Profile picture for SoCal Engr

Why all the huff-and-puff when a consumer mentions "commission rebates"?

Ok, I get it. Irrespective of how much you "are in the business because I love to help people", it's your livelihood so "commission rebates" may hit too close to home. But, really?

Ok, I get it. Irrespective of how much you "are in the business because I love to help people", it's your livelihood. The topic of "commission rebates" may hit too close to home. But, really?

Pushback #1 - "You get what you pay for."
Not really. Diligent consumers get what they shop/negotiate for. Does every consumer need every service a REA provides? Nope. And, not all REAs perform at the same level of competence. Shouldn't a diligent consumer determine what services they need, and what value those services have to them?

Pushback #2 - You wouldn't ask a doctor to discount their services?
Of course not, most consumers use insurance vice paying directly - and the insurance companies negotiate with the doctors. Stolen from another post, but I've seen the insurance statements (the ones showing what the doctor charged, what the insurance paid, and what the insured is liable for?). Also, doctors charge based on the service provided. They don't attempt to charge a single flat rate for all the potential services that they could/might provide.



  • November 23 2012 - US
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Answers (9)

I think personally the one that I hear that doesn't make sense to me is when a buyer says, I'll only work with the listing agent.

The listing agent works for the side that you want them to negotiate against on your behalf????  If they do cut a deal, it is with the seller, not the buyer, and any agent worth his salt is not going to cut any deals.  Now they have twice the responsibility!

Carry on, good day....
  • November 24 2012
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There are always people that feel that they deserve a deal, or that they can do just as good of a job as the professionals.  Truth be told, some can.  Usually those that can also understand the time and expertise that it takes to ensure the transaction goes properly, so they don't do it themselves.  They have more important things to do.

Case in point (not to the same level but work with me here) I got new brakes today, sure I could have done them myself, I actually do know how to, BUT it was worth more to me to come spend the hour and a half working than it was to get down and do them myself.  I glady paid the $241 and went on my way 2.5 hours later.  I understood that my time is worth money.

  • November 24 2012
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No need to wonder, SoCal. People prefer to get paid more than less. It's really as simple as that. We don't want to get paid less on every deal, we'd prefer to get paid more. If somebody thinks that they can get more business by discounting, they will do it (we lose money on every sale, but we make it up in volume!)

It is so much easier to sell price than value, yet most people want good value for their price.

It is true that real estate agents have a near-impossible time explaining their value to the general public. Real estate is an unusual field; comparisons to other transactions or professions are difficult to make.

I don't mind telling people that real estate brokerage fees are cheap in comparison to auction houses - a $200,000 piece from Christies comes with a 15-25% buyer's premium AND a 15-25% take from the seller's side!
  • November 24 2012
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Profile picture for SoCal Engr
"Most prospective "negotiators" don't have a clue about negotiating. What they do is ask for a commission reduction or rebate. That's not a negotiation, that's just asking for a discount."

At a certain level, I have to agree. Far too many Wal-Martians for my personal tastes. But, at a certain level, the service/product providers are just as guilty. Think of all the stores with the "we'll beat their price" guarantees. And, I've also had that same line with service provides (some in the RE industry).

Yet, we always deal with negotiation - even with folks who start from an unreasonable or unreasoned position. That doesn't mean that we cannot try to introduce some rational foundations for the discussion (although it also doesn't mean that the other person will start thinking rationally), vice making weak analogies and presenting poorly thought out arguments.

Personally, I have to wonder if part of the pushback from REAs is that (a) they really don't know what their specific services are worth, and (b) there is a fear that partitioning/pricing their services may be the slippery slope to a whole new way of doing business.
  • November 24 2012
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Referrals, eh?

Well, there is a new generation out there that is less likely to act on personal recommendations (referrals) and more likely to act on crowd-sourced reviews (Yelp!, Zillow, Trulia, et cetera). 

- aren't all commissions negotiable?

No, not really. Along with "you get what you pay for," the cliche of "everything's negotiable" is wrong-headed and misleading.

Most prospective "negotiators" don't have a clue about negotiating. What they do is ask for a commission reduction or rebate. That's not a negotiation, that's just asking for a discount.


  • November 24 2012
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Profile picture for wetdawgs
from the perspective of a professional in a different field:

#1 You get what you pay for
-   when I provide professional services, the services are not a package deal but can be selected upfront.  Clients know exactly which of a selection of options they are paying for.

#2 - You wouldn't ask a doctor to discount their services?  Why not?   The doctor (and other medical bills) are discounted to the insurance company after intense negotiation, so when paying cash it is prudent to ask the same question.   Without vision or dental coverage, I always ask for a discount for paying cash and have always received it.

Pushback #3 - Do you rebate your pay to your employer?   There are certainly years that our bonuses drop as low as 0% when the team hasn't achieved the full list of ambitious goals.  It isn't a rebate as it hadn't been paid yet, but it certainly is less pay. 
  • November 23 2012
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Profile picture for SoCal Engr
Personally, I wouldn't mind paying more than negotiated if the REA performed over-and-above my expectations. But, all the REAs say they'd rather have referrals. ;-)
  • November 23 2012
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Nice blog post, SoCal!

I wish we would stop saying, "you get what you pay for" - if only that were true!

In my view, I think that you can only HOPE to get what you pay for; but if you're paying less, you really should expect less rather than more.

The fact is, people prefer to pay less, and they're not shy about asking real estate brokers to take less money, even though they are not actively asking insurance agents or their stockbroker to rebate their commissions.

On the other hand, people prefer to be paid more, and I don't know why we should especially laud one group and criticize the other. Personally, I'd like to advocate that clients pay their agents more money than we're contracted for, the way they do in restaurants!

  • November 23 2012
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Profile picture for SoCal Engr

cont...

Pushback #3 - Do you rebate your pay to your employer?
Of course not, because the compensation for services provided has already been negotiated based on experience/skills. The newbie, junior, full-performance and senior level employees don't all command the same compensation. And, in business models where a customer pays for the services of these employees, the charge to the customer is similarly stratified. And, in those same business models, the competitiveness of the end-rates is based on the ability of the business to minimize overhead and control their margins. In other words, every business competes based on rates and history of expertise.

Last, but most important, aren't all commissions negotiable? If so, why the stress? The notion of buyers wanting to negotiate rebates is a natural extension of the move to a transaction model that includes "buyer agents". The seller is free to negotiate commissions as part of the listing agreement, so why shouldn't the buyer negotiate as well? Only problem is, in almost all traditional transactions the commissions are built into the listing agreement. So, the commission rebate is the vehicle left to buyers. Also, the commission rebate actually impacts the out-of-pocket dollars, so it's potentially a significant issue for buyers.

This is not to say that you have to, or should, rebate your commissions. However, less indignation when a consumer wants to negotiate would better serve your industry.

  • November 23 2012
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