The Dangers of Taking a Reduced Commission

When a client is on the fence, and a strong breeze could blow them into your camp, it is tempting to create a favorable wind by offering to take a reduced commission. Sometimes agents agree to it impulsively; they get caught up in the heat of the pitch and make the offer without thinking it through.

There are only two situations where an agent should take a reduced commission.

  • They want to break into higher priced properties and they need to get their foot in the door with initial sellers of luxury homes.
  • The amount of work required of them is commensurate with the lowered cost.

To be a luxury agent, you need to have a track record of selling high-dollar homes. If taking a reduced commission means builds your value proposition, and earn larger commissions down the road, it’s fine to take the hit in the beginning. Make sure that you never devalue your service under these circumstances, only lower your price if it’s your only chance to win the client.

A reduced commission also makes sense when you’re trying to win a FSBO. Often the seller already knows the buyer, and you will just operate as contractual oversight. This means a large part of your job is already done for you, so it’s fair that you get paid a bit less.

The real danger of taking a reduced commission outside of these two scenarios is making the percentage seem arbitrary. It exacerbates the misconception that real estate agents, “don’t really do anything.” It leads people to believe it’s just some number pulled from a hat.

The best way to never have to take a reduced commission again? Keep your pipeline full. When you have a lot of leads at different points in your funnel, you never have to worry about losing one individual prospect that wants to trim a nickel. It gives you the confidence to present your services at the price point you deserve, and the opportunity to provide an experience that leaves the client believing you were worth every penny.

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