When Clients Demand Price Cuts

Your real estate commission is too high!

Have you heard those words lately? Perhaps spoken them? Before you act, make sure you investigate the situation. This post gives you a structured approach to doing so—looking at causes, solutions, and handling discussions.

Causes: What Drives Client Demands

Before you respond to demands for price, it is useful to understand what lies below such demands. Three things drive the vast majority of client demands: 

1.   Fear—the simple fear of being taken advantage of. If clients perceive that someone else is getting a better "deal," they can quickly feel abused, and may react very negatively. Clients who feel abused become very creative about attributing causes— your rates, your profits, your margins, and so forth.

2.   Miscommunication—usually around services to be rendered. The "apples and oranges" problem can arise from a lack of communication. Are you a full service or fee for service brokerage? Is this communicated clearly in your marketing matierals?

3.   Quality—misaligned assumptions about quality required. Do you have examples of your marketing matierals? Marketing expenses vary greatly between Walmart and Neiman Marcus. Example- Does the home require a professional photographer or will you take the photographs yourself?

Clients demanding price concessions do not present the issue in these neat terms. They simply say, "your price is too high, and you need to cut it." Listen carefully--this does not mean that your price is too high--nor that you need to take drastic action. But you'd better investigate what's going on.

Solutions: Fix the Right Problem

Ask Yourself these questions: (1) What do my clients want? (2) How am I willing to serve? (3) Am I willing to put my services in writing so that my value is clearly understood by all?

Handling the Price Objections

There is no need to get angry when a client asks if you are charging a fair price for services rendered. Practice scripts and dialogues for overcoming objections in the mirror. Take a class on negotiation. Do whatever you need to do to build up your self confidence and self esteem. The bottom line is that if people do not see the value of your service, the presentation needs work.

If the client would be willing to switch to find a discounter, then you should probably walk away and find a relationship buyer. If so, walk away smiling--your competitor just lost money, and you didn't.

Price negotiations don't have to be about power and control; trust and openness go a very long way. Most clients are happy to pay a fair price to a real estate professional they trust. Just give them the information with which to trust you.