Tips and Traps When Negotiating Real Estate: When Would You Be Better Off Negotiating Directly?

Negotiating without an Agent: When Would You Be Better Off Negotiating Directly?

A lot depends on whom the agent represents. Does he or she repre­sent you or the other party? If the agent represents the seller, then he or she cannot fully represent the buyer and vice versa. Thus, in most states today we have strictly seller’s agents and strictly buyer’s agents. In some states there is a confusing combination where the agent has both the buyer and the seller sign a statement saying that he or she represents them both, except not entirely and not in every situation. This is called a “dual agency.”

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I firmly believe that no one can serve two masters faith­ fully at the same time. No agent can faithfully serve both buyer and seller. If the agent represents the seller, than he or she cannot fully represent the buyer and vice versa. Yet many agents appear to do so.

Be sure you determine for whom your agent works. If you’re a buyer and the agent is working for the seller, be careful of confiding your thoughts on price and terms to him or her. Your agent has a fiduciary responsibility to reveal your confidences to the seller! The same holds true if you’re a seller talking to a buyer’s agent. If the agent presumes to represent both parties, then probably neither party should confide.

All of which comes down to the fact that if the agent with whom you’re dealing is not your fiduciary, then you might be wise to deal directly with the other party. Or get an agent who is loyal only to you.

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TIP

Most buyers and sellers use agents as a kind of financial “Dutch uncle” to try out prices or terms they might consider. There’s nothing wrong with this, so long as the agent is your fiduciary. Watch out, however, if the agent is working for the other party.

Can an Agent Work Against You?

Even if you’re working with an agent who is presumably strictly on your side, there are still some subtle, sometimes unconscious con­flicts of interest that can crop up. Remember that an agent works in a community, and it’s to his or her advantage to see that every deal is a good deal for all concerned. The reason an agent wants things to work out this way is, simply put, repeat business. He or she wants to continue doing business in the community, wants recommenda­tions (the bread and butter for new clients)—in short, wants to maintain a reputation.

This desire for a “fair deal” every time has some interesting rami­fications in negotiations that are not always to your advantage. Let’s say you’re a buyer who, naturally, wants to get the lowest possible price on a house you want to purchase. (Obviously, this is the desire of every buyer.)

An agent shows you a suitable house and you decide you want to make an offer. Only, you want to lowball it. You want to offer far less than the asking price. So, you explain your offer to your agent and, further, state that you want to give the seller a 24-hour deadline to decide—no more.

The agent balks at this and argues against it. She says that the offer is ridiculously low; the seller won’t even consider it; and it’s not worth presenting. Further, the short deadline is a bad idea. She argues you can’t “push people around like that. You have to be fair and give them time to consider.” In short, she doesn’t want to pre­ sent your offer.

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Now, is the agent looking out for your best interests? In some cir­cumstances a lowball offer accompanied by a short deadline can be very effective. This is especially the case where the seller has had few or no other offers and is desperate to sell. But, if the agent doesn’t want to present the deal, I would suspect that the real reason is that she isn’t comfortable in pressuring sell­ers. The lower the offer and the shorter the deadline certainly make her job harder.

There’s also her reputation at stake. She probably doesn’t want to be known in the business as someone who brings in lowball offers. It could affect the agent’s ability to list other properties in the commu­nity. (Would you list with someone who brings you very low offers?)

So she attempts to discourage you. She says she wants the best deal for both you and the seller. But, do you really care if it’s the best deal for the seller? Or are you concerned about getting the best deal for you?

How can you count entirely on this agent? She may, indeed, want to do the best for you. But conflicting with that may be her timidity and/or desire to maintain a reputation in a community among sell­ers and other agents.

Remember that for you, however, it’s a one and only deal. You’ll probably never see this seller again. Most likely you don’t have a rep­utation as a real estate negotiator to worry about. (Indeed, the bet­ter the deal you make, the more respect you’re likely to get from your peers.) Further, you can’t count on making up on the next deal what you lose on this one. For you this is a “one shot,” and it’s to your advantage to get the best deal possible.

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In short, your interests and those of your agent could be in conflict.

What is a good agent going to do in this situation? I’ve known agents whom I consider to be excellent who, when faced with taking in an offer that they really didn’t want to present because of per­sonal reasons, would do the right thing and simply tell such a buyer, “I’m sorry, but I really can’t represent you. I think you’d be happier with some other agent.” In other words, they realized they couldn’t act in the best interests of the buyer and bowed out.

On the other hand, I’ve also known agents who would continue to work with buyers (or sellers) no matter what, even when they weren’t representing them faithfully. The agent may indeed take in the offer, but only make a halfhearted presentation, which will surely not get the sale. You could lose the purchase not because of your offer, but because of your agent.

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When your agent starts arguing that he or she doesn’t want to present the offer you’re ready to make, it’s time to think about presenting the offer yourself—or getting a new agent.

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There’s a very fine line between advice that’s in your interest and coercion. A good agent may indeed point out that it could be to your advantage to make an offer or to counter and may even suggest what he or she considers to be a realistic price. On the other hand, a not so good agent may use a variety of arguments to bully or even scare you into making an offer that you really don’t want to make.

If you ever find you are negotiating with an agent over the kind of offer or counteroffer to make, you are being pressured. The agent should present alternatives, not insist on what’s best for you. If the agent insists, it could be that he or she is really insisting on what’s best for the agent.

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This is not to suggest that you should never trust your broker. It’s only to point out that you should never put all of your trust in any other person in a business transaction.