It’s good to negotiate with your real estate agent Loaner

The big NAR regulation is expected to be finalized next week, but the changes already took effect in August.

They include requiring a written buyer’s agreement before viewing a home and removing multiple listing service (MLS) compensation offers.

This initial agreement is also supposed to outline the fee the agent will charge, such as a flat dollar amount or a percentage of the sales price.

There must also be “a clear statement that broker commissions are not fixed by law and are entirely negotiable.”

Yet every time I bring up the idea of ​​a real estate agent reducing or lowering their fees, it is met with resistance.

Real estate agent commissions are negotiable

NAR was quick to point out that “agent compensation for home buyers and sellers continues to be completely negotiable.”

And that the negotiability of commissions must be explicitly communicated to the consumer via information.

So we know what fees an agent offers is not set in stone. For example, an agent might say they charge 3% of the purchase price.

On a $500,000 home, this would equate to $15,000, but it is important to note that this amount is often shared with the brokerage. This means that an agent can only see part of it.

Conversely, if you walk into a retail store or restaurant, you’ll likely see fixed prices. For example, a pizza might cost $15.99 and a stick of deodorant might cost $5.99.

You cannot go to the checkout and start negotiations. They will nicely (hopefully) tell you to leave the store if you don’t like the price.

Now back to real estate agents. They too can set their price and not move. Just because their fees are “negotiable” doesn’t mean they will negotiate.

Many will tell you to pound sand. It’s their prerogative. If they want to charge 3%, they can charge 3% and no less.

However, as a consumer, you can always try to negotiate. And if they don’t want to reduce their fees, you can go talk to another agent. Or you can stick with it if you think the fees are justified and you like them.

The problem is that most agents all charge about the same amount, which is part of the settlement problem. The commissions appear fixed, even if they are not technically fixed.

There always seems to be resistance if you question the fees

In my experience (I don’t speak for anyone else), there is always resistance if one attempts to negotiate the real estate agent’s fee.

I understand. Why wouldn’t there be any? You ask them to accept less money for their work. It’s their livelihood. Chances are they won’t smile and say, “Of course!” »

However, it is not unreasonable to negotiate their fees, as you would for many other things.

You can negotiate mortgage rates, you can negotiate the price with the buyer or seller. Or on necessary repairs, unforeseen events, deposits, etc.

There are many things you can negotiate in life. This does not mean that the other party must comply. But you can at least have the conversation.

In the past, I have negotiated discounts on real estate agent fees, usually in the form of a credit to use toward closing costs.

Did I ask for half of their fee or most of it? No, I asked for maybe 0.50%, so instead of making 2.5%, they made 2%.

Did they have the right to say no? Absolutely. This is all part of the negotiation. In one particular situation, I asked for credit and the agent was beside herself.

She told me she never negotiated her fees for X number of years, etc., etc. Then the next day, she was reluctantly forced to part with some of her compensation to make the deal work.

Lots of money is better than no money.

Buyers and sellers also need to negotiate along the way!

The irony when a real estate agent refuses to negotiate is that home buyers and sellers often have no choice.

For example, a home seller can negotiate a list price with their agent, even if they don’t like the price.

Then they may have to drop the price by X amount if it doesn’t sell. Again, they can tell their agent they’re holding out if they want. But there is a good chance they will lower the price.

And guess what. This hurts the seller even more. Let’s say the purchase price goes from $800,000 to $750,000 and the agent charges 2.5%.

The seller loses $50,000, while the agent receives $1,250 less in compensation. Remember, they’re probably sharing it, so they’re probably losing even less than that.

The same thing can happen if a buyer needs to make a higher offer as part of their negotiation.

All of a sudden, the offers pile up and they have to bid an extra $50,000 to win the house.

In this case, the buyer may be asking their agent, “Can I get a credit for closing costs?” »

After all, their out-of-pocket expenses are therefore higher and they might need a little help to cross the finish line.

Also, the agent now makes more money due to the higher sale price, assuming they charge a percentage fee.

(Can we finance real estate commissions?)

Should agents play the long game and offer discounts?

I’ve mentioned before that many real estate agents are not very keen on reducing their compensation. And it’s obvious why.

They would earn less money! We all understand. But at the same time, everything is negotiation when buying and selling a home. Real estate is a big negotiation.

So why should sellers accept lower prices for their homes and buyers forced to pay more, while agents stand their ground?

Now this might also have to do with semantics. Real estate agents, like everyone else, don’t like to be called “discount agents.”

Or that they accept less than their worth.

But couldn’t they still offer a credit for closing costs, or a reduced fee, as a gesture to maintain a longer relationship?

Imagine an agent who offers credit on a transaction, then gets referrals later. And additional transactions from this customer.

The credit allowed this agent to stand out. This in no way devalued them. It was a well thought out negotiation to win even more business down the line. Or to make a deal work.

And overall, even if they agreed to less on a transaction, they could still make a lot more.

Finally, in light of the regulation demanding agents clearly and visibly state that commissions are entirely negotiable and not set by law, perhaps it is time to actually negotiate.

Continue reading: How does the real estate agent commission work after settlement?