Entry by Tom Keys

Fees vs Commission


I don't recall reading how to address the situation or question of reverting back to fee base pay after an agreement has been made to pay the commission and you have gone all the way to the day of closing and the client thinks or knows that they made an error in there decision to go commission as compensation.I would think that if that commission agreement has been made there is no turning back. I understand that the fee based agreement can be applied to commission.Thank You. 


Tom, I'm pretty new to the ACRE team, but not to negotiating.  I think this is a simple answer.  If you're at the closing table, negotiations for how you're getting paid is way past.  You determine your pay structure at the beginning of the relationship, not at the end.

The whole point of fee-based, or pay upfront pricing, is that the seller (I'm assuming we're talking about a listing) is willing to accept some/all of the risk.  If they're at the closing table and have decided that "they made an error" it probably means that you did a great job selling their house and they don't think you "deserve" the whole commission.  My thoughts.  That said, I say that if the pay structure is explained upfront, a situation like this would be extremely rare.

I'm not new to consulting Tom but I agree with Roger wholeheartedly. I have had experiences with people who went with a fee and sometimes in certain circumstances, at the beginning, I would let them go with commission but not the other way around. And I can only think of one time where the circumstances warranted my considering it.

The situation you outlined, I would never agree to. Fee based pricing and the absorption of risk by the client can't be re-negotiated retroactively, IMHO.

I've had a lot of experience with this too at closing. It seems like they clients want to renegotiate terms at the last minute, fearing that you won't get paid.  The truth of the matter is that althought they want to push you into giving up money, they are not willing to lose the house or be sued for non performance.  All you have to do is learn to say the magic word: NO.  We had an agreement, it was in writing, I honored my part of the transaction and you should honor yours. 

Some agents fear to do this because they think the deal will die or they want referrals from their clients. Personally, I don't want referrals from people like that and they won't lose the house, they are just trying to rip you off.

It reminds me of when I sell a house very quickly for a client, so they want to reduce the commission.  My question back to them is "if it took me longer then you'd pay me more money?"  I don't get paid for how long or quick it takes me to sell your houe, I get paid for my expertise and knowledge. They should be thankful when it sells quick because they don't have the carrying charges of taxes, mtg payments, hoa dues, etc.  But they all want to wait til the last minute and renegotiate. I just don't do it.  Once you say no, and they sit there for awhile at the closing table abosorbing that, they will finally cave in because they don't want to lose the house. 

You can do this in a nice way, just by saying you honored your part of the agreement and they should honor thiers.  Kinda makes them feel bad they even asked ;-)  

Great comments.  I like to use this: When you go to work, do you want to get paid ?  You and I are alot alike.  I work hard to feed my family just like you.  How would you like it if you're employer said they were going to pay you on payday and then on payday, they then said, they changed their mind.  You wouldn't be able to work under those conditions and neither can I.

Are some people charging for their services by flat fee but not getting paid until closing??  It seems to me that this isn't reducing your risk of working and not getting paid. (I agree with Roger's comments earlier.)  Or are most of you using some form of Merv's shared success plan and it is just the final payment that you are trying to collect at closing? Whether that is commission based or fee based? Thanks for clarifying!


If it's a shortsale, agents don't have any choice but to wait until the lien holder approves the terms and the Seller accepts the terms.  This is the requirement of the FTC rule known as MARS.  Part of this rules says that the Seller can cancel at anytime and owes you nothing.


Thanks Everyone,I just wanted to hear the responses to see what the frequency and or possibility of this situation happening was.

This page contains a single entry by Tom Keys published on March 8, 2011 10:05 AM.

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