When it comes to increasing property management fees, most companies resist because they believe that they will lose an unsustainable level of business and also have to deal with too many angry calls.
When it comes to assisting real estate businesses to add and improve their fees, the most commonly asked question we get is; ‘How do we deal with owner objections?’
The following is what we have found works well:
1- The person with the best relationship takes the calls.
The person that has the best connection with your owners needs to take any objections from them regarding any fee changes as they stand the best chance of getting them onside. This means any letter advising of the changes has their name and contact number on it.
2- Know you’re worth the fee changes.
It’s really important that if you’re the person taking the calls that you really know you and the business are worth the new fees. If you believe it – your clients will too. If you don’t, then you’ll be wondering why so many clients are objecting and you will have less success when it comes to the negotiation process. Fees will always be adjusted to what you think they’re worth or what the client thinks they’re worth – so learn to believe in your worth.
3- Not all calls are objections.
Sometimes the client gets the letter and forgets about another issue they wanted to discuss so they use this as a prompter to call you about something else.
-Or they get your letter and call you so you can read it to them. They have no real objections at all with the higher fees.
4- Be ready to justify your actions.
When a client calls in reaction to the news you have increased your fees, you need to be ready to let them know why you’ve done it.
Use words like ‘Mr Smith, we’ve had to increase our fees because of the ever-increasing costs of overheads and also the cost of legislative compliance. You are really important to us Mr Smith, and we hope you can also see why we’ve needed to do it.’
5- Know your good from your bad clients- upfront.
Before you send your letter advising of the changes (together with a new management agreement to be signed/returned) know what clients you don’t care if you lose! This will likely be under 5% of your owners.
6- With your good clients be ready to negotiate.
When you’ve got a good client, you want to keep them onside. Just be aware that the number of people you will need to negotiate with will be minimal but this also depends on your level of conviction and belief that you’re worth your new fee changes. (See Tip #1).
Use words like ‘Mr Smith, we’ve had to increase our fees due to the ever-increasing business overheads but also the cost of legislative compliance. Not only that but we haven’t reviewed our fee structure for X years. With that in mind, what do you suggest would be fair to both of us?’
7- With your bad clients hold your ground.
If you’ve got bad clients who you’re happy to keep but just as happy to farewell, then you shouldn’t be worried about losing them if you increase your fees.
Use words like ‘Mr Smith, we’ve had to increase our fees due to the ever-increasing business overheads but also the cost of legislative compliance. Not only that but we haven’t reviewed our fee structure for X years. Regretfully we must stand by our fee changes in order to remain viable and provide you with continued service. Could you please let me know what you decide to do?’
8- Let your clients nominate the changes.
When you allow your good clients to negotiate, you might also let them nominate the changes to the proposed changes. In most cases, they will ask for lesser changes than what you would have given them. If the changes are satisfactory, ask them to make the changes on the management agreement that they have, initial/sign the changes and to send it back straight away where you can counter-sign and send them a copy.
If you’re doing an electronic signing, re-issue the new management agreement straight away with the new changes.
9- Get the signed agreement quickly.
Make sure that if you’re negotiating any changes, you ask them to return the agreement straight away and make this a condition of agreeing to any changes. Otherwise, you may find the owner hasn’t returned the agreement, and now they think you’re a pushover and want to negotiate even more!
10- Don’t go backwards.
If you need to negotiate don’t go back to where the old fees were. Instead, aim for fees that represent at least 50% to 75% of the way to the full changes. You’re worth it!
11- Be ready for some surprises.
Don’t be fooled! Some of the clients you thought would be OK to pay more may give you some backlash, and some of the clients you thought would be upset just sign and return your agreement without a fuss! Be ready for some surprises either way!