Real Estate

8 Ways Real Estate Agents Can Combat Commission Compression

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Although 2020 was a banner year for plenty of agents, there’s still a sizable share who are struggling to battle iBuyer and discount competitors who enable buyers and sellers to access agents for a fraction of what traditional brokerages charge. So, how exactly are agents supposed to compete in a landscape with 1 percent commissions and the promise of an easy sell?

Keller Williams trainer Dana Cadena and Compass Texas sales manager Bryan Pacholski alongside Connect moderators Katie Kossev and Kymber Menkiti on Wednesday shared nine ways agents can combat commission compression and leverage a changing landscape to their benefit.

1. Understand your value proposition and create a strategy around it

Brian Pacholski

Pacholski, who is managing director of sales for Compass Dallas-Fort Worth, said the first steps in battling commission compression lies with their value proposition and strategic planning.

“Most importantly, I think our agents have to discern their value,” he said. “We’re in a world that’s changing with different types of businesses trying to make a difference in this industry.”

“We need to make certain that our traditional Realtors understand their value proposition,” he added. “How they specifically deliver value proposition is extremely important in terms of discerning value and understanding why this person is selling at one and how [they can sell] their value at a full commission.”

Once agents are able to identify their unique value proposition, they need to create a strategic plan on how to effectively market it to buyers and sellers.

“I think our agents have to be strategically positioned in their businesses to be able to approach any discussion with regards to value,” he explained. “Whether that be a playbook checklist or [something] else, I think strategic planning to understand their business and understand what it is that they’re doing when they get into the relationships with their clients is important.”

2. Manage your relationships

Next, Pacholski said agents need to seriously manage their relationships since most buyers and sellers choose the first agent that connects with them, which most times isn’t the agent they worked with before.

“Relationship management is such a key to this game — being in a relationship, not only with your colleagues and peers as Realtors but also with your clients and being engaged in the real estate relationship,” he said. “National statistics say 85 percent of home buyers and sellers do their next transaction with a new Realtor.”

“If we want to really sustain value and really compete, we need to be in better relationships with our clients,” he added.

3. Be vocal with your leadership about what you need to succeed

Pacholski said agents must tell their leadership about what it’s like to hustle day in and day out, and the specific challenges they’re facing with consumers, different business models and other market factors.

“Our agents are the ones hedging their money,” he said. “They’re hedging their investments, they’re the ones feeling the pain. They’re at the epicenter of all of this real estate activity that takes place.”

“While the executive leadership of these different organizations certainly should have a pulse on that, your local leadership should be dialed in completely and be business partners with agents on the street and then be able to facilitate that information up,” he added.

4. Know the difference between protecting your commission and net income

Dana Cadena

Keller Williams DeMoro Leadership certified trainer Dana Cadena said agents need to know the difference between protecting their commission and net income by “holding every dollar accountable” and shifting their focus to units sold versus volume.

“Just like a lot of top agents, we really focus on volume, volume, volume,” she said. “And yet, we really want to focus on the units because when prices fluctuate, what happens to the volume? It’s the same thing in terms of your gross versus your net.”

Watching our bottom line, we have a lot of agentssay  that money is just releasing out of their checking accounts like a sieve, and we need to pay attention to that just as much as we drive revenue to the business,” she added. “Checks and balances.”

5. Embrace technology and create a side hustle

Pacholski said agents can safeguard their futures by embracing technology that enables them to do their job better, and creating side hustles that monetize their strengths as real estate professionals.

“We have agents in our in the state of Texas who are focused on developing the answers for the business needs that they have, and who better to understand basic level needs that agents have,” he said. “That is one way where you see agents are being able to take their passion for something else and turn it into something for them inside the real estate industry.”

For those who aren’t tech savvy, Cardena said agents have ample opportunity to create and monetize online content that helps other agents and consumers better understand the real estate industry.

“I’ve seen a lot of agents who have synthesized and monetized their strengths,” she said. “For example, we have agents who are published authors and write books to educate clients and homeowners.”

Lastly, Cardena said agents should look into wholesaling and real estate investing to build long-term wealth that will last beyond their sales career.

“Investing in real estate as a long-term tool to build wealth,” she added. “I feel like that is a great thing even for the mid-level emerging agent. What does it look like if in your buyers’ experience they use a moving company and the moving company they hire maybe you have a little equity stake in that?”

6. Consider building a team

For agents who don’t want to take on the work of leading their own franchise, Pacholski said agents with an entrepreneurial spirit and knack for leadership should consider leading a team.

“Many of our agents work extraordinarily hard, have crafted a playbook in this business, and have built or are building teams,” he said. “I think that’s the way you have these ‘mini brokerages’ inside the platform, where you can extend yourself as an individual Realtor leader inside the brokerage platform that you’re in.”

“I’ll be perfectly candid, there’s no better way to make money than on other people doing the work,” he added. “If you can bring value and you can help agents be successful and build a team inside your platform, I think that’s a very reasonable way for agents to really execute and grow their ancillary income.”

7. Don’t fear iBuyers — utilize them

Cadena said some of the top agents in her market have learned how to use iBuyers to their advantage by either partnering with them or making iBuyers part of the education they offer to curious consumers.

“We’ve seen a lot of top agents utilize the iBuyer as a magnet to intercept homeowner interest and then really educate the client and look under the hood to say, ‘Hey, here’s a menu of services, this is what you get for this price point and just to kind of go through what the net tangible benefit is,” she said.

Cadena said consumers are looking to get to the “closing table netting the most with the least amount of hassle.” However, Pacholski said consumers sometimes sacrifice their profits to have a shorter and smoother process, which is ok.

“I think there’s a very specific demographic that iBuyers are going to really appeal to. I think that it makes sense for those people that need to do this thing now, they’re at a certain price point, and they’re willing to take the reduction of the net proceeds,” he said.

Despite that, Pacholski said agents need to learn about the ins-and-outs of iBuyer platforms, so they can better articulate their value and how it stacks up to the competition.

“You get into the net discussion and you start talking about net proceeds,” he said. “And again, if you’re unfamiliar [with iBuyers], you’re gonna have a hard time articulating.”

“But if you step inside the iBuyer world and understand it just a little bit, you’ll see you can bring your clients more money,” he added.

8. Don’t lower your rate

Lastly, Pacholski and Cadena said agents need to resist the offer to reduce their commission and stick with the percentage that reflects their value.

“Say ‘no,’” Pacholski said. “I’ve known agents who have gotten to that point of sale and the consumer asks, ‘What do you think about taking 5 percent or 4.5 percent because so and so will do it.’”

“Say, ‘No, I don’t do that,” he added. “Just sit there stoically say nothing.”

Email Marian McPherson

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