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Is It Ethical to Negotiate the Agent’s Commission?

BY Richard Montgomery TIMEJanuary 28, 2022 PRINT

Dear Monty: My wife and I are in the process of downsizing. We have shopped neighborhoods and have chosen several where we would like to land. In this process, one particular agent showed us five or six homes. Now it is time to list our home. This agent’s company has proven a definite lack of knowledge of our development. We have decided to go with another company. We have signed nothing, nor have we made any verbal agreements. Is it unethical to negotiate a sweetheart deal with the listing agent by agreeing to use them to purchase our new home?

Monty’s Answer: You are free to negotiate any arrangement on the commission with any real estate agent. The question will be, is the agent open to negotiating the fee with you? It will affront some agents; some will not be affronted but say no; and others will negotiate with you. The agent’s broker may or may not participate in a reduced-fee transaction, which may reduce your new agent’s incentive to cooperate on the fee.

Check for Procuring Cause

A potential issue could come to bear in the situation you have described. Your agent may have a procuring cause conflict with the agent that showed you homes in the new neighborhoods. There would be no conflict unless you bought one of the homes the first agent showed you. I will assume both agents are members of the National Association of Realtors (NAR), which bounds them to NAR’s rules on procuring cause. Procuring cause protects agents from being cut out of the fee when a buyer or seller switches agents. If you plan to buy one of those homes, you want to discuss this with the new agent to learn if a conflict is possible.

A procuring cause arbitration may determine, depending on the particular circumstances and events, that the first agent was the procuring cause and is therefore entitled to a share of the commission on the purchase. This arbitration is not something that the customers are directly involved in and will not affect the closing but could affect a side agreement to which the new agent agreed.

Is the Broker Involved?

If you can make some deal, it may be in your best interest to see that the designated broker of the office signs off on the details. The agent does not own the listing. The agent’s broker owns the listing. Sometimes, agents switch brokers. When that happens, if the broker has not OK’d the commission cut, you will not have a better deal.

One Final Thought

This is not a suggestion. Ask both agents for a concession and let them both know there is competition. This transparent approach may help obtain a more favorable outcome. One factor most consumers are not aware of is that the listing agent may not be the one to sell the house. An agent from a different company may be the one to find a buyer.

Do not be shocked if an agent from the company you know to be unfamiliar with your neighborhood finds the buyer for your old home.

Richard Montgomery is the author of “House Money: An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty or at DearMonty.com. Email him at monty@dearmonty.com.
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