Why “Secret Codes” to Communicate Seller Incentive Fees Should Be Avoided
Part of the NAR Lawsuit settlement is that buyers and sellers are to work their respective agents’ fees into the negotiation process and come to an arrangement that benefits everyone.
Darryl was asked recently on a coaching call several questions about how to communicate what a seller is willing to pay towards a buyer’s agent’s fee, but the more he considered workarounds, the more he believes “secret codes” should be avoided at all costs.
He recently saw a listing where the listing agent seemed to confuse seller’s concession and commission, and he had the distinct impression they were telling selling agents via a “wink” or “nod” or some other kind of secret statement to say their seller was willing to pay 2% to the selling agent. First, the seller’s concession field should not be used to convey our seller’s intentions for commissions, or as we call them, professional fees. Second, trying to secret-code our seller’s wishes is going to land us in hot water.
The Intentions of the Settlement
Putting things in secret-code goes against the spirit of the settlement. The #1 complaint in the lawsuit was that the seller didn’t have the option to negotiate the selling fee with the selling broker. The whole reason we lost was because we didn’t give the sellers the opportunity to negotiate with the selling agent.
If we say the seller is willing to pay at 2% seller’s concession fee, we’re STILL not giving the homeowner the option to negotiate with the selling agent. The key term here is “negotiate.”
Recently, the attorney in the NAR Lawsuit, Michael Ketchmark, stated his intentions very clearly by saying “Every move you make, we’ll be watching you.” He indicated that they were on the hunt for agents and brokerages alike who were looking for workarounds to the terms of the settlement, including screen captures of social media posts and blog articles. Agents who continue to “Secret-code” their seller’s offer are opening themselves up to legal problems.
Related reading; Michael Ketchmark: The Attorney Who Put Profits Over People in the NAR Lawsuit
Calling Listings to Find Out What the Seller is Offering
On the outset, simply picking up the phone and calling the listings your buyers are interested in seems like the perfect solution…until its not. It’s the same trap as using the seller’s concession field to communicate what a seller is willing to pay ahead of any offers made. It robs the seller of the opportunity to negotiate with the selling agent.
Related reading: The Negotiation Dance: Why Partnering with the Other Agent is in Everyone’s Best Interests
What’s a POWER AGENT® to Do?
First and foremost, in the example here we are NOT price fixing – we are merely using these numbers and percentages as an EXAMPLE.
Next, what the seller is willing to offer doesn’t matter, and we’re going to explain why. It doesn’t matter what they are willing to offer because when you write the offer with the buyers, you’re going to tell the seller: “Here’s the offer we’re going to make, and it includes a 2% (or 3 or 4%) selling fee. The seller will then counter, saying ‘that number doesn’t work for us. We want $500,000 that includes the 3% fee’ or ‘we’ll take the $500,000 but not the 3%, we’re willing to pay 2%’.” There! You’re negotiating!
So, they are offering 2%, so what are you going to do next? You tell your buyer, “We’ve got this Buyer’s Agreement for 3%, but they’re paying 2% because they didn’t accept the 3%. So, we’re short 1%. Now we have a choice to make. You can either cut me a check for $5000, we could up our offer by 1% and put it in the contract and include it in your financing. What would you like to do?”
There is no need to secret-code the selling fee in the listing, because it’s not worth the legal hot water you will inevitably land in, and it’s intended to be a part of the negotiation process in order to best serve the needs of our buyers and sellers. Not only do the seller’s have their much-anticipated ability to negotiate terms, but it presents buyers with more choices as well, without having to pay out of pocket. In the end, presenting choices is how we best coach our clients, leaving them with a positive experience as they move through the transaction and into their next stage in life.
Related reading: Axios – Real estate brokers scramble for workarounds ahead of new rules on commissions
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