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With the Aug. 17 deadline approaching to implement practice changes in our business, the message I’m communicating to my clients is this: “Who you hire matters more than ever.”
Many consumers are learning the importance of taking the time to interview a real estate professional and understand what an agent does for them. So, I’m demonstrating in my customer communications that I understand their focus on value and can explain everything an agent does to support their transaction. This is an educational point that all real estate professionals can use to strengthen trust with their clients right now. We must let our customers know that we take these practice changes seriously—and understand how they benefit the consumer.
There’s plenty you can be thinking about and preparing for in the lead-up to the practice changes deadline. To start, go to facts.realtor for the latest updates on NAR’s proposed settlement agreement, which spawned the practice changes. Then, join a webinar with NAR’s legal team on Aug. 15 from 3 to 4 p.m. CT to learn exactly how the practice changes will impact your business and clients. What else might you want to think about?
1. Changing Your Compensation Model
The great part about our business and industry is that we have the freedom to develop whatever compensation model works best for us and our customers—as long as it adheres to local law and our brokers approve, of course. You may be considering offering à la carte services or a choice between full and limited service, for example. We’ll likely see a variety of compensation models emerge or become more prevalent.
But the decision to change your model is about more than what you want for your business. It should be about what will work best for your clients. And if your current model works for them, then why switch?
I’ve built my reputation on being a full-service agent, and that’s what my clients have come to expect. So, I plan to continue offering my services on a contingency basis, earning a percentage of the sales price post-closing. I’ve considered a flat fee, combined with a scaling percentage, or a range of fees based on price point. The exciting part is you can be innovative.
2. Countering Objections to a Written Buyer Agreement
If you haven’t used written buyer agreements consistently before, your clients may have questions about their purpose and why they are necessary. After Aug. 17, the written buyer agreement must contain information about your compensation and how that compensation will be paid. The written agreement should also lay out your role as a real estate professional and what you will do for the client. It’s a perfect entryway to explain your value. Touch on three things that a written buyer agreement clarifies for the client:
- The scope of your work
- The type of representation the client agrees to (exclusive vs. nonexclusive, agency vs. nonagency, etc.)
- The amount of compensation you will earn (make sure that the compensation provisions and disclosures concerning compensation follow NAR’s rule changes).
Hopefully, the agreement itself demonstrates why the consumer should hire you. But what if your client needs more convincing before they sign on the dotted line?
I think we as real estate professionals need to be flexible. Perhaps starting with a non-exclusive agreement is a softer introduction in areas where written buyer agreements haven't been widely used before. Explain the new requirement for a written buyer agreement and how the agreement protects the consumer and empowers them through transparency and choice.
Remember that while an exclusive agreement may be your goal, they are not a given and should not be treated as if they are. Some buyers may be more willing to sign a non-exclusive agreement initially. If I were in this situation, I might sign a non-exclusive agreement for a period of time, and I’d use that time to demonstrate my value and commitment. Once the buyer sees the benefit of our partnership, I’d ask to convert to an exclusive agreement. This way, the buyer has time to build confidence in our working relationship and hopefully see the value in choosing exclusive representation.
3. Mastering the Compensation Conversation
First thing’s first: You do not have to work for free. So, don’t shy away from discussing your compensation. In fact, your clients likely will respect the transparency. I’ve learned early in my career that the one who initiates the contact reaps the rewards. So, it’s my mantra that if your client is the first to ask how much you charge, you’re already behind on winning them over.
It’s crucial to clearly communicate your track record, experience and specific expertise. This is supporting evidence for not only why consumers should choose you—but also why they shouldn’t choose another agent.
Honestly, this is a conversation you have to master over time. You can and should be prepared with your talking points, and you’ll build confidence with practice. Keep in mind that with stiff competition among real estate professionals, this conversation becomes primary. I believe that with confidence in your abilities and the benefits you bring to transactions—and, of course, experience—you can have compensation conversations that leave you and your customer satisfied and excited to move forward on the homeownership journey together.
4. Aiming Higher for Referrals
Because you’re in competition with other agents, think about how much easier it is to win business by referral. Typically, you’re not competing with other agents for the attention of a referral client. The trust is already established before your first conversation. So, by focusing on building strong relationships and delivering exceptional service, you can position yourself as a preferred agent among your clients—regardless of compensation.
5. Helping First-Time Home Buyers
You have an opportunity to be of even greater help to first-time buyers following the practice changes. Many first-timers can’t afford an additional fee for their agent, so they’ll look to you to help them figure out a way forward. This is where you can lean into client education, which demonstrates your value. Real estate pros need to help their buyers understand that they will do everything possible to find a scenario where the offer, including compensation, works for the seller. This might mean writing several offers before finding one that works, but you will show your client that you’re persistent and committed to making the deal happen.
6. How do you approach negotiating compensation?
The amount of compensation you negotiate with your clients will depend on a number of factors. Sometimes, it’s based on the relationship with the client, such as whether they are a repeat client. Such a decision also may be based on market conditions. Agents may fluctuate their fees based on varying factors, such as time on market or the complexity of the transaction.
I’ve always been flexible with clients throughout my career, and this change will be no different. We must look at the bigger picture and weigh the benefits of each situation. Additionally, offering value-added services and creating tiered pricing models can be effective strategies to justify the fees while still delivering exceptional service to our clients.
