I recently had a conversation with a Real Estate Agent around his fee structure. I asked him this question: “What do you charge someone to sell a $1 Million home?” He replied 2.5%. I then asked, “What about a $3 Million home?” He replied “we try and secure 2.2%.”
My question to him was this… What extra value do you offer a vendor to sell a $3 Million home verses a $1 Million home when the difference in fees is $66,000-$25,000 = $41,000. How is selling a $3 Million home worth nearly double the commission of selling a $1 Mill home when on the surface it seems like you do the same thing, spend the same time and similar process.
He went on to look at me in bewilderment and explained… “oh we have the experience and the buyers”… my response was “hmm wow… really for $41,000 more? Sorry I can’t see it. With the way you said that I might be happy to pay a few more thousand, but not $41,000!”
There is a lot to take in from this case study, and I went on to explain to him that by looking at this in relation to his own internal fee differences, will highlight how to change his approach to selling his fees and how they are absorbed by the vendor. Most importantly if he knows how to understand and sell value across his own service range, then the competitor becomes less relevant when competing.
Here are some of the points I coached and we practiced that were required to discuss with the vendor of the $3 million home.
In the market of $3 Million I believe there is a type of buyer at that price point that we have access to that we already have relationships with “here is an example of a sample of our database”;
These buyers are difficult to find and contact without the relationship “here are our notes on these buyers, as you can see we have regular contact and they answer the phone when we ring them”;
How you get them to see the property is a totally different conversation than with potential buyers of a $1 Million home because they are usually corporate, business owner or professional and time poor; “Here is an inspection log of a recent case study. I have marked on here the buyers we generated off our database and those that came from the marketing”
The 3 million dollar buyer usually requires the agent to have a broader understanding of what they are wanting to achieve, i.e. know the value of what they can sell their home for and the experience in pricing and timing to unlock the obstacles to offer. These deals are more complex and require experience to navigate. “Here’s the home that was sold straight after that client that settled on time with the sale of 123 Jones Street”
The way a home is shown to a $3 Million buyer is different to that of a $1 Million buyer. “Here is an example of a home we sold recently where we had 3 Agents at the open home instead of 1. Here is where we stood (referencing the floor plan). We like to have at least a 3 minute conversation with each buyer and a further one that afternoon and then a minimum of 2 more the following weeks after. In comparison to a 20 second conversation at the door followed by a Monday call back, which is usually the case with a $1 million property”.
The negotiation process differs namely around the technique of the negotiation that leads to the increments that a $3 Million buyer advances on their bidding i.e. $1 Million buyer might go up in $10-15k increments, whereas a $3 Million buyer is more like $25-50k. “Here is a copy of a contract that was completed a few weeks back, as you can see we moved the price up 5 times with an average push of $40,000″.
There is a pool of 5 buyers that purchase in the top end market each month compared to 30 buyers in the bottom end of the market. Therefore we are accessing a smaller market of buyers on top can be challenging, let alone getting them to the property and making offers. Typically if we get one extra bid our fee difference pays for itself in that alone.
So therefore it’s a question of the skill and experience of finding the buyer and extracting the maximum bids possible that makes the fee difference relevant and valuable to you to maximise your price.
In summary what has this case study highlighted that’s changed when it comes to selling value?
1) Don’t rely on saying, show them your point of value. Madonna once said, “words are only words unless they are true…” (talking about the papparazzi). Have a “let me show you” communication approach to discussing value. i.e. show the negotiation in increments you pushed the buyer opposed to just saying that you achieved more.
2) Transparency of information online means unless value is explained it will be assumed. Bring up your value, seperate from the internal competing product and then the external competing product will seem less relevant.
3) Communicate value on a granular level, not broadly. I encourage you to have a “focussed delivery style” via previous case studies, communicating on a granular level rather than a broad tell.
4) Always communicate as if your fee is double. Imagine this agent selling a $15,000 fee now. Can you only imagine if he sold it like it was a $50,000 fee how unstoppable he would be? The competitor becomes irrelevant. In the world of data, we cannot assume they are reading all the right information, so we must aim high with the right value points.
I believe every sales person has the ability to sell their product 2 x value of how they are currently delivering it with 90 days of intensive coaching.
Id love to show you how.
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