Redfin recently rolled out an initiative to drop their listing fees, significantly undercutting the average listing fee. The company tested the strategy in major markets, such as Washington D.C., Seattle, Chicago, Denver, and San Diego and, not surprisingly, saw a substantial increase in business. In many of these markets, the typical listing fees are around 2.5 percent, yet Redfin has lowered their fee to 1 or 1.5 percent. Redfin has claimed that their listing count has grown in every market where they’ve dropped their listing fee.
The new low-fee strategy is spreading into residential real estate, which is leaving many brokerages concerned about how they’ll compete. Lower listing fees will put pressure on your pricing, which is painful in an industry with already dwindling margins.
The pricing conversation
The first step is to coach your agents on how to handle the pricing conversation. While a low listing fee will, in theory, save the seller a decent chunk of change, in reality, it’s important for any consumer to look at the whole picture when making a decision. When agents educate their client, buyers and sellers better understand exactly what these low listing fees mean for them, and how they can shop around to ensure they get the experience they’re looking for.
Provide support to your office managers in coaching agents throughout your brokerage to have these conversations, putting your brokerages’ value proposition front and center, regardless of a high or low listing fee.
Focus on the sphere
An agent’s sphere of influence is their key to success in such a competitive market.
If the competitive factor is listing fees, get your agents to rely less on new, unfamiliar leads. Why? Those leads are more likely to shop based on price, whereas those leads who already have a relationship with your brokerage are more likely to shop based on familiarity and trust. When agents focus on maintaining their sphere of influence to encourage repeat and referral business, they no longer face the direct competition that they would with paid leads.
All Moxi Works tools are built to accompany a sphere selling methodology. We’ve seen that when agents have productivity tools that align with their sales goals and methodology, they find long-term success. If contacts are nurtured and relationships are upheld, the decision is no longer about a one percent listing fee difference – it’s about trust and professionalism.
There’s no doubt that Redfin will continue to find success due to their unique low fees, however, that doesn’t mean that price cutting is the only strategy. Work with your managers and agents to ensure they’re armed with the tools they need to remain competitive.