Negotiating Commission in Commercial Real Estate Agency

commercial real estate fee negotiation.
A fair commission for a good commercial real estate service.

Many commercial real estate agents have a question as to exactly what the right commission should be when it comes to selling or leasing a commercial property.  In most cases, the choice is yours, and should be based on the work required in the listing, together with the trends of the local property market.

Competitive pressures will always push commissions and fees lower.  It may be that you have acceptable line in the sand drawn when it comes to fee calculation.  In most cases you should have some leverage in your fee base.  It is generally acceptable to move up or down 0.25 per cent as required.

There is no point taking on a listing if you are going to lose money.  Given that time is money, a low fee will drive less interest from both your agency and yourself.

Here are some rules that I set regards fees and commissions.

  1. Look at the fees that the other agents are charging through the local area.  You can only compare agents to agents based on experience and relevance to the property type.  A top agent will always command a good fee.  A poor quality agency will always seek to reduce fee to attract the listing.  The fact of the matter is that these poor quality agencies cannot service a high quality property with the required marketing and industry knowledge.  The client will always get what they are willing to pay for.
  2. Don’t focus on reducing your fees.  Focus on unique and specialized marketing campaigns that produce more relevant enquiry.  The client wants to move their property more than they may want a reduced fee.  Focus on your points of difference and relevance to the client.
  3. Show the client how other properties in the local area are struggling with some of the competing real estate agencies.  Tell the client what those other agencies are doing wrong, then tell the client how you can improve on their efforts.  Property marketing is not an experiment.  It is a very specialised process for which your commission and marketing fees allow you to provide a very specialised service.  It is more important for you to be known as the top local agent locally, than the cheapest.
  4. As a general rule, all of your listings should be on an exclusive listing basis.  In this way you can control your market place, client contact, and negotiations.  Every exclusive listing should be supported by vendor paid marketing funds.  Those funds should be paid in advance prior to the campaign commencing.

In the property market today, there is generally a good selection of properties for sale and for lease.  Many agents are struggling to get results were some of the listings.  Many of those listings are on an open basis.  The media by you can see the problem and the solution that is required.  This market requires dedicated effort on the part of the agent, and that will only be achieved by an exclusive agency for a long period of time.

Pitching and presenting for a listing should therefore involve a very specific process of information, knowledge, and marketing strategies.  Refine your presentational system so that the exclusive listings become easier to achieve.  Practice will get you there faster.

Get more tips and ideas about negotiating Commercial Real Estate Commissions and fees in our Newsletter right here.

By John Highman

John Highman is an International Commercial Real Estate Author, Conference Speaker, and Broadcaster living in Australia, who shares property investment ideas and information to online audiences Worldwide.