How often do you hear the term “fee” (as opposed to commission) in relation to a real estate transaction?

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Call it semantics, but we think the words we use to describe ourselves matter in our professions. One term in particular is loaded with nuance, and tainted with a negativity that is hard to ignore: the real estate commission.

Upon closing a transaction, brokers receive a dollar amount equal to an agreed-to percentage of a sale. The broker then passes a portion of this amount on to their agent who handled the transaction.

Related article:

How real estate agents are compensated

It’s common parlance for real estate professionals and their clients to refer to this payment as a commission. But first tuesday has long argued for the use of the word fee instead.

The difference in wording may seem small, but the weight behind the words is significant. For example, “commission” conjures up images of used car salesmen, furniture salesmen and stock brokers. Commission percentages float and are related to very little measurable factors. On the other hand, the term “fee” carries fewer associations. This word can refer to anything related to payments of money, though consumers generally feel that fees are mostly fixed and agreed-to by all players in a transaction.

The term “commission” reminds buyer clients of the fact that it is against their agent’s best interest to seek a lower-priced home for their client. The more money their buyer spends, the higher the commission amount their agent will receive. Therefore, the interests of agents and their buyer clients are diametrically opposed. While changing the terminology doesn’t change this basic fact, it removes this negative taint.

Moreover, unlike most jobs that operate on commission, real estate transactions are a process, and agents are bound throughout the process to exercise due diligence in representing their client’s best interests. The term “fee” better represents this relationship.

The state’s real estate trade union, the California Association of Realtors (CAR), limits its words to describe the money earned during a transaction solely to the word “commission.” With this wording, an outsider might compare the trade union to a car dealership, and its members to the car salespeople in the yard.

Of course, we know that real estate agents are more than that. But does the public know that, too?

Consumer perception of agents

Only 2% of U.S. consumers report having a very high trust in real estate agents, according to a 2018 Gallup poll. For comparison, 28% of consumers report having very high trust in nurses (the highest ranking), and just 1% of consumers say they have very high trust in used car salesmen (the lowest ranking).

One thing in common with those in the bottom half of the Gallup poll is that they all operate on some form of commission structure (except for members of Congress, who fall second from the bottom).

The good news from the Gallup poll: while only 2% have very high trust in agents, 23% of consumers have high trust in real estate agents as of 2018, the highest it’s ever been since the survey was first collected in 1977. Still, as real estate agents act as representatives for the largest financial decision of most clients’ lives, the goal for how much consumers trust real estate agents ought to be much higher.

How can agents clear the cloud of distrust and become more trustworthy as a profession?

Using language to reflect the care and diligence exercised by real estate agents throughout the process of completing a transaction is a start. Other ways real estate agents can gain trust include:

  • communicating often and consistently throughout the process of buying or selling;
  • informing clients up-front about when you will be available and not available to communicate, including how often they can expect to hear from you;
  • answering questions in as much detail as possible, as speaking in generalizations can make clients think you know something they don’t;
  • being discreet about any personal information you come into contact with, which includes not sharing any gossip with the client about other past or current clients;
  • giving firm and realistic expectations about price without upselling or overselling; and
  • never telling lies or omitting the truth in regards to a real estate transaction (this should go without saying).

Ask clients who have seen your trustworthiness first-hand to provide testimonials. If you really went above and beyond for their transaction, your client might even be willing to act as a reference for future clients.

Use these testimonials wisely by making them more personal. After selling a home, ask the client for their permission to distribute marketing material around that same neighborhood which includes their testimonial. This will serve as a personal testimonial to neighbors, almost as good as a word-of-mouth reference.

Agents: do you have ideas for gaining your clients’ trust? Share them with other agents in the comments below!