After attending a training session on ‘defending your fee’, Norman So of Belle Property Strathfield decided to go up against a local competitor who holds 23 per cent market share and offers 1 per cent commission rates (excluding GST).
“The session was great – it shared the experiences of a number of agents working across different marketplaces. I was shocked to learn that the average commission in the Eastern Suburbs is 2 per cent. In Strathfield, it’s 1.5 per cent, and some agencies charge much lower,” he said.
Walking down the main street of Strathfield you will come across no less than 26 real estate agencies – competition in the area is fierce. So it was no small feat for Norman to reposition his pitch and increase his fee.
“As we were establishing ourselves as Belle Property, we did drop our fee, just to get the business,” Norman explained. “But now we’re in a position to change that.
“We started collecting data around our recent sales results and comparing them to sales from our competitors on the same streets. What it showed is that we’re achieving a substantially higher sale price.”
Norman took this data into his next listing presentation and saw immediately how effective is was. Another agent had come through the property before Norman with an agency agreement already filled out at 1.1% commission and no marketing. Norman’s proposal included 1.8% commission with an $8,000 marketing campaign and professional styling worth $4,000.
The result? Norman took home the listing.
“I had a new confidence in what my services were worth. Quality comes with a price tag. It’s like the question you ask agents when they buy a new car ‘why did you pick the Mercedes over the Toyota?’”
This new-found confidence has given Norman and his business partners a much-needed change of direction. No longer will they compromise on price.
“What we’ve learnt is that it’s okay to turn down a listing opportunity if it’s not going to benefit our business,” Norman said.
For those principals who are establishing a real estate brand in a new marketplace, he proffered some advice: “if you’re setting yourself up and you need the business and cutting your fee is the only way to win it, then I understand why you might do it, but you can’t make it a permanent thing.
“Word travels fast among agents on what your average commission is, so if you’re doing it consistently you will cheapen your brand. After a few good sales, switch it off. Set your fee, back yourself and prove to your clients why it’s worth paying more. Be the Mercedes, not the Toyota.”