It’s OK to Talk to Your Real Estate Agent

The NAR’s major settlement is expected to be finalized next week, but the changes will already go into effect in August.

It includes requiring a written buyer’s agreement before visiting a home and removing compensation offers from Multiple Listing Services (MLS).

That prior agreement should also set out the compensation the agent is charged, such as a dollar amount for the down payment or a percentage of the sale price.

There also needs to be a “clear statement that consumer commissions are not mandated by law and are fully negotiable.”

However, whenever I bring up the idea of ​​a real estate agent reducing or reducing fees, it is met with resistance.

Real Estate Agent Commissions Negotiable

NAR was quick to point out that “agent compensation for real estate buyers and sellers continues to be fully negotiated.”

And that the negotiation of commissions needs to be clearly communicated to the buyer through disclosure.

So we know what amount the agent is proposing it is not set in stone. For example, an agent may say they charge 3% of the purchase price.

For a $500,000 home, that would be $15,000, although it’s important to point out that this amount is often shared with the brokerage. Which means the agent can see part of that.

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

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

Now back to the real estate agents. They can also set their price and not move. Just because their money is “negotiable” doesn’t mean they will negotiate.

Many will tell you that it is sand. That is their right. If they want to charge 3% they can charge 3% and not less.

However, as a buyer you can still try to negotiate. And if they are not willing to lower their price, you can go talk to another agent. Or you can stick with them if you believe the money is worth it and you love them.

The problem is that many agents charge the same amount of money, which was part of the problem with the payment. Commissions seem to be fixed, even if they are technically so.

There is always resistance when you ask for payment

In my experience (I don’t speak for anyone else), there is always resistance when you try to negotiate money with a real estate agent.

I get it. Why wouldn’t there be? He asks them to accept a small fee for their work. It is their life. Chances are they won’t smile and say, “Sure!”

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

You can negotiate the loan amount, you can negotiate the price with the buyer or the seller. Or for necessary repairs, emergencies, earnest money, etc.

There are many things you can discuss in life. That doesn’t mean the other party has to commit. But at least you can have a conversation.

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

Did I ask for part of their money or most of it? No, I asked for maybe .50%, so instead of them getting 2.5%, they got 2%.

Did they have the right to say no? Definitely. This is all part of the negotiation. In one case, I asked for credit and the agent was right next to him.

He told me that he had never negotiated his money for X amount of years, etc., etc. Then the next day he reluctantly undertook to part with one of his compensations to make the deal work.

More money is better than no money.

Buyers and Sellers Should Negotiate on the Road!

The irony when a real estate agent won’t negotiate is that home buyers and home sellers often don’t have a choice.

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

Then they might have to drop the price by X amount if it doesn’t sell. Also, they can tell their agent to hold firm if they choose. But they may have lowered the price.

And guess what. It hurts the seller a lot. Say the purchase price drops from $800,000 to $750,000 and the agent charges 2.5%.

The seller is out $50,000, while the agent gets $1,250 less in compensation. Remember, they may be sharing it, so they may lose even less.

The same can happen if the home buyer has to make a higher offer as part of their negotiations.

Suddenly there are multiple offers and they need to bid another $50,000 to win the home.

In this case, maybe the buyer says to his agent, “Can I get a credit toward the closing costs?”

After all, their out-of-pocket costs are higher as a result and they may need a little help to get to the finish line.

And, the agent now gets more money because of the high sales price, it is assumed that they charge a percentage.

[Can real estate commissions be financed?]

Should Agents Play the Long Game and Offer Discounts?

Now I have said that most real estate agents are not very willing to lower their compensation. And it’s obvious why.

They will get less money! We all get it. But at the same time, everything is a negotiation when buying and selling a home. Real estate is a big deal.

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

Now it may also be related to semantics. Real estate agents, like everyone else, don’t like to be called “discount agents.”

Or that they accept less than their worth.

But could they offer a credit toward closing costs, or a reduced fine, as a gesture of long-term relationship-building?

Consider an agent who gives credit to one transaction, and then receives referrals in the future. And more transactions from that client.

Credit makes that agent stand out. It doesn’t diminish them in any way. It was a well thought out negotiation to win more business down the line. Or to make the deal work.

And when they are combined, even if they accept less than one transaction, they can do a lot more because of it.

Finally, because of the agreement that requires agents to clearly and unambiguously state that commissions are fully negotiable and not dictated by law, perhaps it’s time to negotiate.

Read on: How does a real estate agent’s commission work after being paid?