February 18, 2022

How Low Fees May Be Hurting Your Business

Real estate fees. This is a subject that every real estate professional thinks about, but almost never talks about, and that's how much they should charge for their services.

Real estate professionals deal with people all day, every day, especially agents who are out on the front line, representing their business literally every day of the year. And, to be successful as a real estate agent, you have to understand how people think and how they're programmed to react to certain things.


In other words, to be a successful real estate agent, or if you're in any other business where you're selling and dealing with people, you have to learn human behavior such as how to understand nonverbal communication actions of others and how to control your own nonverbal actions. One of the most important elements of human behavior takes place when people are faced with deciding whether or not to hire a professional, whether it's a real estate agent, an appraiser, or a lawyer.

But the thing that's almost always overlooked by real estate's salespeople is the way the perspective client perceives their professional quality. Now, this may come as a surprise to some of you, but aside from having a good physical appearance, which is certainly important, one of the most influential factors that makes a prospective client decide your quality is how much you charge for your services.

What may surprise you even more is that professionals who charge high fees are virtually always perceived as providing higher quality services. And, as you may have guessed, professionals that charge low fees are virtually always perceived as providing low quality services. They're looked at as the bargain brand. When I tell this to my students, there's always somebody who gets up and says, "Well, if I don't lower my commission, I won't get the listing."

Okay. But maybe you not getting the listing has nothing to do with asking for a higher commission. Maybe it's because of other reasons, such as not properly explaining how your experience and your services will more than make up for your higher commission or fee. Or maybe you didn't offer the quality services the client wanted to justify your fee. Or maybe you're just dealing with bottom feeders who don't care about your quality and are only interested in a low price.

Although I have no idea what the issues were or what the problem was with that particular person, I'm going to go into the issue of the fear of losing business because of having high fees.

The first thing I have to say, is that you can't buy a Rolls Royce for the price of a Chevy, and there are many reasons for that.

For one, the Rolls is a prestige brand for a variety of reasons, not the least of which is that it's handmade, while the Chevy is an assembly line product.

And that goes to prove what I just said about real estate professionals. If they have the quality, the provenance, the experience, if they offer premium services, if they've built a reputation for being the go-to professional in their particular field, in their particular market, they can certainly charge higher fees than the rest of the crowd. I know that for a fact because I've done it and still do. That's because I have the proven experience and I offer higher quality services. But let's get back to the understanding of why low fees may be hurting your business.

Do you know the difference between a lawyer that charges $200 an hour and one that charges $1,000 an hour?

With only that information, I'll bet you just made an assumption about both of these lawyers. And I'll bet that you made the assumption that the $1,000 an hour lawyer is a better lawyer than the $200 an hour lawyer. And if you did make that assumption, which I'm pretty confident you did, you just reacted in the exact same way as your clients react to real estate people who charge higher fees versus those who charge low fees.


Let's go back to the concern about losing business because of high fees. Will you actually lose business if you charge more than the others in your space? Yes, you probably will. But you're only going to lose some business; you're not going to lose all your business.

And, here's what you're going to lose. You're going to lose the bottom feeders who don't care about the quality of your experience and your services. And you may lose those who are working so close to the bone, that they're afraid that they can't afford to pay you your fee.

But while you will lose some percentage of the numbers of clients you may have done business with if you had a lower fee, you're not going to lose anything from your gross; it will be about the same from the clients who do hire you at your higher fee level. Let me just give you a quick down and dirty example using hypothetical numbers.

Let's say you're a real estate agent and in your market area the majority of the competition is listing property at a 4% commission. But now, you've decided that you're going to list property at 5% or maybe even a 5½% commission.

If you charge 5% or 5½% commission, you could afford to lose at least 20% of your business and you will still gross the same amount as you would if you were competing with the others at 4%. Additionally, you're going to have a higher bottom line because you'll have lower expenses because you'll have fewer clients.

And isn't it more important to have a higher bottom line? You're in business, and a higher profit is always better than a higher gross.

On top of that is that you're likely to have more free time because you don't have as many people to service.

Something else about charging higher fees that almost always gets overlooked is that\ you are going to enhance your professional reputation. You are going to acquire the professional reputation of that $1,000 an hour lawyer.

Yet, another hidden benefit of charging higher fees is that your professional life is going to improve. For one thing, you're more likely to eliminate even being called by the bottom feeders. They're not going to call you because they know you charge more money than everybody else.

You're also more likely to be contacted by prospective clients who appreciate your knowledge and experience. And when you're dealing with clients who appreciate you, it makes doing your job far less stressful and far more rewarding. Not only more financially rewarding, but personally rewarding. I don't know about you, but to me being satisfied with what I do and having people appreciate what I do is very important to me. It's at least as important to me as the money.

Sadly, when you charge low fees, people get the impression that the only thing you can offer them is a low price. And what happens is you're only going to attract the lower quality prospects; the bottom feeders; the people who don't respect what you do. They only want a cheap price. They're price buyers. They're not quality buyers. And yes, there are quite a few bottom feeders out there. I agree.

Oh, there's one other thing; something that you have to realize about presenting yourself that is absolutely critical to charging higher fees and landing higher quality clients. And that is presenting yourself and your services with confidence.

Confidence is like fear. It's the other side of fear. Other people can sense it; they can smell it. Confidence is also contagious. So, when you're confident about what you are saying, if you adopt the attitude that you know you are the best person for their needs.

People are attracted to confident people and they're repelled from people who aren't confident. So, if you want to improve your career, if you want to make more profit, lower your stress factor, and have more free time to enjoy your life... spend time with your family, your wife, your kids, your husband, or whoever, you should charge higher fees.

If you want help to learn how you can start charging higher fees for your services, contact me and I'll be happy to point you in the right direction.


agent, broker, clients, commissions, fees', listings, real estate, sellers

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