Conversations about compensation with your home-buying clients may feel a little awkward for us as Realtors right now. As we approach August 17th, the day significant changes to compensation rules take effect, it’s important to master this discussion. And yes, it’s change, and change requires new skills, but these changes will ultimately create more transparency and more trust for consumers in our industry. And that’s a good thing! Here’s a straightforward approach to ensure that you are compensated fairly while keeping your clients informed and engaged.

Setting Expectations Early

The key to a smooth compensation discussion lies in setting clear expectations from the outset. This is what I believe is a Jedi sales technique: mastering the art of expectation setting. In fact, in the world of residential real estate sales, taking the time to inform, educate, and set  expectations with your clients in the beginning of the relationship makes for the best sales. By investing time early in the relationship to clarify what you do and the value you provide, you pave the way for a smoother transaction.

Explaining Compensation Scenarios

Once you’ve established your value, the next step is to discuss compensation. It’s vital to explain the possible scenarios to your clients:

• The seller pays the full commission
• The seller pays part of the commission
• The buyer pays the full commission

Being upfront about these scenarios helps manage expectations and prepares your clients for any potential costs involved in securing their new home. It’s important that they have time to process these three different scenarios *before* they find themselves in one of them. In the heat of the moment of contract negotiations, when emotions are running higher, it’s more difficult for consumers to process how their agent is getting paid.

Communication Before Showings

As we transition from how things were done to how they will be done, it can be helpful to ask the listing agent if compensation is being offered by the seller. If it’s less than the agreed rate with your buyer, best practice is to let your clients know prior to the showing. This preemptive communication helps avoid surprises and ensures your client is aware of any additional costs they might need to cover. Note that in the future, these calls will most likely not be necessary as agents, buyers, and sellers all adjust to the new compensation practices.

Documenting Agreements

Whenever there’s a discrepancy between the expected compensation and what’s offered, make sure to document this in writing—either through a text or email. This confirmation protects you by ensuring there’s a record of the agreed terms before moving forward with an offer.

Collaborating with Lenders

If your client is financing their purchase, involve the lender early on. Create a group text or email thread involving you, your client, and the lender where you outline all relevant transaction details, including how your compensation will be handled. This step is crucial to ensure everyone is on the same page and prevents any last-minute issues at closing.

Why This Matters

Having open discussions about compensation not only underscores your professionalism but also reinforces your commitment to transparency with your clients. It shows that you respect their right to understand all aspects of the transaction, including how you’re compensated for your services.

Looking Ahead

As we adapt to new industry standards, being proactive in these discussions will not only help you secure your earnings but also build lasting trust with your clients. Remember, the more informed your clients are, the more they will appreciate the value you provide.

If you have any questions about navigating these changes or need further advice on discussing compensation with your clients, feel free to reach out. Let’s continue to support each other as we transition into this new regulatory landscape.

Peter Chabris
Lockbox
CEO, The Chabris Group, Cincinnati
Keller Williams Seven Hills Realty