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Ask the Audience: How do you defend your own paycheck?

This came in as an Ask the Broker question:

Thanks for having this site.

We found the house we like and we made the offers and counter offers, finally getting to a place where we got stuck. The seller does not want to came down on her price and we cannot pay more. We are $20,000 apart.

What I would like is for all parties involved — the buyer, the seller and the two agents — to come to the table to make up the difference.

Have you heard of a situation like this?

Alas, I have.

I can be pretty free about using commission dollars to solve problems with transactions, but there are constraints. I will rebate every cent of an untoward commission or bonus, and I don’t hesitate to pay out of my own pocket to make problems go away.

But: My money is mine to do with as I choose.

I can address the problem posed by the question with a very simple analogy:

If your employer decided to buy a company car for his own use, would he be justified in asking you to kick in $1,000 toward the purchase price?

That clarifies that.

But take up the problem as a Realtor or lender: What would be the optimal response to an appeal like this?

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  • 7 comments

    7 Comments so far

    1. Chuchundra July 24th, 2007 7:23 pm

      Here’s a better analogy.

      Say your boss comes to you and says the company is doing poorly. If you (and to make it realistic, everyone in the company) don’t take a modest pay cut, he’s going to close the doors. What do you do?

    2. Greg Swann July 24th, 2007 7:26 pm

      You lost me. There is only one house on Earth? Only one job? In any case, the scenarios are not analogous. The buyers want a house they are unwilling to pay for. How should a professional defend his or her paycheck in that circumstance?

    3. Robert Kerr July 24th, 2007 7:39 pm

      If your employer decided to buy a company car for his own use, would he be justified in asking you to kick in $1,000 toward the purchase price?

      Make the choices:
      1. Kick in $1,000
      2. No paycheck at all
      … and ask again.

      That’s a better analogy and it changes everything.

    4. Chuchundra July 24th, 2007 8:19 pm

      I’m not sure where I lost you.

      Look, the decision is either take less money and be guaranteed a payday or refuse and figure you can make the money somewhere else. How do you defend your paycheck? You don’t. You either take less money or go find another paycheck. Simple as that.

      In the end, though, it seems like a silly question. If 20K is such a significant part of the home price that it’s a deal breaker, I don’t see where there’s enough money in the realtors’ commissions to cover it. If it’s a smaller part of the transaction, the buyer and seller should be able to work it out.

      If the buyer asking me this question, I think I’d just tell him to walk away. If 20K more will break you, you need to look at cheaper houses or wait for prices to come down a bit.

    5. Greg Swann July 24th, 2007 8:21 pm

      > If the buyer asking me this question, I think I’d just tell him to walk away. If 20K more will break you, you need to look at cheaper houses or wait for prices to come down a bit.

      Now we’re getting somewhere.

    6. Tom July 25th, 2007 6:47 am

      From a sellers perspective, I look at the deal. The last house I sold the agent had both sides, but brought a buyer that was light on his offer.

      After a couple of weeks of dancing with a prospect and the e agent knowing that I had a number that I needed to hit (and that he had promised 2 months prior that hitting that number would be a piece of cake), I told him that I would walk without that number being hit.

      I also allowed that I would do the deal if they kicked in, but that was at their discretion to get the deal done quicker.

      The home was priced right, the real estate agent was in full concurrance on this, and knew that the buyer and I were close. So he kicked in a point and a half to get the deal done. I never would have expected it if he did not have both sides or that the home was priced incorrectly. Just for 1.5 percent commision lost, he got a closed deal and took the risk off of the table.

      I think that is where a seller asking an agent to spend their own money makes a great deal of sense.

    7. john July 25th, 2007 9:29 am

      There is simply no blanket response to this; its a purely subjective math riddle. What is the asking price, and commission levels for the agents? How much debt does the seller need to pay off? And how much cash do they need to get that other house they are in escrow to buy? All of these can affect the outcome.

      If the buyer is 20k short, they are looking at the wrong home. The seller has no obligation to come down on price, and the agents have no obligation to ‘pitch in’. If this buyer is stretching already, its a risky buyer based on qualifications in this market anyway… hope they are locked-in!

      However, it may serve all parties to comply with the buyer’s request, as a deal made is a deal made. If both agents can still make a fair dollar and the seller can avoid having to re-test the market, they should consider a collaborative effort to close that 20k gap. A buyer’s market defined.

      But don’t let emotion or defense of full-service commission govern this decision. Either it makes sense or it doesn’t. The buyer wants to negotiate, and they risk not getting the home they desire. If I were a seller or the agent, I would likely counter that the buyer will have to also come up (maybe 5-10k or so) to match good faith efforts by other parties. But if the lower price was simply unacceptable, then tell the buyer that the deal won’t work. And then take the property back to the marketplace and hope your market holds up, and your next buyer is stronger.