Return for Effort Expended
Increase Font Size
| 
Normal Font Size
Editor’s Note: This article first appeared in the June 1973 issue of the R.E. News Observer.
Commissions and fees collected by real estate practitioners represent the return for efforts expended in their business.
Since in this jet-age no one can successfully hide in one part of the country and do a large volume of business differently from fellow brokers in another part of the country, it is advisable that there be a mutual understanding about the subject of commissions and fees.
DIFFERENCE IN HANDLING EXCHANGE FEES
In straight selling, commissions or fees are usually figured on the price the property brings on the market-place. It is customary in most parts of the country that this is a minimum of six per cent of the actual selling price.
In exchanging this is not necessarily so, since in the mechanics of the exchange itself, seldom is a price used. The modern trend is to call a commission a fee and charge a fee rather than a commission. Whatever it is called, it should be determined at the time the property is listed.
How much is to be paid? The most professional approach is to decide on a definite fee which stands regardless of what prices may be used in escrowing a transaction. It is realized that customs in various parts of the country have some bearing on this subject.
However, professional Exchangors are pretty solid in their belief that their fee should not be based on a percentage of a selling price because their ”selling price” is not the same as in the straight selling of real estate.
Once the fee is determined and agreed to at the time the listing is taken, no further thought should be given by a professional practitioner to the fee itself. Rather, he should solve the problem at hand. If he does his work satisfactorily and performs the proper problem-solving service he will automatically have earned the fee.
SIX RULES AGAINST CUTTING COMMISSIONS OR FEES
It should be the rule of every practitioner that he will never reduce an agreed upon commission or fee. Following are six good reasons why a broker should never cut his commission or fee:
1. Your professional standing is jeopardized if you allow others to dictate what they will pay you for your services. Labor is worthy of the hire, and you are entitled to your just fee.
2. Your client will think less of you if you accept less than you should for your services.
3. Often, commission cutting is one of the first signs of deterioration. It is one of the steps along the downward path when going out of business.
4. Your fellow brokers will never know just where they stand when they are working with you if it is known that you do not insist upon getting your full commission.
5. By not insisting on receiving your full commission, you give the impression that you are in need. This, in turn, causes an adverse reaction from your clients. Success breeds success. Failure breeds failure.
6. If it becomes known that you make a habit of cutting the commission, you will attract all types of propositions and the sharp-shooters will all rally ’round expecting you to assist them with their various schemes.
You may not always be able to get your commissions in cash, but get it in full “in kind.” Take a vacant lot, a mortgage, a note, but always get it in full. Your client will respect you, and you will not lose any business by insisting that you be paid the agreed commission.
