The time that you spend successfully negotiating for your commercial real estate commission will probably represent the highest amount of money that you’ll ever get paid per hour within our industry. Most negotiations around the amount of your commercial real estate commission will take no more than about 2-5 minutes, but these negotiations can represent tens of thousands of additional dollars or more to you. With this in mind, the first thing that I recommend here is not doing what many brokers do, and that is caving in to the amount of money that the owner tells you they want to pay you. You are worth every single penny of what a full and normal commission would pay you on any transaction, so hold firm for what you really believe in. In addition, your owner will respect you even more when you stand firmly for what you truly believe in.
So what I recommend that you do is to anticipate these commission negotiating situations in advance, and prepare and rehearse your comeback and how you will handle these situations, before the next time that you will ever be faced with one of them. Because the truth is that most of the time the owner will be willing to favorably negotiate the amount that they’re willing to pay you as your commission, but they’re really just trying to see how low of an amount you’ll be willing to accept. Because in the end, they’d just rather have that money in their own pocket, instead of in yours.
With this in mind, there are different options and scenarios that you’ll need to address around this, but here are some things that you can say to your owner when you’re getting a listing, for example, when they’re trying to get you to reduce the amount of the commission that you’ll receive within your agreement:
1) Mr. Owner, the commission I’m asking you for is what’s fair, reasonable, and normal for this exact kind of transaction. So can you please tell me why you are trying to pay less than what would be a fair and normal commission?
2) One of the most important activities that I will be doing is getting the word out to as many brokers as possible about your property, inviting them to get their buyers to submit us offers on it. So with this in mind, and with these brokers seeing that you’re only willing to pay such a low amount of commission on the sale, how many of their buyers do you think might never even see your property, costing you a ton of money in the process, because the brokers will be submitting their buyers all of the other competitive properties first, instead of submitting them yours first? (With this in mind, ideally you will want to have an agreement in place with your buyers, where they agree to pay you a commission when the owner refuses to do so, or when the owner is only willing to pay a substandard amount of commission.)
3) I assume that you want to hire the best broker to sell your property, and that’s me. But when you hire the best, I must be able to offer a commission that will get all of the other brokers excited about submitting offers, so that we can ideally then create a bidding war between the buyers, driving the price up, but we can’t do this when you’re paying such a low commission. So with this in mind, do you want to pay the amount of commission that will get you by far the highest price? Or do you want to pay a lower commission amount that can then cost you a ton of money in the final price that you will then ultimately receive for your property?
So when you effectively translate the idea of the owner paying a lower commission amount, into this then potentially costing them a ton of money in the end, in the final sale price, now you’re much more likely to begin getting their attention.
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