Phone Bills, Newspaper Delivery and Real Estate Commissions

Our real estate commissions

I recently received a $700+ phone bill from SBC. About $600 of this was long distance charges for calls to one of our buyers in Germany. SBC billed me $4.99 per minute for these calls. I called to protest and the girl on the phone cheerfully removed all the charges and changed my account so that I now pay $0.12 per minute for those calls. She was unable to provide an answer to the question of why I was charged $4.99 to begin with. In the era of VoIP phones, Skype, etc., nobody charges $5/min for international phone calls, but SBC tried to do it to me. The way I see it, they tried to rip me off.

I let my Austin Statesman newspaper subscription lapse again this year, and just like every year, I got a call from a nice salesperson the day after delivery stopped. As usual I played hard to get and the renewal price kept dropping. “No thanks”, I would say, “I can read all my news on the web nowadays” and “I usually don’t have time to read it” – both true statements. To which she would respond “Well, what if I could ….{offer a better deal}”.

Finally, when the price became reasonable, I said OK and paid for another 15 months. Why in the world does the Austin Statesman send me a renewal 3 months before the end of my subscription trying to bill me double the amount they eventually settle for? The way I see it, they try to overcharge me and when it doesn’t work, they eventually offer the real renewal rate.

Both examples above are a reflection of what appears to be a business principle of “charge as much as possible and if the customer doesn’t go for it, drop the price to what we are really willing to take”. This happens in all area of business, especially with subscription based services. People who understand this and know how to work the system get better prices. Everybody else pays more than they have to.

Another example – my two year contract with Cingular ends this month. Instead of signing up for a contract at the published rates, I’ll call to say I want to cancel the service – that I’m going to switch to Sprint or Verizon (which in fact I am considering). This will immediately land me in the “Customer Retention” Department where the person on the phone is paid based on how many cancelling accounts they can salvage. Their job is to make sure Cingular doesn’t lose me as a customer, and they have the authority to wheel and deal. I’ll end up with a MUCH better deal than if I simply renew and take the free cheapo phone that is offered with a new contract. I might even get a free Treo 650! Wishful thinking, but anything is possible. (I’ll report back what happens later).

Ironically, you’ll never talk to a more skilled and competent customer service person than the one in the Customer Retention Department of any organization. These people are sharp. They are good at what they do. You don’t wait on hold either. When you are getting ready to cancel service, you suddenly become a very important person, too important to be left on hold or to be turned over to the call center in India. You get someone who knows their stuff, wants to make you happy, and has the power to do so. Imagine if all businesses treated all customers this way.

What does any of this have to do with Real Estate Comissions? Well, it helps explain why Sylvia and I don’t negotiated lower fees. We charge what we think we are worth and stick with it. If I were to drop my rates it would mean I was getting ready to overcharge you (just like SBC, the Statesman and Cingular above), but since you caught me I’ll admit to you what my true rate is – what I really think I’m worth.

That’s not in integrity with our ethics and business principles. The commission we charge should not be based on your negotiating ability, it should be based on the services we privide and how we stack up to other agents you interview.

We prefer to offer a higher level of service than the competition. We compete on knowledge, experience, service and expertise, not on lower commissions. We work hard to earn the trust and loyalty of out clients. We do more. We are in business to provide the very best service possible, not the lowest prices.

We do lose listings to lower priced agents, and that’s ok. Customers have choices. Frankly, not every seller needs a full service agent, and they can, in the right circumstances, be well served by a competent Limited Service agent or Discount Broker.

We provide full service to clients who need and value the full scope of what we do, not just a piece of it. We would not be very good at giving less than full effort, we simply don’t know how. And we’d go broke giving full effort for less than full compensation.

Other agents disagree and make agruments in favor of being negotiable – anything to get the listing. Many Realtors say “if it’s the difference between walking out with a signed listing or not, I’ll match a lower fee”.

Ask them why they were trying to overcharge you in the first place. Ask them if they are prepared to negotiate on your behalf to defend the sales price that is set for your home. Do you want an agent who can’t explain and defend their own commission being the one you trust to defend the list price of your home?

And, if you are going to pick an agent based on the commission rate, pick one who has the lower commission rate built into their business plan and pricing strategy. That way you pay a lower commission to someone who builds their services around that lower rate instead of an agent who cut the rate to get your listing, but now may feel resentful (even subconciously) and that you are not deserving of their full efforts since you are not paying their full fee.

Real Estate Commissions will continue to be a topic of discussion in coming years as technology changes the way we sell real estate and provide information. You do have choices, much more so today than ever before.

Posted by Steve
10 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Spencer - 10 years ago

As an Austinite temporarily relocated to the DFW metroplex (and working on a scheme to get myself back as soon as possible), I enjoy reading your posts about the Austin market, and I especially appreciate your stance on real estate commissions. Keep up the great work.

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