Let’s go on a little thought exercise. Don’t worry, it’ll be easier than actual exercise.
Imagine you’re at work, doing whatever it is you do. You’re working away, minding your own business, not even doing anything wrong like slacking off at the water cooler or flirting with that hot blonde from accounting. Then, out of nowhere, one of your bosses comes in and has an announcement. You’re paid too much money, and he wants you to take a 12% pay cut. How would you react to that?
I know how I’d react, and most of the words aren’t suitable for this page. I wouldn’t be impressed, and I might even cry a little, but that’s mostly because I cry all the time. You know that expression ‘crying over spilt milk?’ That was named after me, after I knocked over my bowl of cereal. What? I like cereal.
We don’t normally suggest people take a pay cut. Even when we think certain professionals are overpaid, we still grudgingly pony up and pay, even though our cheap hearts are screaming in protest. (Or maybe that’s because of cholesterol.) I hate how much it costs for my dentist to fill a cavity, but you don’t see me trying to negotiate the fee before getting in the chair.
And yet, when it comes to real estate agents, we do it all the time.
I’ve heard all the arguments before. Real estate agents make thousands of dollars per hour they actually work. They make too much money considering the educational requirements of the job. They’re no better than used car salesmen. They’re less attractive than that guy who lived in the watchtower at Notre Dame. And so on. Wow, those people really don’t like real estate agents.
Remember how you felt when you imagined someone suggesting you take a pay cut? Now imagine how your real estate agent feels when you hammer her on her commission, money that’s no more guaranteed than my March Madness bracket. (Whoo! Not the least bit topical!) Sure, she’s grateful for the opportunity to sell your home, and she’s grateful you picked her over all her competitors. But there’s still going to be that general frustration that she’s not quite getting paid what she deserves. It’s the same feeling my sexual partners feel when I’m done with them. I don’t know what their problem is. I’m the best lover I’ve ever had.
Chances are, your agent isn’t just trying to sell your place, they’ve got another dozen on the go. If you’re one of twelve, do you really think they’re going to spend the most amount of time on the one that’s paying them the least? Even I know that, and I’m not very good at math. 3+2 is 14, right?
Most of the time another agent will be on the buying half of the transaction, so they’ll get half of the total commission. It comes down to the same issue, will other agents want to show your property if it pays them less? If you live in a big market like Toronto or Calgary, there are hundreds of properties just like yours. Some of us are insane enough to think the market is about to implode, so maybe now is not the best time to take steps that will sabotage the sale of your house.
Okay, maybe I haven’t convinced you. Fine, feel free to aggressively negotiate your commission with your agent. Any good salesperson knows sales is a numbers game, and making something on a sale is a whole lot better than making nothing. Your agent likely won’t bat an eye (at least to your face) when you suggest a lower commission.
But please make this clear when you and your agent write up the listing agreement. Don’t spring it on them 3 months into the process, right as you’ve got an offer on the table that isn’t quite up to your expectations. You’ve entered into a contract, and you should really honour its terms until the end. How would you like it if your agent insisted on more commission if the final sale price was better than expected? (They can’t, actually, but that’s beside the point.)
I know it hurts to pay real estate commissions. It hurts me to drop cash for most everything, since I am the cheapest person outside of one of those Extreme Cheapskates. But when it comes to paying your real estate agent, it’s money well spent.