After attending a training session conducted by Belle on ‘defending your fee’, Norman decided to go up against a local competitor who holds 23 per cent market share and offers 1 per cent commission rates (excluding GST).
“We are above other agencies in terms of our premium branding and we felt our commission should reflect that,” Norman said.
“When the commission is so low, vendors start questioning why this is the case. It took me a few months to get to this stage, but now that I have a fair few $4 million sales under my belt, I can go in and meet vendors with confidence.”
Norman said anecdotal evidence from his contacts showed the disparity in average commission levels across Sydney suburbs.
“I was shocked to learn that the average commission in the Eastern Suburbs is 2 per cent. In Strathfield, it’s 1.5 per cent, and some agencies charge much lower,” he said.
Walking down the main street of Strathfield you will come across no less than 26 real estate agencies – competition in the area is fierce. So it was no small feat for Norman to reposition his pitch and increase his fee.
“As we were establishing ourselves as Belle Property, we did drop our fee, just to get the business,” Norman explained. “But now we’re in a position to change that.
“We started collecting data around our recent sales results and comparing them to sales from our competitors on the same streets. What it showed is that we’re achieving a substantially higher sale price.”
Norman took this data into his next listing presentation and saw immediately how effective is was. Another agent had come through the property before Norman with an agency agreement already filled out at 1.1% commission and no marketing. Norman’s proposal included 1.8% commission with an $8,000 marketing campaign and professional styling worth $4,000.
Norman took home the listing.
“I had a new confidence in what my services were worth. Quality comes with a price tag. It’s like the question you ask agents when they buy a new car, ‘Why did you pick the Mercedes over the Toyota?’”
This newfound confidence has given Norman and his business partners a much-needed change of direction and they no longer compromise on price.
“What we’ve learned is that it’s okay to turn down a listing opportunity if it’s not going to benefit our business,” Norman said.
Since February, Belle Property Strathfield has closed $81 million in transactions and is hoping to reach $120 million by the year end. Their rental portfolio has surpassed 120.
For those principals who are establishing a real estate brand in a new marketplace, he proffered some advice: “If you’re setting yourself up and you need the business and cutting your fee is the only way to win it, then I understand why you might do it, but you can’t make it a permanent thing.
“Word travels fast among agents on what your average commission is, so if you’re doing it consistently you will cheapen your brand. After a few good sales, switch it off. Set your fee, back yourself and prove to your clients why it’s worth paying more. Be the Mercedes, not the Toyota.”
To be the Mercedes and not the Toyota, Norman offers advice to other agents and says the best way to back yourself is confidence, evidence and a good reputation.
“When you get the call from a potential vendor, you need to have a reputation in that marketplace first with the sales behind you. You show evidence to the vendor, you show what you have done and compare it to other agents. You narrow down and show evidence from external sources, you collate that information, you provide that info to your vendors. This is the more proactive approach.
“I tell vendors it’s not just premium marketing and the brand they are getting, but it’s also evidence based.
“Every agent is going to tell the vendor they are number one. And every local agent has a sale here or there. But you have to show the evidence.”
