What is the number one reason why you cut your commission?

We have all been asked to cut our commission before. Yet I wonder how many actually do and why they were compelled to do so? I believe that the number one reason why agents cut their commission is because they don’t have enough business.

Lets admit it, when we are starving for business we will do just about anything to receive some of the pie versus no pie. However, can cutting your commission set you down a path of destruction?

I believe it can. Word can travel fast that you cut your commission so you are more likely to do it again. Before you know it you are working harder than you ever had and you think you are happy until you see how little you really make on each deal.

You are spending more time in your business and more money is going out the door to keep going yet you are barely making your ends meet. Then you realize that if you would have charged more money and done half of the deals that you did do, you would have made more money!

Now you might be asking yourself, how is that possible? Lets take a look at the following example of how you could make more money doing fewer deals at full commission:

Example.

Lets say you did 30 deals per year. Your average sales price is 200,000. Commission percentage on average is 2%. That is $4,000 per transaction. That would make you a grand total commission for the year at $120,000. That isn’t a bad year. Remember that is gross. Now you take out all of your expenses and your brokers cut.

You might only end up with $ 80k per year and a 40 hour work week which includes weekends.

Now, lets say you only did 20 deals that year but you never cut your commission. Therefore on each deal you received 3% commission. That is an extra 2,000 per deal, which translates into $120,000 per year. And that is doing ten less deals. Now how much time, money, and energy is saved by you standing firm on your service price?

You make more in less time.

I understand that the market is slow in a lot of areas. That just means that you need to be even firmer on you commissions. Sellers need you more than they ever have before. You need to educate them.

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