How to negotiate your fee when others are discounting

How to negotiate your fee when others are discounting


You all know the saying, ‘you get what you pay for’. But that’s all well and good until you are faced with an owner who has been offered a discounted property management rate by a competitor down the road and asking you to lower yours. How often has this happened to you? How should you respond?

As property managers our job can be a real balancing act. We must balance the need to bring in and retain good business to grow and sustain the company rent roll with the importance of ensuring we’re not undercutting ourselves. This is an industry-wide challenge, no matter where you operate and what kind of demographic you work with. It’s also an issue that applies equally to sales and property management.

Many potential sellers and landlords will do their best to coerce an agent to lower their fee. If you’re tempted to succumb to this request in order to secure or retain the business, ask yourself, what’s the cost to the business? Will the revenue generated make having the management worthwhile?

We don’t need to tell you how much work is involved in professional property management. There is no point having a large rent roll if it’s not generating sufficient revenue to make all the hard work worthwhile. The more you discount rates, the more properties you will need to manage, which will not only put a strain on everyone in the business, but also carries the risk of missing important things and making mistakes.

So how do you hold your ground when faced with the ‘will you discount your management fee?’ question, especially when the owner tells you that ABC Real Estate is offering less?

The answer lies in three key areas:

  • How much you believe in what you do,
  • The services you offer (your points of difference), and
  • Your ability to negotiate.

Let the owner know about all the strategies your agency deploys to minimise vacancy periods, maximise annual yield and optimise long-term capital growth potential. Tell them about the world-class systems you use, such as the cloud-based Maintenance Manager and how it helps them treat their investment property like a business by providing all parties with an easy to use mobile software solution to ensure everyone is kept better informed about maintenance and repair issues. Let them know about your state of the art marketing that is designed to attract the best tenants and your stringent tenant selection and inspection processes. Tell them about all the things you do that goes above and beyond expectation and the minimum requirements.

What if competition is extremely strong in your area?

If you can’t avoid some kind of monetary incentive to win business because of strong competition in your area, consider some alternatives to a fee reduction for the life of the management. For example:

  • Waiving the letting fee for the first tenant
  • The agency paying for a smoke alarm compliance package for the first year.
  • The agency paying for the first professional safety inspection report from PropertySafe
  • Offering a discount when there are multiple properties being managed.
  • Offering an incentive, such as the first 3 months’ management for free, for owners who refer your services to others (provided those referees sign up with you).

What tools do you have in your toolbox to help you win and retain more business without dropping your management fees?

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