What should Realtors do when friends or family members ask them to cut their commission when selling their house?
Fred Martens, a Realtor with Confederation GMAC Real Estate in Cornwall, P.E.I., points out, “This is very much an individual decision. My first response would be – would my cousin sign his next paycheque and let me deposit it to my account? This question goes to the heart of the profession of Realtors. Are we professionals offering our services for a fee? Do we treat our choice of work as a profession or not? We must make our family and friends aware that we are no different than them. Realtors have bills to pay. We have many duties to perform for our clients that cost us money out of our back pocket. This is the reality of the business and must be appreciated by the client though it may be your brother or sister.”
Tim Snow, a Realtor with Royal LePage Cavagnal in Hudson, Quebec, has made sales for friends and relatives at a reduced commission rate. He explains, “It is the choice of the agent on how much he wants to collect as commission. There is a big misconception that agents get the commission that is stated on a brokerage contract. Most of the commission is absorbed by the broker and his fees, the regional real-estate board, the provincial board where it applies and regulators that love to have all kinds of fees to charge.”
If you do cut your commission for your cousin Johnny, will there be anything left after you pay brokerage fees, office overhead and expenses, the buying agent's cut, automobile costs, referral fees, advertising costs, secretarial support, insurance and the myriad of other expenses that crop up? Can you afford to offer reduced commissions?
Real Estate is Financially Driven
Like most professionals, Realtors are financially driven. Does anyone expect Johnny to cut his $300 an hour attorney rate? Do relatives lowball Aunt Jennie’s plumbing prices? Doctors get paid whether a patient lives or dies. The same is not true for Realtors who get nothing when a house is not sold. If your friend or brother decides to go with a lower commission Realtor, remind him that in most cases you get what you pay for. An agent earning a 3% commission may not have the same incentive to sell the house compared to a property they have listed at full commission. As Tim Snow points out, “Agents make their income solely by commissions so it is common sense that agents will show the listing that gives the highest percentage first.”
Kevin Muir, a Realtor with Sutton Group – Heritage in Durham, Ontario, has offered a commission discount for family members. “As to whether Realtors should reduce their commission to family or friends – I think this is strictly an individual decision. The Realtor of today must treat real estate as a business complete with a business plan that includes forecasting and profit/loss margins. That said, family is family and I have reduced my commission by ½-1% for family in the past. My father was in the auto parts business and routinely gave discounts to family. He did not give product away any more than I can provide services free of charge. My family recognizes that I am in a business with many expenses and a profession where I essentially wake up every morning looking for a new job.”
Geina Cutts, a Vancouver Realtor with Re/Max Masters Realty Inc. and a professional interior designer shares her thoughts. “I am a professional interior designer and full time Realtor. Both professions involve considerable expertise based on sound knowledge, of which I pass along to my clients. I have just sold my son’s home and he did not ask me to reduce my commission on his behalf. Why? Because he observed my advice on how to successfully market his home which resulted in a full price sale within thirty days of listing his home.”
Help Friends and Family in Other Ways
Martens offers an alternative. “There are many other ways that you can help your family and friends. This could be as simple as lending a hand to clean up the property before you start to show the home, help paint to refresh the home, or help with the moving exercise when the property sells. You will also have the opportunity to buy a new couch for a house warming present when they move into their new home.” Lending a hand to loved ones in ways that don’t affect your cash flow may be a solution.
Only you can decide whether to reduce your commission for friends and family, help them in other ways or leave them to fend for themselves.
Toby Welch - Toby is a full-time freelance writer who specializes in magazine articles, online writing, e-books, and manuscript editing.
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