Is it unethical to negotiate a sweetheart deal with the listing agent by agreeing to use them in the purchase of our new home?

December 3, 2019

You are free to negotiate fees with any real estate agent. Some real estate agents negotiate fees and some do not. Here is information about certain constraints that may help you best pose the question.

Reader Question: Do real estate agents negotiate fees on dual transactions? My wife and I are in the process of downsizing. We have shopped neighborhoods and have chosen where we would like to land. In this process, we have had one particular agent show us 5 or 6 homes. Now it is time to list our home. This agent’s company has proven a definite lack of knowledge of our development, and we have decided to go with another company. Is it unethical to negotiate a sweetheart deal with the listing agent by agreeing to use them in the purchase of our new home? We have signed nothing, nor have we made any verbal agreements.

Monty’s Answer: You are free to negotiate with any real estate agent. If the agent has suggested such an agreement, you are already aware that the agent will participate. Still, if this deal is your idea, the question may be; will the agent be open to negotiating with you? Some agents will be insulted, some will not be affronted, but say no, and others will negotiate with you. In some instances, the broker will not participate in any reduced fee transaction, which may reduce an agent’s incentive to cooperate.

The procuring cause effect

The one potential issue that could come to bear in the situation you have described is the concept of ” procuring cause ” in the real estate industry. Assuming both agents are members of the National Association of Realtors (NAR), they are bound by NAR’s rules on procuring cause. Procuring cause could impact the fee on the purchase of your new home if the first agent showed you the home you now want to buy from the second agent. Go to https://dearmonty.com/real-estate-procuring-cause/ for more information.

A procuring cause arbitration may determine, depending on the particular circumstances and events, that the first agent was the procuring cause, and 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 the second agent’s agreement.

Ratchet up negotiations

Consider asking both agents for a concession. Let them both know there is competition. This is transparency. If you can make some kind of deal, it may be in your best interest to see that the designated broker of the office signs off on the details. The agent’s broker, not the agent, owns the listing. It may be that this approach could help you obtain a more favorable outcome.

A real estate myth

Your concern about agents’ lack of knowledge about your development is justified. Do not be shocked if an agent or company you have never heard of sells your home. One fact most home sellers are not aware of is that the listing agent, or even the listing company, may not be the one to sell the house. Most listing agents indeed want to be the selling agent. Still, a large percentage of buyers will come from cooperating agents representing other real estate companies.