Do You Want the Buyer for Your House Negotiating the Purchase of Your New House

Do You Want the Buyer for Your House Negotiating the Purchase of Your New House

Court decisions on Real Estate Commissions changed everything. New rules do not allow Listing Brokers working with Sellers to negotiate or collect commissions paid to Brokers representing Buyers. That sounds simple on the surface. Sellers pay commissions to Brokers listing the property and represent the Seller. Simple. Buyers negotiate with a Broker to represent them and agree to pay a commission to the Buyer’s Broker. The Seller negotiates services, agrees to a commission to the Broker representing them and Buyers negotiate services and commissions with Brokers representing them.

The court decision intended to place Sellers in control of the Contracts they negotiate with the Broker they choose to work with and Buyers have the same power to negotiate with the Broker they choose to work with. The court ruling was meant to make Listing Contracts easier to understand and give home sellers more control over the process.

Of course there are always exceptions to the rules along with people looking for gray areas and loopholes. One of which is presented as a noble concept. Sellers have the choice of helping first time home buyers by agreeing to pay the commission they negotiated with the Broker they chose to work with. Let’s do something unique by taking a few steps back and looking at a few practical examples that could pop up in this new system.

Let’s stick to nice round numbers. You have a $300,000 house you want to sell. You plan on using the money you receive at closing as a down payment on a new house. Using the old method of doing business you may have paid between $12,000 and $18,000 or more in commission to sell your house. That all changed. I decided to look at the commission schedule Crossroads Real Estate charges. My commission concept is simple. I looked at the units sold in 2020 before mega inflation hit the housing market and the average commission received on each unit. In round figures that came out to an average sale price of $200,000 and average commission of 2%. Which came out to an average commission of $4000. Which is what I decided Cross Roads Real Estate would charge as a flat fee for residential property in Sheboygan County in Wisconsin. For outside of Sheboygan County there is an additional $500 fee to cover time and transportation expenses within an hour of Sheboygan.

Looking at the example. You have a $300,000 home to sell. If you looked at the average old commission, $15,000 and find you can sell your house paying a commission of only $4000 you look at the round figure to see you are saving more than $10,000. Which places you in a position to make a decision. The goal of the court decision was to place home sellers in the position to take control of their home sale and the money they plan on receiving. One option is to lower the list price of your house. You found the perfect house you want to put an offer on. You may want to lower the list price on your house to get a quick offer. Just what the court wanted to achieve. You decide to go with option A and put the house on the market at a list price of $290,000, or $10,000 less than similar units on the market. You have a few showings and an offer comes in. We look over the offer and in that offer the Agent working with the Buyer is asking you to pay the commission to their Broker. Not knowing any better the Buyer decided to sign an agreement to pay their Broker a 3% commission and is asking you to pay them $8700. The Buyer is looking at their Agent as a rock star because they found such a great deal. You the seller have a different view. You cut the price of the house for a quick sale. The Buyer is saving $10,000 on the price of the home and then asks you to pay the commission the Buyer agreed to pay their Broker. You the seller look at the offer as double dipping. Which is when you need a good Broker representing you to explain to the Broker working with the Buyer how the price was reduced so the Buyer would have no problem paying a fair commission to the Broker they chose to work with. In fact, by asking the seller to pay the commission the Buyer agreed to pay the Broker they are working with, the Buyer is now interfering with the offer you the Seller put on the new home you have your heart set on. The Buyer for your house wants to control the down payment you want to put on your new house. That Buyer is also interfering with your loan, the lender you are working with on the new home, and may even effect the interest rate you are trying to negotiate.

Taking a single step back and looking at a possible scenario this new system will present, you can see how home Sellers may be asked to pay for poor decisions Buyers may make or their lack of negotiating skills. The good news is, if a seller decided to List their property at a lower than market price that may bring in a number of offers presenting the seller with the opportunity to negotiate with multiple Buyers offering different terms with at least one Buyer comfortable with paying the commission they negotiated with the Broker they chose to work with.

There is nothing stopping a Seller from helping a first time home buyer. A circumstance brought up in the news explaining this new system. The choice is in the hands of the individual home seller.

Other scenarios can pop up but I’ll save those for other articles as we see how this new system pans out.