By LISA KLEIN
Lately, real estate agents have been in heavy competition to score luxury listings in a market in flux.
Low inventory and rising prices have led to many turning to a discounted commission rate to stand out to sellers. But agents can instead differentiate themselves by offering a full-service approach that others do not.
“I think we allow ourselves to be commoditized too much and therefore we’re victim to that discount,” said Dan Elzer, president of The Training Academy, a sales education organization, during a Luxury Portfolio International Luxury Hour webinar.
“Agents are being interviewed instead of presenting, which puts us in a position of weakness instead of a position of strength,” he said.
LPI president Mickey Alam Khan hosted the Luxury Hour.
Having a lower cost to the seller seems like an easy way to get more listings, and agents often justify lowering their fee thanks to higher-than-normal home prices evening out their take.
“We’re hearing constantly that commission is being challenged,” Mr. Elzer said. “The statistics coming out of different organizations show that our commission percentage is falling.”
However, this sets a precedent that will be hard to recover from and creates an environment in which everyone loses – commission for the agent and attention for the seller.
“That doesn’t really indicate value in what we’re delivering when we can offset it in our mind that way,” Mr. Elzer said.
Another issue is that many newer brokerage business models use a discounted fee as their “winning difference” in the marketplace.
These platforms are driving commission down while using low costs to gain market share. Many even admit that the consumer gets less service with the lower price tag.
“You can go on some of their Web sites, and they just lay it out,” Mr. Elzer said. “‘I’m going to give you a better deal, you’re going to get all the technologies you need, but you’re not going to get the personal touches. But that’s OK because you’re paying less.’
“I think everybody has a different perspective on how they’ll leverage a fee to win business versus leveraging their winning difference or their service or their contacts,” he said. “At the end of the day, we have people focusing solely on fee versus service.”
Focusing solely on the commission amount makes the fee the only thing the seller sees or thinks about when choosing an agent to represent his or her listing. This commoditizes the agent for the seller, who should really be looking for someone who can provide the services he or she actually needs.
“We go to the store and an apple is an apple,” Mr. Elzer said. “When we don’t have differentiation, we allow the consumer to consider us all the same. And as soon as we are looking the same, the consumer immediately feels that it would be silly to pay more when I can get the same apple for a lesser price.”
With everyone attempting to compete by matching lower and lower fees, the consumer is left in confusion with no way to tell who is actually better to handle the sale of his or her home. This is a huge opportunity for agents who are able to stand out in other ways.
“We can step aside and offer to the market, ‘Hey, we are the full-service agent, we are high touch. We are the Louis Vuitton, the Cartier,’” Mr. Elzer said. “I think there’s a gap in the market for that.”
To really be different and avoid being commoditized, agents need to bypass the traditional approach of being interviewed during their first appointment with the seller.
“I believe that we get into these interview situations by not taking the position of expert walking through the door,” Mr. Ezler said.
Customarily on a listing appointment, the first step is to tour the home immediately and talk about it with the seller, which puts the seller in charge instead of the agent, asking the agent questions about the agent and leading straight to asking what the home is worth.
“The problem is you’re only presenting what everyone else can present, which is price,” Mr. Elzer said. “If you look the same and present the same, you allow the seller to commoditize you and make a decision based solely on the price tag.”
Mr. Elzer recommends to instead follow a five-step approach that addresses the seller’s needs and puts the agent in the position to be the one to solve them.
Step one is discovery, which means talking to the seller about why she is moving and what she wants from the selling process. This will establish what it is that the seller wants from their agent and build rapport.
Step two is presenting the agent’s marketing plan: how she works and what she brings to the table that will address the seller’s individual needs.
“All too often, especially with markets like we’re in, we get into a routine about talking about ourselves and it sounds very similar across all people,” Mr. Elzer said. “The thing that’s left out of that conversation is the seller’s needs.”
The last three steps are then touring and talking about the home, developing a pricing strategy with the seller rather than behind closed doors and finally coming to a mutual decision to work together.
Oftentimes, the seller is so convinced by the presentation that she forgets to even ask about commission. But if she does, or asks to match a competitor’s lower price, go back to her needs and ask whether or not the competition can meet them.
Simply tell the seller, “’You can go with them – I know there’s a discount. Or you can go with me and get what you’re looking for,’” Mr. Elzer said.
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