was very up front in telling me she intended to negotiate commission. "That is fine." I replied. I prepared a comprehensive analysis. As expected, the conversation turned to commission during my presentation. I explained that I charge a certain fixed percentage rate for my full service and always have from day one. I added that, were I to deviate from this business strategy, I would have to do so for all my clients, both a short and long term option I consider impractical and counter to my personal ethics.  I added that my track record, level of licensing, experience and other qualifications continue to set me apart from my competitors.

What surprised me most about the conversation was not that we had it, rather that I am the only agent who said "no" to negotiating compensation, one of at least seven. I am either wholly intractable and missing the boat on valuable business, or am keeping an eye to the long game, aware there are ample opportunities available for those of us prepared to articulate value, stand firm on price and deliver one hundred and ten percent on the effort. Commission, of course, is always negotiable. On an individual office or agent basis, however, it need not be. There are those who will make the case that being flexible on price offers more opportunity leading to increased volume. This may be true for some. I, on the other hand, will argue for quality over quantity.

Not long ago during a local broker tour, I ran into a colleague who was holding open his new listing. Though not in the same office, he is licensed with the same company. We have a friendly relationship, usually tinged with biting humor, the kind of banter in which friendly competitors often engage. When I asked how he was doing to which he responded, "Oh, you know, working twice as hard for half as much", I didn't think it too untoward to reply with a wink and a nod, "Well, if you didn't always cut your commission, you wouldn't have to".  Humor aside, it does speak to a point.

There are as many schools of thought on the subject as agents, buyers and sellers. Of course, anti-trust laws are not to be ignored either. And, indeed, for every client, there is an agent whose philosophy and business approach can be matched. I'm not going to make an argument one way or another. I've made my choice and stand by it. I certainly have not been harmed by doing so. If I lose out on yesterday's competition, so be it. There will be more. One thing I may certain of, however. I didn't compromise a core business principal in an effort to throw myself into the melee.