By Glenn Freezman, Nucazza, LLP
I was talking with a friend recently who told me that he's one of those guys who needs ‘adult supervision' when he buys a car because he has a history of reading the price tag posted on the vehicle and then writing a check for that amount to the dealership. He understands that the price is negotiable but he says that the challenge is that he doesn't really know how to get started driving the price down even when it's to his benefit.
I doubt he's alone. Those of us who work in real estate not only understand the ‘dance of the negotiator' but are comfortable in our roles as agents who are trying to increase our value in a deal while also making sure that our clients walk away satisfied and not feeling like they got burned in some way.
But for many ‘civilians', price negotiating is a skill they only need to rely upon once a decade (or less) so many don't ever get that good at it.
It's also a challenge to understand just when these negotiating skills can be put to use. For example, nobody ever goes to the checkout line at the supermarket and says to the cashier "I understand that the price on this package of steak says $18.43 but I'm willing to give the store $14.50 in an all cash deal right now." Yet, when buying a big ticket item like a car or a home it's an expected part of the buying process.
Fortunately, people who don't have certain skills can often rely on those who do to get the job done. Whether that means hiring a plumber, electrician or attorney, the end result is that we can find a way to get the help we need from somebody who is experienced in solving those particular problems.
However, in most traditional real estate agreements it's difficult to find help negotiating deals because of the way the compensation agreements work. To put it frankly, an agent who successfully negotiates a home price down has also effectively negotiated the amount of her commission check down at the same time.
But what if it didn't need to be this way? What if instead of working for a commission check that is contingent on the final selling price of the home, the agent is free to really help the home buyer find a deal because they're getting paid the same amount for their help regardless of the final home price?
Ay Nucazza, these are the questions I get to think about all day long.
During my conversations with Realtors in the field (and from the great feedback on this site!), I hear a lot of mumbled agreement that this particular issue can be a real burden for agents and give rise to potential conflicts of interest. So, wouldn't it be better if we could all work together to find a way to give agents the ability to help their home buying clients really negotiate the selling price of a home in a clear and transparent way? Wouldn't it be better if the role of the agent was not to ‘sell' home buyers on the idea of buying a home (for which they get part of the deal) but to instead stand beside the buyer as an advocate and consultant to offer them expert guidance, all the time knowing that they were getting paid for their time and expertise AND that their paycheck wasn't based on the closing price of the home OR getting the buyer all the way to the closing table?
Here's the bottom line as I see it: the current real estate system was built by people as a way to make the process of buying and selling homes as efficient as possible. However, that model no longer works for all home buyers and it no longer works for all agents. As a result, we're now creating new models that allow home buyers to pay a fair amount for the expert guidance they need. It also means that agents can offer that support without needing to take on ALL the risk that often comes with more traditional real estate agreements.
At the end of the day, it's about help home buyers realize their dreams while getting paid for your time. Being able to do this is a way that allows everybody to ‘win', well that a really great deal.
I was talking with a friend recently who told me that he's one of those guys who needs ‘adult supervision' when he buys a car because he has a history of reading the price tag posted on the vehicle and then writing a check for that amount to the dealership. He understands that the price is negotiable but he says that the challenge is that he doesn't really know how to get started driving the price down even when it's to his benefit.
I doubt he's alone. Those of us who work in real estate not only understand the ‘dance of the negotiator' but are comfortable in our roles as agents who are trying to increase our value in a deal while also making sure that our clients walk away satisfied and not feeling like they got burned in some way.But for many ‘civilians', price negotiating is a skill they only need to rely upon once a decade (or less) so many don't ever get that good at it.
It's also a challenge to understand just when these negotiating skills can be put to use. For example, nobody ever goes to the checkout line at the supermarket and says to the cashier "I understand that the price on this package of steak says $18.43 but I'm willing to give the store $14.50 in an all cash deal right now." Yet, when buying a big ticket item like a car or a home it's an expected part of the buying process.
Fortunately, people who don't have certain skills can often rely on those who do to get the job done. Whether that means hiring a plumber, electrician or attorney, the end result is that we can find a way to get the help we need from somebody who is experienced in solving those particular problems.
However, in most traditional real estate agreements it's difficult to find help negotiating deals because of the way the compensation agreements work. To put it frankly, an agent who successfully negotiates a home price down has also effectively negotiated the amount of her commission check down at the same time.
But what if it didn't need to be this way? What if instead of working for a commission check that is contingent on the final selling price of the home, the agent is free to really help the home buyer find a deal because they're getting paid the same amount for their help regardless of the final home price?
Ay Nucazza, these are the questions I get to think about all day long.
During my conversations with Realtors in the field (and from the great feedback on this site!), I hear a lot of mumbled agreement that this particular issue can be a real burden for agents and give rise to potential conflicts of interest. So, wouldn't it be better if we could all work together to find a way to give agents the ability to help their home buying clients really negotiate the selling price of a home in a clear and transparent way? Wouldn't it be better if the role of the agent was not to ‘sell' home buyers on the idea of buying a home (for which they get part of the deal) but to instead stand beside the buyer as an advocate and consultant to offer them expert guidance, all the time knowing that they were getting paid for their time and expertise AND that their paycheck wasn't based on the closing price of the home OR getting the buyer all the way to the closing table?
Here's the bottom line as I see it: the current real estate system was built by people as a way to make the process of buying and selling homes as efficient as possible. However, that model no longer works for all home buyers and it no longer works for all agents. As a result, we're now creating new models that allow home buyers to pay a fair amount for the expert guidance they need. It also means that agents can offer that support without needing to take on ALL the risk that often comes with more traditional real estate agreements.
At the end of the day, it's about help home buyers realize their dreams while getting paid for your time. Being able to do this is a way that allows everybody to ‘win', well that a really great deal.
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