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Educating Clients on the Value of Real Estate Agent Commission

As a real estate agent, you know the value of your work – and you know how hard you work. Nevertheless, you may often have to explain real estate agent benefits to clients in order to validate your fees. Here’s how to answer, “Why do I have to pay buyers agent commission?” to your real estate clients. We’ll discuss common misconceptions and tips on proving your worth.

Common Misconceptions About Real Estate Agent Commission

Before we advise you on how to talk to your clients about your commissions, take time to look at the topic from their perspective. There are a lot of things that need to be clarified about how real estate agents get paid.

Myth 1: A real estate agent gets 6% of every sale.

Yes, the average real estate commission in the U.S. has hovered around 5-6% for decades. However, you may need to explain to your clients that you will not receive that full commission. First, the 5-6% commission is divided between the seller’s and buyer’s agents. In addition, each agent’s brokerage will take their cut, which is typically half of what the agents earn. Real estate agents must also pay taxes and business expenses out of those earnings.

Myth 2: Real estate commissions will disappear following the proposed NAR lawsuit settlement.

Your clients may have seen headlines or TikTok videos proclaiming that significant changes in the industry could mean the end of real estate commissions. Correct this misinformation by giving a brief overview of the proposed NAR settlement. Tell them that real estate commissions are (and always have been) negotiable, but real estate agents will continue to get paid for their valuable services.
Related article: Key Changes Mandated by the NAR Lawsuit Settlement

Myth 3: Sellers always pay the buyers agent’s commission.

Sellers in hot markets may ask, “Why does a seller have to pay the buyers agent?” While this may be the practice in your area, no regulations mandate it. Sellers typically pay the buyers agent commission because they have more cash at closing than buyers. However, these fees can be negotiated – just as a buyer may ask for new carpet or a seller may ask for a faster closing date.

It’s worth noting that due to the proposed NAR settlement, buyer agents who are NAR members will be required to enter into written buyer agency agreements with their clients before providing them brokerage services. This agreement will outline their compensation requirements.

Myth 4: Discounted real estate services will save the client money.

Some clients will choose an inexperienced agent or online broker because they promise to work for a lower commission or flat fee. While choosing lower fees is the client’s prerogative, you might tactfully remind them that a better-skilled agent could net them more money. Have real-life examples in your back pocket of how you were able to assist clients with your expert negotiation skills.

Why Should Real Estate Agents Should be Paid Commissions?

Once you have addressed these common myths about real estate commissions, explain the benefits of working with an experienced real estate agent. After all, your training and experience have helped you become an expert in real estate transactions. You deserve compensation for this knowledge and expertise and for being a forceful representative for your client at the negotiating table.

1. Real estate agents provide industry expertise.

Highlight the expertise and knowledge you bring to the table. Provide case studies or testimonials demonstrating how you have navigated complex transactions or negotiated a great deal.

Even typical transactions require knowledge of real estate laws and regulations. Here are a few ways a real estate agent’s knowledge can assist clients with buying or selling.

  • Financing: Clients will turn to you for advice about mortgages. You’ll educate first-time homebuyers about the process and tell them how to secure pre-approval.
  • Local market: Real estate agents stay on top of property prices in their markets to advise buyers and sellers during negotiations.
  • Offers: Buyers agents write offers on behalf of their clients and ensure that the appropriate contingencies are in place.
  • Listings: Sellers agents advise clients on what they must disclose about their property for sale and offer expert marketing advice.

2. Real estate agents take care of time-consuming tasks.

Someone buying or selling real estate typically is also planning a move. Real estate agents take care of time-consuming tasks on their client’s behalf, saving them time and giving them peace of mind.

Here are some tasks a real estate agent checks off a client’s to-do list.

  • The real estate agent will set up showings for buyers and sellers.
  • Real estate agents have industry contacts and can help set up buyer home inspections or handyman services for sellers.
  • Agents may also attend inspections and appraisals on behalf of their clients.

3. Real estate agents are marketing experts.

Ensure your pre-listing package and presentation show examples of the marketing strategies you will employ to sell your client’s property.

This expertise will help sellers expand their reach and utilize networks and other industry-only resources to showcase properties.

Here are some marketing services real estate agents provide to earn their commissions.

  • Real estate agents write listings that sell.
  • Agents have access to real estate photographers and drone operators to create compelling images and videos for listings.
  • Real estate agents are typically good at home staging – or have contacts in that industry to help the seller.

4. Real estate agents offer legal protection and guidance to clients.

State-specific laws and regulations cover the legal complexities of real estate transactions. Agents ensure compliance and mitigate risk throughout the entire process.

  • Real estate agents stay abreast of fair housing laws that protect people from discrimination.
  • They advise clients on what sellers need to disclose to buyers.
  • Brokerages have legal counsel available for complex transactions.

5. Real estate agents’ commissions offer an excellent return on investment.

Prove to your clients that you are worth your commission by comparing statistics from your local area. Compare sale prices and time on the market for agent-assisted vs. DIY transactions.

Finally, remind your client that the real estate buying and selling process can be very emotional, and it helps to have a trusted advisor to look out for their best interests.

How Real Estate Agents Can Boost Their Value

For real estate agents, continuing education and advanced training can be vital to growing professionally. Continuing education can help real estate agents take their practice to the next level. When you take these extra steps to improve your services to clients, it becomes even easier to justify your commission to clients.

Learn how to improve your real estate services by taking continuing education courses with Colibri Real Estate School. We offer at-your-own-pace online courses (and audio real estate classes!) that will allow you to renew your license and improve your services.

Key Takeaways: Real Estate Agent Benefits

  • It’s important to address misconceptions about real estate agent commissions, such as the belief that agents receive the full 6% of every sale or that commissions will disappear due to recent legal settlements.
  • Clients need clarity on how commissions are divided and the ongoing value agents provide despite changes in the industry.
  • Real estate agents offer a range of benefits that justify their commission. Agents should invest in continuing education and advanced training to further explain their commission and enhance their value proposition.