There’s a commercial real estate broker who I’m coaching right now, who consistently grosses approximately $1,500,000.00 to $2,000,000.00 a year, or more, and quite frequently during our coaching calls together, he will ask me for both recommended strategies, and for the exact words to say, when he is negotiating with a challenging client.
So earlier this week he was telling me about a property he’s selling for tens of millions of dollars, where the terms have now been agreed upon, but the owner is now asking for this agent to cut his commission.
This has often been referred to within our industry as the broker getting a “haircut”, but I’ve always liked Robert Ringer’s description of this scenario, when saying that the principal was performing a “commissiondectomy” on the broker.
But either way, it’s not fun when you’re a broker, and people are just trying to squeeze money out of you like this.
So when working with this broker, in preparing him for different scenarios around how the owner might respond to him, I suggested that the broker prepare several different alternatives, depending on what the owner might say to him.
The broker, in this situation, is owed approximately $830,000.00 in commission, and he believes that the owner wants to knock that down to about $700,000.00.
So I told the broker to hold firm, and then say to the owner, “When we signed our listing agreement, I was relying on your word to pay me the amount of commission that we’ve agreed to. So can I still rely on your word, to do the right thing, and to pay me this amount that we’ve already agreed upon?”
Because very few principals want to have others know that their word cannot be trusted.
In addition, I told the broker that if the owner tries to say something like, “Don’t be greedy. You and I will be closing many more transactions together in the future”, to then respond to the owner with, “Yes, and I’m looking forward to that, and when that time does come, you and I will then agree on the amount of commission that will be appropriate, for you to pay me on those transactions at that time, too.”
There are other scenarios that I instructed the broker to prepare for also within that conversation with his owner, and we recorded our conversation together, so that the broker can now listen back and rehearse and internalize all of my recommendations, to then prepare to deliver them on autopilot to the owner.
So in putting all of this together, the time that you spend negotiating for your commission will be the most valuable time you will ever spend as a broker. Most of these discussions will take no more than 3-5 minutes, but they can mean the difference of tens, or even hundreds of thousands of dollars, in additional commission to you.
So use this time wisely, and be fully prepared to handle that discussion, because you’re worth every single penny of the commission that someone has already agreed to pay you.
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If you’re interested in becoming more effective with your prospecting, and in getting more listings, closing more deals, and making more money, send me an Email or give me a call!
“My work with Jim is making me more effective at finding new business with the kind of companies I want to work with.”
Larry Crumbley, SIOR, CCIM
Fickling & Company