{"id":8271,"date":"2024-11-21T03:41:49","date_gmt":"2024-11-21T03:41:49","guid":{"rendered":"https:\/\/finderica.com\/its-okay-to-negotiate-with-your-real-estate-agent\/"},"modified":"2024-11-21T03:41:49","modified_gmt":"2024-11-21T03:41:49","slug":"its-okay-to-negotiate-with-your-real-estate-agent","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=8271","title":{"rendered":"It\u2019s Okay to Negotiate with Your Real Estate Agent"},"content":{"rendered":"
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The big NAR settlement is expected to be finalized next week, but the changes already took effect back in August.<\/p>\n

They include<\/a> needing a written buyer agreement prior to touring a home and removing offers of compensation from the Multiple Listing Services (MLS).<\/p>\n

That upfront agreement is also supposed to lay out the compensation charged by the agent, such as a flat fee dollar amount or percentage of the sales price.<\/p>\n

There also needs to be \u201ca conspicuous statement that broker commissions are not set by law and are fully negotiable.\u201d<\/p>\n

Yet whenever I bring up the idea of a real estate agent reducing or discounting their fee, it is met with resistance.<\/p>\n

Real Estate Agent Commissions Are Negotiable<\/span><\/h2>\n

\"commissions<\/p>\n

NAR has been quick to point out that \u201cagent compensation for home buyers and sellers continues to be fully negotiable.\u201d<\/p>\n

And that the negotiability of commissions needs to be communicated to the consumer explicitly via disclosures.<\/p>\n

So we know whatever fee an agent proposes isn\u2019t set in stone<\/strong>. For example, an agent might say they charge 3% of the purchase price.<\/p>\n

On a $500,000 home, that\u2019d be $15,000, though it is important to point out that this amount is often shared with the brokerage. Meaning an agent may only see a portion of that.<\/p>\n

Conversely, if you walk into a retail store or a restaurant, you will likely see set prices. For example, a pizza might cost $15.99, and a stick of deodorant might be $5.99.<\/p>\n

You can\u2019t go up to the cashier and begin negotiations. They\u2019ll tell you kindly (hopefully) to leave the store if you don\u2019t like the price.<\/p>\n

Now back to real estate agents. They too can set their price and not budge<\/strong>. Just because their fee is \u201cnegotiable\u201d doesn\u2019t mean they\u2019ll negotiate.<\/p>\n

Many will tell you to pound sand. That\u2019s their prerogative. If they want to charge 3% they can charge 3% and no less.<\/p>\n

However, as a consumer you can still attempt to negotiate. And if they aren\u2019t willing to lower their fee, you can go speak with another agent. Or you can stick with them if you believe the fee is justified and you like them.<\/p>\n

Problem is most agents all charge around the same amount, which was part of the issue with the settlement. The commissions seem fixed, even if they technically aren\u2019t.<\/p>\n

There Always Seems to Be Resistance If You Question the Fee<\/span><\/h2>\n

In my experience (I\u2019m not speaking for anyone else), there is always resistance if you attempt to negotiate the real estate agent\u2019s fee.<\/p>\n

I get it. Why wouldn\u2019t there be? You\u2019re asking them to accept less money for their job. It\u2019s their livelihood. Chances are they aren\u2019t going to smile and say, \u201cSure!\u201d<\/p>\n

However, it\u2019s not unreasonable to negotiate their fee, as you would many other things.<\/p>\n

You can negotiate mortgage rates, you can negotiate with the buyer or seller on price. Or on necessary repairs, contingencies, earnest money, etc.<\/p>\n

There\u2019s lots of stuff you can negotiate in life. That doesn\u2019t mean the other party has to oblige. But you can at least have the conversation.<\/p>\n

In the past, I\u2019ve negotiated discounts on real estate agent fees, usually in the form of a credit to be used toward closing costs.<\/p>\n

Did I ask for half of their fee or most of it? No, I asked for maybe .50%, so instead of them earning 2.5%, they earned 2%.<\/p>\n

Did they have the right to say no? Absolutely. This is all part of negotiating. In one particular situation, I asked for the credit and the agent was beside herself.<\/p>\n

She told me she had never negotiated her fee in X amount of years, etc., etc. Then the next day she begrudgingly obliged to part with some of her compensation to make the deal work.<\/p>\n

A lot of money is better than no money.<\/p>\n

Buyers and Sellers Have to Negotiate Along the Way Too!<\/span><\/h2>\n

The irony when a real estate agent won\u2019t negotiate is that home buyers and home sellers often have no choice to.<\/p>\n

For example, a home seller might negotiate a list price with their agent, even if they don\u2019t love the price.<\/p>\n

Then they might have to lower the price by X amount if it doesn\u2019t sell. Again, they can tell their agent they are holding firm if they choose to. But chances are they might lower the price.<\/p>\n

And guess what. It hurts the seller more. Say the purchase price drops from $800,000 to $750,000 and the agent charges 2.5%.<\/p>\n

The seller is out $50,000, while the agent receives $1,250 less in compensation. Remember, they are likely sharing it, so they probably lose even less than that.<\/p>\n

The same thing can happen if a home buyer has to make a higher offer as part of their negotiation.<\/p>\n

All of a sudden there are multiple offers and they need to bid another $50,000 to win the home.<\/p>\n

In this case, maybe the buyer says to their agent, \u201cCan I get a credit toward closing costs?\u201d<\/p>\n

After all, their out-of-pocket expenses are higher as a result and they might need a little help getting to the finish line.<\/p>\n

Also, the agent is now earning more money<\/strong> because of the higher sales price, assuming they are charging a percentage fee.<\/p>\n

[Can real estate commissions be financed?]<\/p>\n

Should Agents Play the Long Game and Offer Discounts?<\/span><\/h2>\n

Now I\u2019ve already mentioned that many real estate agents aren\u2019t too keen about lowering their compensation. And it\u2019s obvious why.<\/p>\n

They\u2019d earn less money! We all get it. But at the same time, everything is a negotiation when buying and selling a home. Real estate is one big negotiation.<\/p>\n

So why should sellers accept lower prices for their homes, and buyers be forced to pay more, while agents hold firm?<\/p>\n

Now it might also have to do with semantics. Real estate agents, like anyone else, don\u2019t like to be referred to as \u201cdiscount agents.\u201d<\/p>\n

Or that they\u2019re accepting less than their worth.<\/p>\n

But could they not still offer a credit toward closing costs, or a reduced fee, as a gesture to nurture a longer relationship?<\/p>\n

Imagine an agent that offers a credit on one transaction, then gets referrals in the future. And additional transactions from that client.<\/p>\n

The credit made that agent stand out. It didn\u2019t cheapen them in any way. It was a well thought out negotiation to earn even more business down the line. Or to make a deal work.<\/p>\n

And on aggregate, even if they accepted less on one transaction, they might make a lot more as a result.<\/p>\n

Lastly, in light of the settlement requiring<\/a> agents to clearly and conspicuously state that commissions are fully negotiable and not set by law, maybe it\u2019s time to actually negotiate.<\/p>\n

Read on:<\/span> How does real estate agent commission work post-settlement?<\/p>\n

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\"Colin<\/div>\n
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Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.<\/p>\n<\/div>\n<\/section>\n

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\"Colin<\/div>\n
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