Answering Questions About Compensation
By Melissa Dittmann Tracey
Learn what research shows about framing discussions around money to get the most positive outcome possible.
CHICAGO – A written agreement is a prime opportunity to explain all the services you provide and the value you bring to the transaction. Keep in mind that selling the value of an intangible service, such as what you offer to buyers and sellers, may take extra thought, patience and explanation. “The buyer can’t line services up on a shelf and compare them the way we can when choosing among products, whether it’s cars or Lego sets,” says researcher Ann Mirabito, assistant professor of marketing at Baylor University.
First, make sure you’re armed with the right information at facts.realtor to accurately and fully explain the practice changes to your clients. Clearing any confusion they may have about the impact on the transaction is a good way to build trust and show value. You also need to explain and demonstrate your brand, which is the vehicle that drives your connection to consumers. Establish for your clients how you’re different from other agents in a way that matters to consumers, Mirabito suggests, and emphasize that difference in all your communication channels.
Chris Blocker, professor of marketing at Colorado State University, who studies value positioning for industries like real estate, says agents need to communicate their value in three main areas:
Outcomes, such as how an agent will help clients sell or acquire a home
The process, such as how the agent will clarify the homebuying or homeselling journey
The overall experience, such as how the agent will manage the client’s emotions
“The challenge lies in clearly articulating these aspects and connecting them to the client’s specific needs and desires,” Blocker says. “By doing so, agents can effectively communicate the holistic value they provide.”
4 insights to frame the compensation talk
Compensation conversations can be challenging when clients perceive the cost as higher than the value they’re receiving. Many times when that happens, it’s because the client isn’t educated on what they’re getting for their money, Mirabito notes. Researchers stress the need to ditch sales scripts as a method for communicating value, especially because your communication will vary from client to client. Use the following research to frame your discussions.
1. Ask open-ended questions
“Open-ended questions are vital, as they delve deeper into clients’ motivations, uncovering their true needs and potential objections,” Blocker says. He found in the study “Are We on the Same Wavelength?” that eliciting stories from clients can help them better articulate their desires and concerns. So, when discussing compensation, you might ask, “Can you walk me through what an ideal homebuying or selling experience looks like for you?”
“This question can help identify key concerns and allow the agent to address them effectively, aligning their services with the client’s values and needs,” Blocker says. You also may consider saying something like, “Tell me about the last time you made a large purchase.” Ask about the experience, who else was involved and what made the process painful.
2. Find common ground
Social psychologist Robert Cialdini, who has long studied sales principles in negotiations, emphasizes “liking” as a key motivator in sales. People tend to like others who they connect with on a personal level and who cooperate in reaching a mutual goal. Cialdini’s research found that 90% of business professionals reached an agreement with their client after having a personal dialogue and finding common interests. That compares to only 50% of business professionals who bypassed the dialogue and got straight to the compensation conversation. So, don’t underestimate the importance of small talk before compensation discussions. Find similarities with your clients and offer up genuine compliments to create rapport before getting down to business.
3. Establish trust through action
When choosing a real estate agent, honesty and trustworthiness are among the top-ranked traits buyers and sellers look for, according to NAR’s 2023 Profile of Home Buyers and Sellers. Agents who are Realtors® can demonstrate these traits by talking about their adherence to a strict Code of Ethics, which requires that they act in their clients’ best interests. You might also consider sharing NAR’s pamphlet on 179 ways you’re worth every penny of your compensation. Consumers extend their trust when they view you as dependable, competent and customer-oriented, the report shows. On the other hand, a client’s perception of your trustworthiness can be jeopardized if he or she perceives an invasion of their privacy, such as being prodded to buy before they’re ready. Research shows that trust can be established by showing the following traits:
Listen carefully and ask related follow-up questions.
Show understanding of the client’s individualized needs.
Be highly responsive to any concerns a client expresses.
Show yourself as an excellent problem-solver.
Discuss how you’ll keep them updated on the transaction.
Emphasize your commitment to a successful outcome.
Offer competitive pricing.
“During compensation talks, agents should focus on listening actively, being transparent about costs and emphasizing their commitment to prioritizing the client’s best interests over simply closing a deal,” Blocker says.
4. Demonstrate expertise through success stories
Use relevant, recent data when talking about your compensation and share client success stories, Blocker suggests. Data and storytelling showcase successes from your work experience and relate them to the current client’s situation. For example, you can present case studies of similar buyers, outline the challenges they faced in the market, the solutions you provided and the positive outcomes you achieved, Blocker says.
Mirabito encourages agents to show their negotiation skills by recounting specific examples of how your savvy negotiations turned into a higher contract price for a seller. “While statistics demonstrating your prowess are powerful, anecdotes are more memorable,” she notes.
If your clients still have questions
Be prepared: “Prevailing market conditions might influence potential clients to put undue focus on an agent’s commission rate and not listen to their pitch,” notes Blocker in his study “Want to Convert More Leads? Dig Deeper Into What Customers Value.” “In response, successful agents will go out of their way to understand what creates value for consumers and help them to believe in their superior ability to facilitate that journey.”
Understand what’s really behind any probing your clients are doing about compensation. “Handling objections effectively involves understanding the objection, validating the client’s concerns and reframing the conversation to address underlying needs,” Blocker says. “This approach helps in addressing the real concern and provides a path to a mutually beneficial solution.”
Clarify your understanding of the client’s concern by repeating what they said back to them. This acknowledges that you heard their concern. Then, introduce a different perspective, such as reemphasizing the time and effort you will put in to help them achieve their goal, talking specifically about how you’ll help them achieve the desires they’ve previously communicated to you.
“Each buyer’s agent will need to think through the value of their service, such as time they’re saving the buyer by previewing properties, their ability to find rare properties and their ability to negotiate more favorable prices and terms for buying the house,” she says. When agents can communicate this value clearly, clients are likely to view the compensation as fair given everything they’re getting.
© 2024 National Association of Realtors® (NAR)