It’s okay to negotiate with your real estate agent

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

they Includes Needing a written buyer agreement before touring a home and removing compensation offers from Multiple Listing Services (MLS).

This pre-agreement is also supposed to specify the compensation the agent receives, such as a fixed dollar amount or a percentage of the sale price.

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

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

Real estate agent commissions are negotiable

NAR is quick to point out that “agent compensation for home buyers and sellers remains fully negotiable.”

The negotiability of commissions must be communicated explicitly to the consumer through disclosures.

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

On a $500,000 home, that would be $15,000, although it’s important to note that this amount is often shared with the brokerage. This means that the agent may only see a portion of that.

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

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

Now back to estate agents. They can also set their prices and not budge. Just because their fees are “negotiable” doesn’t mean they will negotiate.

Many will tell you sand pounding. This is their prerogative. If they want to charge 3%, they can charge 3% and no less.

However, as a consumer you can still try to negotiate. If they are not willing to lower their fees, you can talk to another agent. Or you can stick with it if you think the fees are justified and you like it.

The problem is that most agents charge about the same amount, which was part of the settlement problem. Commissions seem fixed, even if they technically aren’t.

There always seems to be resistance if you question the fees

In my experience (I’m not speaking for anyone else), there is always resistance if you try to negotiate real estate agent fees.

I get it. Why wouldn’t he be there? You’re asking them to accept less money for their work. It is their source of livelihood. They probably won’t smile and say, “Sure!”

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

You can negotiate mortgage rates, and you can negotiate with the buyer or seller on the price. Or on necessary repairs, emergencies, earnest money, etc.

There are a lot of things you can negotiate in life. This does not mean that the other party must oblige. 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 used to cover closing costs.

Do I ask for half the fee or most of it? No, maybe you asked for 0.50%, so instead of them earning 2.5%, they got 2%.

Did they have the right to say no? definitely. This is all part of the negotiation. In one specific situation, I asked for credit and the agent was on edge.

She told me she never negotiated her fees for X years, etc., etc. Then the next day she reluctantly had to give up some of her compensation to make the deal work.

Lots of money is better than no money.

Buyers and sellers have to negotiate along the way too!

The irony of when a real estate agent doesn’t negotiate is that home buyers and sellers often don’t have the option to do so.

For example, a home seller may negotiate a list price with his agent, even if he doesn’t like the price.

Then they may have to lower the price by X amount if it doesn’t sell. Again, they can tell their agent they’re stuck with it if they choose. But there are chances that they may reduce the price.

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

The seller received $50,000, while the agent received $1,250 less compensation. Remember, they’re probably sharing it, so they’ll probably lose less.

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

Suddenly, multiple offers come in and they have to bid another $50,000 to win the house.

In this case, the buyer might say to their agent, “Can I get a credit for closing costs?”

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

also, The agent now makes more money Because of the high selling price, assuming they charge a percentage of the fee.

[Can real estate commissions be financed?]

Should agents play the long game and offer discounts?

I already mentioned that many real estate agents are not too keen on lowering their compensation. And it’s clear why.

They will make 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 of the big negotiations.

So why do sellers accept lower prices for their homes, and buyers are forced to pay more, while agents remain resilient?

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

Or they accept less than their value.

But can they still offer a credit to cover closing costs, or a reduced fee, as a gesture to foster a longer-term relationship?

Imagine an agent offering credit for one transaction, then getting referrals in the future. And additional transactions from that customer.

Credit makes this agent stand out. They were not licensed in any way. It was a well thought out negotiation to win more business in the future. Or to complete the transaction.

All in all, even if they accept a smaller amount in one transaction, they may earn a lot more as a result.

Finally, in light of the settlement require For agents to clearly and clearly state that commissions are fully negotiable and not determined by law, maybe it’s time to actually negotiate.

Read on: How does the real estate agent’s commission work after settlement?