By Ross Wilson

In this second column in the series on the controversial topic of real estate fees, let’s begin with a few questions.

A prospective seller asks you to lower your usual professional fee. How do you handle this increasingly common tactic? Do you charge the same rate as you normally offer to pay a co-operating brokerage, say half of the total rate? If your seller agrees to also buy through you, do you charge a lower listing rate? What’s your fee for a “double-ender”? Do you promise to negotiate your fee at offer time? To reflect a lower rate, do you chop services, or offer various individually priced services from a menu? Do you even have a clear policy? Maybe you habitually surrender whenever the subject rears its ugly head? Or do you stick to your principles and refuse to budge?



If negotiating your fee is normal practice and/or you’re registered with a discount brokerage, that’s quite understandable because your practice is presumably structured accordingly. You anticipate providing incentives and hopefully enjoy sufficient volume and profitability to justify them. But full service agents, often with higher expenses and lower volume, must generate relatively higher commissions to reflect their business model. And until a dramatic industry shift occurs, for a business to stay solvent, it must remain this way.

Did you reduce any fees last year? How many times? A reduction, for example, of $2,000 for each of 10 transactions totals $20,000. If you’re an average producer, after expenses, that may represent a large portion of your net annual income. Did such generosity generate any referrals? If you had refused to reduce, would you have lost that client? Did they demand full service anyway?

Whenever I was asked to lower my usual fee, I’d normally respond by asking why they needed a reduction – and calmly awaited their reply. If unable or unwilling to respond, I’d ask if they were under financial duress and desperately needed my charity. If they denied being needy (usually the case), I respectfully refused and moved on. But if they persisted, I’d ask why they contacted me. If they said because they trust me, I’d ask what that trust was worth. Often, this would nip the problem in the bud.

Rather than automatically capitulate to a prospective seller’s demand, which is obviously the easiest thing to do, defend yourself by justifying your fee. Start by differentiating between your actual fee and that of the buyer agent. You may have to explain that you don’t receive the entire commission, that your company takes its share and also pays the co-operating brokerage. Offering an attractive buyer brokerage commission is just as important as establishing a realistic asking price. The list price is designed to attract buyers and the posted commission rate to entice their agents. Though such unethical practice is not officially condoned, when selecting properties to show a buyer client, it’s easy to inadvertently skip a listing offering a non-competitive co-operating brokerage fee.

Once your would-be seller sees the logic, you’ll no longer have to justify the full rate – only half. If, however, they still balk at your share, ask why they’d even consider paying you –  who will have contractually undertaken to be legally and ethically bound to protect their interests (and spend your money and your time promoting their property) – a fee less than that being offered to the buyer’s agent whose intent is the exact opposite?

Ask how the seller would feel if forced to face aggressive buyer agents without your strong representation. What’s that assurance worth to them? Further, why would they want to hire a weak agent who would easily yield to their demand for a lower fee, and then expect that same agent to behave any differently under argumentative assault from a buyer’s representative? If you so readily surrender during the listing presentation, what will happen to the ultimate sale price when the rubber really hits the road and you’re negotiating with an aggressive, skilled buyer agent? Cave for one – cave for all.

In the next column, I’ll discuss the topic of risk verses reward.

  • Andrew Crook

    Good post Ross, I think holding true to your business model and value offer is critical for any professional.

    State your value, believe in your product and build a strong lead generation system so you have lots of irons in the fire. When you have a seller prospect that is only fixated on paying the least amount possible instead of finding the best value for money spent you can smile and walk away knowing you are a true professional (and have lots of other opportunities to work with people that value your services).

    I believe that making the CB take the hit while the LA takes their usual fee is counter productive. CBs bring the majority of buyers and in my opinion (and experience), it’s a lot more effort (and time) to be a good buyer’s agent then it is to be a good listing agent.

    • Alan M.

      Andrew, regarding your following statement:

      “CBs bring the majority of buyers and in my opinion (and experience), it’s a lot more effort (and time) to be a good buyer’s agent then it is to be a good listing agent.”

      Andrew, effort and time are meaningless without expertise. A listing REALTOR and a selling REALTOR, ideally will have the same ability to ascertain the value of a property whether it is their listing, or a property that they are selling — as the cooperating agent. A listing REALTOR should be an excellent marketer — unless he/ she expects the MLS to be all that is required in that regard. A Buyer’s Agent (REALTOR) does not need to be an excellent marketer or a marketer, at all, really!

      Andrew, the attitude that you’ve expressed in the paragraph that I’ve quoted, fits your business model — as one would expect, but your attitude is beyond reason logically, for someone who strives to be a professional.

      Andrew, by the time: a property is successfully listed, and the lock box is installed, marketing material is dropped off, and replenished as need be, and open houses are conducted (some discount brokers don’t do open houses, of course), a good listing REALTOR will have made as many trips to a Seller’s home as a Buyer’s REALTOR might — on their side of the process! Andrew, the real question is: what came first — your attitude and perspective, or your business model?

      • Andrew Crook

        Alan, your comments to me have been nothing but obtuse and confrontational. I’m sorry but I’m not going to explain myself or my business to you any further. Check out Join.PC275.com if you want to learn more about our opportunity. Best of luck in your career Alan.

      • Alan – I believe Andrew was suggesting that in our current hot seller market conditions, wherein listings are oft sold in days, if not hours, listing agents don’t usually have to invest much of their time, aside from the obvious responsibilities. On the other hand, due to multiple failed bids, many buyer agents must invest far more time and effort on behalf of their clients.

        Having said this, I would never discount the skills required to be a great listing agent. Further, listers should be compensated, not only for the expertise involved in evaluating, preparing, advising and negotiating, but also for the risk assumed under an agency contract. I also delve into this subject in future columns.

        A final note here of a personal nature; may I suggest that you tone down the rhetoric a little. Most people don’t mind others expressing their contradictory views, but it is better to express those views with kindness and respect. Maybe, you’ll get further in this world, and be a happier person?

        • Scooter

          Well said Ross.

          • Thanks Scooter. I’m reputed to speak frankly, but respectfully.

    • We seem to be on the same page, Andrew.. Sadly, not everyone has the ability or the desire to recognize value, and focus primarily on price. How much can they get for the smallest cost? And since a large percentage of our membership generate few commissions, those smaller producers tend to bend their fees just to make that deal.

      I address this subject in more detail in future columns of this series. Stay tuned.

  • Carolyne L

    Disqus won’t let me reply, so posting here.

    Thanks, Ross
    Someone said the keys to the future open doors from the past.

    There are so many thousands of new people in the industry who, by nature, have no historical information to relate to and draw upon. And as I noted, so many homeowners haven’t moved in years.

    And they, too, have no straws to make bricks from. In particular in regard to representation and costs involved and how commissions are arrived at.

    And it has become the agents’ job to educate the public, with no help in that regard, from the mother ship’s advertising programs. Perhaps their professional, counselling advertising company believes what they themselves hear in the press, or have experienced personally, not knowing exactly what to expect. Just a thought.

    Respectfully
    Carolyne L 🍁

  • Carolyne L

    Near the end, I coincidentally addressed single independent agent incorporating, when writing this comment, relative as it appears in today’s team-incorporation article guide; it isn’t as easily done as some think. And requires massive and expensive preparation.

    Start understanding the “commission issue” by recalling that until the mid-90’s, the tear sheets and the MLS catalogue pages, in the most lower right hand corner of each listing you could see “the commission.”

    But don’t forget, that was the “full” commission, and board “rules” dictated the division of that amount; typically the division was not a brokerage decision. And typically the division was 50/50 and invoices were issued by the brokerage bringing the APS, to the listing brokerage.

    So, suddenly it seemed almost overnight everything changed. Typically the lower right hand corner now suddenly spoke of the commission, still, yes. But the amount now showed, as registered on the MLS listing, in many cases, only 1$ (one-dollar), or at best a number below what had become the standard typical division of the then typical commission (no longer permitted to use the term typical as that would appear to endorse price fixing), previously shown as the whole of 6 pts, with a presumptive 3%, representing the board rules half division of a mostly 6 pts. Agents never had to concern themselves about deciding which house to show to their prospective buyers, relative to commissions. The subject simply wasn’t on the radar.

    Where was the public when all this new system talk was falling into place? The world was scattered with historical years of printouts of MLS catalogue pages and tear sheets (often given out to the public as catalogue photocopy pages), having previously shown the “full” commission ONLY, now showing ONLY the portion of the commission being offered “to the co-op brokerage” NOT the full commission, any longer.

    And sellers now deemed that 1$ and or, 2 pts, 2.5 pts or whatever showed in the commission field, as the FULL commission, not a “portion.” They simply didn’t know that new mandatory rules were in play.

    Most people are creatures of habit, and graphical in nature. I am a really bad example because when computer program icons change colour, position on a screen, or even a fixed directive change, I fight panic. I am definitely a creature of habit, right down to where to locate items, such innocuous things as scissors, or paperclips. I want them always to be in the same place at all times, so I could find them in the dark, or with my eyes closed.

    And I expect there were/are many out there in the public, not having done real estate business in the in-between, who think that the bottom right hand corner indicates “full commission,” still, and thousands of homeowners have not yet participated in a buyer brokerage transaction.

    Now whose fault is it that the public still does not know about such things? TWENTY years after the fact? After all these years wouldn’t one perhaps wonder why CREA (the industry mother ship) has not produced a boatload of buyer agency ads or actual training for the public, specifically, for the real estate law firms, and last but certainly not least, for the press who insists on declaring that only “sellers” pay the commission, creating misrepresentation by their comments and articles, either intentionally or out of genuine ignorance. After all, they probably checked their newsworthy source, their own agent perhaps who sadly didn’t know much more than the broadcaster did, perpetuating the world of the unknown in regards to commissions and in particular, buyer brokerage and how it relates to the figure that appears in most MLS listings in the bottom right hand corner.

    And for the first time the payout offered to the brokerage bringing the APS was referred to as a “co-op” fee. (Lots of work for the printing department because ALL new forms had to be generated.) The forms cost each brokerage office money, and the offices bought forms by the gross. All trashed. And all forms were printed in triplicate on carbonless paper.

    But, guess what? No one told the public that the “co-op” amount now showing on the bottom most right hand corner, meant ONLY the portion of commission being offered (by the “seller”) to the agency successfully producing a buyer. NOTE: It is vital to note that the listing agent “does not decide” how much commission is offered to the co-op brokerage! The seller decides. The sales rep is not party to the listing contract. Period. He is only the advisor.

    Granted, with the help of the seller’s fiduciary whose job it is: to EDUCATE the public (Mr. and/or Mrs. Seller). Courses galore never attempted to educate “the public” in general, real estate law offices, and especially even the press, as to the new process within the MLS system, called buyer brokerage. As at the mid-90’s.

    We have spent the past TWENTY YEARS beating on this new system, often to no avail. The root cause of discussion is because no one addressed education from this perspective, least of all to/for the sellers who everywhere they looked saw the commission printed on live current paperwork as suddenly being only half, or less, what the public, while doing real estate business, had seen forever as the full amount of commission; they now thought these half-size or less commission amounts actually still represented the “whole commission” amount. They didn’t even know what the term “co-op” meant. Lots of explaining to do, and each listing presented agents with that opportunity at each new listing contract. Over and over again. Having to spend perhaps an inordinate amount of listing presentation time discussing commission: who would be paid how much. And under exactly what premise of understanding.

    And whose fault was that? A whole new process not just hoisted upon the industry, but at least equally important, hoisted upon the literally unarmed, unknowing, public, and putting the job of exposing and explaining the new system mostly into the hands and care of the listing agents; part of their job description, (some never even having taken courses or attending office meetings, themselves).

    If agents themselves were to survive the onslaught of new paperwork, forms, rules, and guidelines meant that suddenly it was the listing agent’s job definition to educate – one seller at a time, day in and day out. And then try to unravel a buyer’s quandary.

    For the past twenty years, sadly when many agents themselves still do not understand even, fiduciary duty, mandatory procedures in regard to buyer brokerage, that has nearly caused the complete unravelling of the real estate industry as it was previously known.

    All this initially brought about by the Sarbanes-Oxley situation with our industry parallels south of the 49th, with the onslaught attacks of our own Competition Act operators who didn’t seem to have a full grip on how our unusual industry operates, themselves, yet, at that point in time.

    It was new “turf” for everyone. Everyone who for years had simply followed board directions regarding how much commission was permitted to be charged and who dictated commission division.

    It will prove really interesting over the next few years if salespeople will be permitted under (changed) law, to register as (real) independents, having thrust upon themselves the onus currently borne by their associated, affiliated brokerage. As is often typical, to wit: the NFLD CREA decision in recent years that brought the industry to its knees, has anyone thought through the full potential burden they are buying into, before final reading in Ontario, at Queens Park? Not just relative to commissions?

    Carolyne L 🍁

    • Thanks, Carolyn, for your comments once again. The old days are certainly long behind us and likely never to return. Our former business model is certainly broken, thanks to uninvited intervention and meddling by our illustrious government. Maybe with the changes in our membership over the years, it had become necessary for the “police” to protect the public from a growing body of unethical and/or unscrupulous sales people; maybe not. Or maybe it was simply a time for the business to morph into another model. Nevertheless, we must work with what we have – or make our final grand exit stage left.