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Wednesday, November 11, 2009

Why Consumers Hate Real Estate Commissions

Michael Soon Lee by GRI Instructor Michael Soon Lee, MBA, CSP, CRS, GRI

Author: "111 Ways to Justify Your Commission" and "Black Belt Negotiating"

In my last posting I explained that brokers hate commission-based compensation because it subjects them to tremendous risks. They must spend money on listings that may not sell and their agents’ precious time on buyers who may never buy which, in this economy, could easily drive them out of business.

Consumers hate real estate commissions for two major reasons. First, they don't believe that we earn them. For some reason most home sellers believe that all we do to sell a house is put a sign on the lawn and a notice in the multiple listing service and the property magically sells and it also closes itself. On the other side of the transaction most homebuyers believe that all we do to earn our money is to drive them around, show a few houses and collect a check.

This is why I developed a list of over 100 things that I do to earn my money when working with home sellers and another list of over 100 activities I engage in to earn my money when working with home buyers. I went to this effort because our clients just don't realize how much work is involved behind the scenes in a real estate transaction.

The second reason consumers hate commissions is because they think we make too much money. Most have the impression that every agent gets six percent of every transaction they’re involved in. This is why I give every client a chart showing where every dollar of the commission goes and how high our expenses are.

As a result of my lists and charts my clients know that I earn every dollar I get and that I don't get as much as they used to think. I know it's not fair and no other profession has to justify their value to our clients but it's a fact of life that REALTORS® do. So I hope you'll take the time to explain to every one of your clients how you earn your money and why you don't make as much as they think.

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