I'm going to buy some real estate in Florida within the next few weeks. I want to drive a hard bargain. I was wondering about the wisdom of going directly to the listing agent. The advice on the web seems to be to get a buyer’s agent because the seller is going to pay that fee anyway. It seems to me that if the selling agent can double dip, they will try double hard to make the deal work -- even if it is a low ball offer. But maybe I'm wrong. - John T.
Dear John: You’re never wrong. The rule I go by is that one can negotiate anything in a Real Estate deal. There are, however, some restrictions on what a professional Realtor can and can’t do. But those restrictions don’t apply to you. If you’re unlicensed, you can offer anything you want to. You can offer a bicycle in exchange for a triplex - especially if it’s located in Detroit. In your case, you are buying into one of the most distressed markets in the country: Florida. I still kick myself for not buying oceanfront condos in Miami in the early 90s that were going for one hundred fifty thousand bucks. You, my friend, get to play hardball in one very soft market.
I think it’s a very good idea to go straight to the listing agent. It stands to reason that, if an agent doesn’t have to split the commission with another agent, he’ll have all the more incentive to close the deal. But Florida prohibits dual agency, so I am not sure whether that logic would apply although they also have something called Transactional Agents. But one thing a listing agent is not allowed to do is give you money out of his pocket. The rationale for that is that he’s working for the seller and it could lead to unethical behavior. Every state has different laws on whether buyers can get rebates through buyer’s agents. In Florida, it is possible that once you agreed to a price you could run it through an agency that would rebate you 50% of the buyer’s commission. Of course, you are still going to have to do all the legwork. The sellers could also pressure the selling agent to contribute to any credits that they might pay you. Again, everything is negotiable but it has to be done in a certain way consistent with state law. But the big picture is getting a rock-bottom price.
So where does that leave you? You make a low ball offer after researching the market thoroughly. If there is some resistance from the seller, you can always suggest that the agent give a little on his commission to convince the owner to part with the property. If the gap between your offer and what the seller wants is a few thousand dollars - a smart real estate agent will not hesitate to volunteer some of his commission to make the deal happen. Of course, if your low ball offer is accepted by the seller - it’s really no skin off your back what the seller pays his agent.
It’s really a question of how and when to go about it in the negotiation process. Sometimes you won’t have to bother. When there is a bridgeable gap, the agent will work it out with the seller without you even suggesting it. Right now, both real estate agents and sellers in Florida want to get deals done, so they are far more motivated than five years ago. But a lot depends on the property that you are looking to buy and what the demand for it is.
If you are looking to drive a hard bargain, nothing helps you more than having several properties that you are bidding on. Fear of losing the deal to another seller often motivates the other side. I’ve worked two properties at the same time and in each I disclosed that I was bidding on another place. Think about the psychology of that for the seller.
Aside from convincing the agent to trim his commissions and nabbing the best price, there are other ways to save yourself money when you’re buying real estate. I’ve convinced more than one mortgage broker to reduce their fees - which tend to be outrageous. There is nothing set in stone that says you can’t do that. It’s up to you to negotiate a reasonable fee with them - especially when you’re buying an expensive property and taking out a $300,000 loan. Just ask and you will receive. So negotiate the price first and start bickering with your mortgage broker before you sign the all the closing forms. Make sure they understand that it’s a deal breaker. Be prepared to delay closing until they get their minds straight.
You can even negotiate the premium on title insurance. It’s a competitive business and there is always room for some give and take. Once an agent has an agreement between the buyer and the seller on the price, you might find him very cooperative in helping you reduce the expense of financing the deal.
About the only thing you can’t negotiate is the excise taxes - but those are usually paid by the seller.
Always remember that you’re dealing with a licensed professional. There are restrictions on what the agent can and can’t do. Legally, a seller’s agent is not even supposed to tell you that his client is flexible on the price. The most he should do is tell you to write whatever offer you have in mind and he’s obliged to take it to the seller - even if he thinks it’s ridiculous.
Allow me to finish this with one last piece of advice. If you are a real estate investor or even a first time buyer - it really pays to know as much as the average real estate agent. One way to do that is to take a real estate course at a community college or at a broker’s office. The licensing course is about 60 hours and varies by state. Investing a few weeks in this course will pay huge dividends in every real estate deal you do.
Good luck bottom fishing.
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