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Today, I want to talk on a very important topic. This is for everybody here in our Sophisticated Agent community and Facebook group. It’s also something that we are going to be doing a more formal training on in week two in one of the modules. So this is kind of a foreshadow and preview for what’s to come, and I think it’s particularly salient and helpful now as we go into the listing season. We’re having more conversations with sellers and homeowners. We’re having more conversations about our value, our value proposition, commission rate, and we’re facing more competition in our business than ever before. The theme that we’re talking about and we will continue to talk about is how do we really combat and respond? How do we react to the changing conditions in the real estate brokerage industry in America as things continue to change?

Commission rate pressure has never been higher right now and continues to be on a downward trend line. We have more and more discount brokers entering the business in major markets across the U.S. We also have a lot of new tech startups coming in, who are really well funded and backed by big venture capital money in California and Wall Street. All of these players are charging less than traditional realtors or even fixed fees and that’s serving to really, really hurt and erode the value proposition and the ability of us traditional realtors to earn a living. So I thought this was a really great topic and I hope you guys agree. I want to talk about a couple of tips that we found really, really productive and helpful in our business to defend your value, to support and actually defend your value proposition.

What is it you bring to the table? Why do you charge what you do? What can a prospect expect as a client? What are some of the things that go into the entire value proposition?

So, the first thing I would talk about when going through this is how to defend your value and focus on results. You want to focus on the outcome, right? Many of you might be new to the business or entering a new market, or you’ve just moved, or you don’t have any direct experience in that area, whether it be sales or direct knowledge. But there are other ways to leverage things. Leverage the results of something bigger than you to overcome those objections based on experience. So, case in point, you’re going to want to focus on one of those scenarios: the results of your brokerage and your brand. What have you guys done together collectively as a body of agents and expert realtors? Use the pronoun such as “we” and “us” instead of “I” and “me”. Portraying something larger than you starts to convey and persuade people to believe that they have an entire team, an entire brokerage or company, and brand behind the effort of selling their home.

Quick little anecdote too. When I was in my first year, I went 12 months with not one sale. I was $40,000 in debt and almost left the business. I lost almost all my faith and confidence in my ability to actually earn and succeed in this business and so I almost walked away. But I didn’t. I never gave up on myself, never once. What I did do that first year that was so critical was I was able to list $30 million in high-end luxury, seven-figure price point listings. $30 million worth from about 30 to 32 listings in my first year with no experience. No sales experience, no sales in real estate, no prior sales experience or marketing in my prior lives, nothing. And you wonder how I did that, right? How does somebody do that and convey a sense of confidence with a homeowner on the other side of the table when they don’t have that experience when they don’t have a history of selling when they don’t have actually results or sales to point to?

This is how I did it. I focused on the results of my brokerage and my brand and the strength of the value that we bring to the table in terms of second to none exposure, network, sales that we have had in the area that other realtors may have done. I was still part of that company. I focused on the fact that we also, again, focus on the outcome and results, not the process. I said, “We’re not owed a penny until we’re successful for you, selling on an offer with price and terms acceptable to you.” They wondered why we cost so much and we are a seven percent firm. That’s probably one of the highest in the market in most markets in the U.S. Most markets are between five and six percent now and a lot of these discount brokers we talked about in startup firms are four, three, somewhere flat fees even below that.

Right now the trend is only going to continue in this area, meaning all the major industrialized nations in the western world are already at an aggregate total commission between two and three percent where just 10 or 12 years ago, they were where we were, an aggregate total commission between five and six percent. So, scary times, a lot is coming up but there is a way to arm and defend your value if you know how. So again, focus on results, talk about we and us, make it about the outcome, and about what you and the company can bring to the table to overcome objections on experience. This is really, really big. The other thing you want to do is focus on your uniqueness as an individual, your unique value propositions, your personality traits, things that can come out about you that your friends would say you’re most memorable for.

These are really, really big. I see a lot of people, homeowners, sellers, and buyers. They want to trust and ultimately like the person they work with. So being able to build rapport, finding common ground, building a little bit of a relationship and some familiarity can go a long way in overcoming some of the issues of experience or other objections somebody might have to your price and to your value. The third major area is you want to frame the conversation that plays off the fact that you do have results to leverage. You have results from your prior positions, your prior careers, your prior jobs, the things you’ve learned in life, right? Maybe it was a marketing role, maybe you were in pharmaceutical sales before, maybe you started a business before and you understand all the different hats you have to wear as you run this real estate practice.

Take those experiences, those lessons, those skills, and those accomplishments in your prior lives, jobs and careers and leverage them into a coherent way to respond and position yourself as an expert who’s willing to work harder than anybody else, who’s willing to focus on the outcome to leverage all the resources and assets they have at their disposal with their company and brand to get the job done for this client. One last point I want to focus on which plays off of the first one again, is to focus on results and the outcome and frame it like this. When we have to discuss a commission, when it comes to that everybody asks, right? Again, we’re a seven percent firm. The highest in our market by far. Most of our competitors are between five and six. Some even go down as low as four. I have right now over 30 listings listed. Everyone I believe is at seven percent. We rarely ever come off of that because we understand how to defend our value.

We’re going to train in depth on how to do this in one of the modules on defending your value, but right now I’m going to give you a little preview on how to do this for you. Those of you who are on appointments right now and you’re up against three or four agents, there’s a race to the bottom and people are coming down in price because that’s the only way they know how to compete. You never want to be the realtor competing on price. It’s a slippery slope and there’s no way back up. When you contribute to the erosion of your very livelihood and value, it’s only going to get worse. All of a sudden you make one exception, then it’s two, then it’s five, then all your listings are under a listing agreement at five percent where it used to be six or seven. With expenses going up, your revenue and your commission cannot be going down or, as you know, at some point you’re gonna be out of business. You’re just not going to have enough money to make a living after you cover your splits, your expenses, your taxes.

So, remember that. And again, focus on the results. Another tip I have is, I leverage the results that we get for our clients, the fact that we get on average about 97 to 98% of the list price and a lot of our competitors in our markets are selling them at 93 to 94%. So if you look at the data or the gap between that, between 94% and 97%, that’s three percentage points. So, take an average property. Our average price is usually $750,000 to $800,000. For the sake of argument, let’s take a million dollar property at 94% of its list price ($940,000). That same property, we would sell on average for about $970,000 to $980,000. That’s a massive savings of about $40,000 or three to four percentage points. But we’re only charging one percentage point more. Think about that. You’re framing it in terms of dollars and cents.

So, our competitors, while they’re charging six percent, some of them five, they’re netting the client substantially less than what we would be charging. And the reason for that is multifold. It goes into the way we market, how we present and defend value, our level of negotiations, and more. However, the homeowners really just care about their bottom line. So first, focus on the results of your brokerage when you don’t have those results yet and then eventually your own to differentiate yourself. Because at the end of the day, you’re not invoicing up front. We’re compensated on a performance fee for selling a property on terms and a price that are amenable to our clients. So, really, really focus on the outcome, guys. Oftentimes people don’t realize that.

You get what you pay for in life and by that, I mean in the marketing, the service delivery, and the results that you get in this business selling your home with one agent versus another. Hopefully, these tips were really helpful. Again, focus on the results, leverage your uniqueness, and focus on your other skills, experiences, and value that you bring to the table from prior jobs, careers, and lives. Do that and you’ll see things start to open, you’ll see conversations be less confrontational when talking about price and commission (which naturally are different conversations) and you’ll start to be able to not come off your commission as much. Defend your value and defend your value proposition so that you can compete on other things. Don’t just trade away price and your livelihood.

So, hopefully, that’s helpful, guys. Drop a comment or let me know if you have any questions. We’re going to be going into more depth in week two in a module. You’re really going to like some of the strategies and some of the tactics that we break down along with some actual role-playing scripts for conducting those conversations in an effective way. Thanks, guys. Have a great rest of the week and we’ll talk to you soon!

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