1. Price competition
One of the most difficult listing challenges is competing against a lower fee. Businesses are free to compete on price, service or quality, and consumers are free to make buying decisions based on these criteria.
You have three fundamental responses to price competition:
- Match their price
- Differentiate yourself through value-added selling
- Let go of the business.
Matching price is painful because someone will ALWAYS be lower and you end up with more busy-ness and less profit.
2. Sell value
If you were deciding on a new flat screen TV and saw three prices, $2,000, $3,500 and $5,000, what would be your first question? You’d ask: “What’s the difference?” When sellers are faced with multiple commission rate offerings, they will also want to know the difference.
You must cite specific benefits that are worth more than the fee difference. Your listing presentation must clearly contrast the difference in service and results over a lower fee competitor.
But this begs the question, what IS value to a seller? All the services in the world are unimpressive if they don’t produce results. The three key metrics are sale-to-list ratio, expiration rate and days on market.
3. Sell NET
Relate all of these to the sellers’ NET because the net equity is more important than any specific cost. Demonstrate that by paying more for better service, they will net more from the sale and will do it sooner. Present your sale-to-list ratio, percent expirations, days on market, average sale price, guarantees of service backed up with cancellation clause, target marketing proposal and/or unique service.
4. Ask about value difference
A final question to ask the seller is: “If our fees weren’t different, who would you hire?” They should prefer you over them. Then ask why. They will cite benefits you offer over the competitor. Say to them: “If you prefer us because of the additional benefits we offer, then wouldn’t you expect to pay more?” If they don’t see a difference, then you have not established your value added benefit.
5. Let go
Sometimes you just have to let go of business. The sellers that cut your fee will usually be the most demanding, difficult and ungrateful. Spend your time prospecting for good quality listings.
David Knox Productions, Inc. is a provider of real estate education through live seminars, online training, consumer videos and mobile apps. Brokers please visit www.RETdk.com. Agents please visit www.RECVdk.com.