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Real Estate Fight Club

5
Feb 2020

Episode 19: Should Agents Cap Their Commission on Higher Priced Homes?

February 5, 2020

In Episode 19 of the Toe-2-Toe Podcast, hosts Jenn Murtland and Monica Weakley duke it out over whether agents should cap their commissions on higher priced homes. Hear why Jenn feels the majority of agents are overpaid and why she sees reasons to cap your commission in some instances. Then hear why Monica feels capping commissions is detrimental to the industry at large. This episode will help you think about how you run your business and the value of your personal brand. 

Episode Highlights: 

  • Should agents cap their commission on higher priced homes?
  • Jenn says yes. She feels that the majority of agents are overpaid.
  • Jenn feels that the barrier to entry to their business is very low. There are many great agents out there, but Jenn thinks they're in the minority.
  • The majority of agents don’t have a real marketing plan and don’t know how much  it costs to advertise a listing.
  • It is ok to adjust your commission based on your marketing plan and also based on the home.
  • Jenn’s marketing plan doesn’t change drastically from home to home.
  • Your judgment should be based on actual numbers of what you spend with a profit margin that makes sense.
  • Monica thinks that when we start capping out commissions, we are in essence saying to the public that agents are not worth the 3%.
  • Jenn argues that agents charge whatever they want anyway.
  • Monica sees capping commission or reducing commission as a problem because it encourages the seller to go find the lowest bid.
  • If your main goal is to elevate the level of service, Monica feels this strategy doesn't align with that goal.
  • She believes that capping commission harms the industry as a whole.
  • Monica feels we need to teach agents how to bring value and how not to sell themselves short.
  • Jenn agrees when you're talking about an average priced home. When you get into high luxury, she's not doing something different for an $800,000 home than she is for a one million dollar home.
  • Jenn wonders if it makes sense for the seller to pay more if they're not really getting more.
  • Jenn feels there should also be a minimum. There is a cost to list the home that agents incur.
  • Monica also does a minimum and calls it the best standard she ever put in her business. She will not sell a house for less than $3k.
  • There's a cost to doing business as a business owner and there's also something that makes sense for the customer.
  • If you're an agent that brings a brand, then that might be something a seller wants to pay for.
  • Your brand isn't something that's itemized out in a P&L. It's an intangible good.
  • Monica wonders about a cafeteria-style approach to listing a house.
  • Jenn is also not going to take a listing where she's doing it for free.
  • Monica feels that if we all had confidence then we wouldn't have these hesitations on price.
  • Agents polled on this subject felt heated.
  • One agent said he never caps his commission but offers tiered options.
  • Monica has never capped commission based on price.
  • They're paying for her expertise and her strategy. You can't put a line item on that.
  • Jenn thinks you should look at your business and profit margins and look at what it costs you to be in business. Then decide what is the minimum you would charge and what is the maximum.

3 Key Points:

  1. Some agents cap their commission on higher priced homes because they feel they are not actually providing more service past a certain price point.
  2. Some agents feel that you should never cap commission because it motivates sellers to find whomever is offering the lowest price.
  3. Your brand and your expertise are intangible goods that should bring you confidence that you are worth the commission price. 

Resources Mentioned: