Bernice Ross
Feeling overwhelmed by all the advice about how to negotiate buyer broker commissions? Confused about what to tell your buyers and sellers? Surprisingly, adjusting to the coming changes may be easier than you may expect.
It’s incredibly frustrating to see so-called industry experts giving advice that keeps agents trapped in the old model that still involves extracting the buyer’s agent fee from the seller or through the listing agent sharing their commission. Specific examples include websites that display listing commissions to buyers’ agents through the seller/listing agent, advice focused on “seller offers of compensation,” or use of forms that recommend “seller concessions.”
I recently reached out to James Dwiggins, the CEO of Next Home Inc. for his opinion about how to approach this issue. His advice was crystal clear: If you are in a seller’s market or a normal market, there is zero reason sellers and their agents should advertise buyer’s agent compensation, concessions or anything in advance of an offer.
“The buyers need to put their best foot forward, and sellers should be open to anything and not put their cards on the table ahead of time. They should let the offers dictate their strategy and response,” Dwiggins told me.
Simple Way to Overcome Seller’s Objection
Dwiggins reminded me of an approach that I have trained for over 30 years on how to handle commission objections.
The first step is asking sellers: “Is it correct to assume that you would like to get the highest possible net price for your property in the shortest amount of time?”
The answer is almost always, “Yes,” but I have seen two cases where there was a divorce, and the answer was “No.”
Next, show them your unique value proposition document that outlines all the services and tools you use to help them achieve the highest possible net price for their property.
If the seller objects to paying the buyer’s agent commission, counter their objection by asking: “Which is most important to you? Not paying the buyer’s broker commission or getting the highest possible net price for your property?”
“The seller only cares about the net, so this discussion about, ‘I don’t want to offer any compensation’ is total nonsense,” Dwiggins said. “The listing agent just needs to tell the seller that they need to be open to anything and we’ll decide once the offers are in.”
It’s also important to remember that advertising “seller concessions” on the MLS or elsewhere may violate your fiduciary duty to your seller – if you’re in a seller’s market for the property you are listing – by telling buyers what your seller is willing to do before receiving an offer.
Instead, simply state that that the seller “is willing to entertain any and all requests you put in your offer.”
Negotiation Strategies
The language you use while negotiating buyer-broker agreements can make or break your deal.
First, use the word “fee” versus the words, “compensation” and “commission,” which have become hot-button words and don’t encompass things like the fee-for-service business model.
Sellers have repeatedly heard through the media that they only need to pay their half of the commission. And buyers are more likely to push back on paying their own “commissions” because they may not be able to afford it, haven’t had to do so in the past, or simply don’t like the idea.
Second, use “terms and/or conditions,” not “concessions.” For decades there has been a field in most purchase contracts where agents can write in additional terms or conditions their buyers want, such as “repairing the roof,” “buying down the buyer’s interest rate,” or “including the dining room chandelier in the purchase price.”
Instead, follow Dwiggins’ advice and leave this field blank. Instead, put the additional terms your seller wants to use in the “other terms and conditions field,” or in an addendum. Also, be sure to check with your manager/broker to confirm how they would like you to handle this situation.
You also need to make sure your buyer-broker agreement takes care of important details: the agreement’s start and end dates, a “good faith” representation of the services you’ll provide and your fee.
It’s also important to determine whether the buyer has an active exclusive buyer-broker representation agreement with another agent. If this is the case, it’s likely you may not be able to represent them until that agreement expires, unless the existing agreement is for a specific property only. Consult with your broker/manager and/or attorney about the specific circumstances and how best to proceed.
The bottom line: Dwiggins believes that all the advice and workarounds are making everything way too complicated:
“This is really simple. Everything is negotiable. Buyers should put all their requests in their offer. The end. No need to advertise concessions, or compensation, or really anything, [and], if a seller puts ‘Sold As-Is,’ you can still request what your buyer wants in the offer. It’s all a negotiation,” he said.
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
