Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

How much should a home buyer or seller pay their real estate agent? Historically, the answer was 6% of the home sale price, split equally by the seller’s and buyer’s agents.

But that amount was basically set by the National Association of Realtors, real estate agents’ trade association. This fee amount will soon be in the past due to the association’s recently settled lawsuit (the court still needs to approve it).

How will agents’ compensation be determined in the future? By negotiation.

In last week’s column, I recommended that agents in this negotiation should: 1) lead with their true value proposition, and 2) be open to creativity and pricing in structure.

Here are two more similarly impactful strategies.

1. Highlight new objective standards and benchmarks

The 6% seller-paid standard commission will almost certainly be gone soon. This means agents should find new objective standards and benchmarks to justify the “fairness” of their compensation. (Regular readers know this as my Third Golden Rule of Negotiation – Employ “Fair” Objective Criteria (video and column linked.)

New real estate compensation benchmarks might include:

· a current market analysis (what others are paying you and other agents now),

· precedent (the 3% paid in the past or, for repeat clients, what they paid previously),

· cost savings (the amount you estimate in savings for your clients in time or money),

· value related to your negotiation expertise or market knowledge,

· compensation of similarly skilled non-real estate professionals, and

· a combination of the above.

Specifically, find compensation-related standards that will differentiate you from other agents. For instance, use past client testimonials (the ultimate independent reference standard) sharing how much you saved them relative to your fee.

Or highlight your expert knowledge of the luxury market in your clients’ target area and the efficiency in which you will only show them homes meeting their needs (saving them a lot of time vis-à-vis other less knowledgeable agents).

Or emphasize the high percentage of sales you close or how your expertise helps your clients set the right list price and how the list-to-sale time period has averaged days and not weeks.

Best of all, use a combination of these to reinforce the “fairness and reasonableness” of your compensation.

Some agents might even differentiate themselves as the low-price leader of the real estate world – highlighting their super low fees relative to others. And don’t discount this – Wal-Mart has been hugely profitable with this strategy.

One more powerful benchmark to consider – get a third-party expert like a trade association or an organization like mine to certify your negotiation education and/or expert skill level.

I know this is self-serving, but real estate buyers and sellers are hiring professional negotiators to engage strategically based on the experts’ proven research. An independent third party certifying your effective negotiation skills – not just you tooting your own horn – will powerfully support this.

2. Finger on the pulse

Few doubt that the next few years will bring a great deal of experimentation and uncertainty as the market increasingly impacts agents’ compensation. And few can accurately predict what will happen.

We may even end up with many different ways and levels of compensation based on different markets and diverse parts of the country (luxury, 2nd home, investment, rental, downtown, rural, etc.).

One thing is certain, though. Agents must keep their fingers on the pulse of the changes. This is the only way to successfully navigate in this newly competitive environment that brings both dangers and opportunities.

Latz’s Lesson: Out with the old and in with the new real estate compensation standards and benchmarks – and keep your finger on the pulse.

 * Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He can be reached at 480.951.3222 or

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