Negotiating Fees and Commissions as a Commercial Real Estate Agent Today

When it comes to commercial and retail property services today, the fees and commissions that we negotiate are critical to the performance of our property agency business, and its stability over the long term.  Whilst discounting fees and commissions may be an option, it should not be a normal activity when it comes to working with clients or taking listings.

Far too many agents provide discounts as a factor of encouraging the listing.  The fact of the matter is that discounts do nothing towards helping the client with a satisfactory sale or lease as the case may be.  When it comes to a competitive situation between agencies in attempting to win the listing, it is better to provide real strategy and points of difference as part of your service offering, than any discounting for the client.

Here are some rules that can apply to the commissions and fees in your listing processes.

  1. Establish a significant and comprehensive marketing campaign that is funded by the vendor.  Give the client a number of alternatives to consider when it comes to marketing.  Invariably and in most cases, you will see the client select the middle ground when it comes to marketing costs.  Show the client a number of alternatives when it comes to the marketing of commercial and retail property today.  Tell them what works, and show them the results that they can achieve.  Drill down on the facts so that they know exactly what the recommendations are.
  2. Do not discount your commission to attract a listing.  The fact of the matter is that property commission is a reward based fee.  If the client wants a successful outcome, they will understand the value of a fair fee for service.  If they still want you to provide a discount, and you still want to take the listing, then discount your available services as part of the process.  Lower commissions deserve less focus and marketing activity on the part of the agent.  Does the client really want a sell or lease their property?  If they do, discounting the commission is not part of that process.  Show them the real savings and service that they will achieve when they have your total focus as a specialized local property agent.  If they still want a discount, then you have not successfully and comprehensively sold your experience and relevance to the client when it comes to the particular property.
  3. Consider the other fees that will be incurred as part of the transaction preparation.  It may be that certain fees will need to be recovered prior to any marketing effort and promotional activity.  This is certainly the case when it comes to preparing an information memorandum for the particular property.  Many agents recover the cost of the information memorandum up front, given that it will take them a few days to put the document together.  It is not unusual to see a fee between $1000 and $2000 for this document preparation.

Do not be too eager to provide discounts.  Be focused on your specialised value as a local commercial or retail property agent.  Top agents do this all the time.  It is hard for a client to ignore or walk away from a top agent.  In the end result, the client wants a satisfactory property outcome within the earliest possible time frame.  That should be the focus of your listings sales pitch or presentation.