The Myth of the Real Estate Agent Negotiator

Posted on February 1, 2009 by | 29 Comments

Peter Mericka B.A., LL.B OPINION
by Peter Mericka B.A., LL.B
Real Estate Lawyer
Qualified Practising Conveyancer Victoria
Director Lawyers Real Estate Pty Ltd

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A real estate sale negotiator requires a thorough knowledge of the laws and regulations affecting real estate, drafting expertise to convert ideas into a written document that will give legal effect to the agreement reached, and the ability to recognise threats to the legality of the sale (and to be able to deal with them if they arise).

Only a qualified property lawyer has the ability to properly negotiate the sale of real estate on behalf of a vendor.

Estate agents have created the myth of the real estate “negotiator” as a way of convincing consumers of the agent’s importance in the sale transaction.

In reality, estate agents take no real responsibility for the contract or the conduct of the sale. The estate agent drops out of the transaction well before it is complete, leaving all final negotiations to the lawyer. It is a little known fact that, when a real estate agent is involved in a sale, the most important negotiations take place after the sale has taken place. The real estate agent just watches from the sidelines, hoping that the commission will not be jeopardised.

True responsibility rests with the person whose role it is to ensure that the vendor is aware of the legal requirements, obligations and rights associated with a sale – the lawyer.

It is the lawyer’s duty to ensure that the vendor complies with Section 32 of the Sale of Land Act, to draft the contract of sale and any special conditions the vendor may need, and to take the sale transaction to its conclusion at settlement – and sometimes beyond.

As a property lawyer, I am constantly called upon to correct mistakes made by estate agents during their “negotiations”.

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29 Comments

  • http:// says:

    I too am a legal practitoner and it has always amused me that real estate agents cast themselves as negotiators. I have been both a vendor and a purchaser of real estate, and never yet have I experienced any attempt by a real estate agent to engage in any form of negotiation.

  • http:// says:

    Reminds me of Mike Moore’s documentary movie about gun control called Bowling For Columbine. There is a scene where Moore is talking to a gun-toting red-neck from the neo-nazi Michigan Militia and he askes the dude what he does for a job and he says “I’m a real estate negotiator”. Everyone laughs.

  • Hi Rainer,

    It’s good to see a lawyer leaving a comment. I’m particularly interested in your opinion as to why lawyers have been so quiet on this issue – why do lawyers, and I must include the LIV here, say nothing when estate agents tell consumers that they are negotiators and that they possess special “negotiations skills”?

  • real estate says:

    Ah, the voice of reason.

    If I had to sum up my personal crusade, to make people realise the agent myth, then it would be along the lines of what you wrote above Peter.

    They are the famed master negotiators…..bunkum.

    Whoever is standing around when the owner says yes to an offer, gets the kudos for it.

    If the property doesn’t sell during negotiations ( I imagine 50% of the time ) the agents remain stonily silent. There is no radio interview or press release about how they didn’t sell the property.

    In other words, shock , horror, agents only ever tell us of there success not their failure.

    If you have studied agents hit rates over a decade as I have, it’s not something they would like to see publicised.

    I challenge any real estate agent in Australia to undergo an ongoing 3rd party audit of their sales to listing ratio.

    Now I know Peter’s post was about agents masterful negotiating but surely the success rate they have should mirror their magical powers.

    Furthermore. I’ll agree to publish figure sabout my company’s private sale system success rate right alongside any agent who wishes to take up my challenge.

    Thanks again Peter and great post as usual

  • http:// says:

    I am not a property law practitioner, but it is my understanding that practitioners in that field rely on maintaining good relations with real estate agencies, which dampens their enthusiasm for spirited negotiation, particularly vis a vis the real estate agent. The practitioner on the other side of my recent sale made it quite clear to me that she could not step on the real estate agent’s toes. While I was sympathetic I did feel rather disappointed with her approach.

  • Hi Real Estate,

    Deceptive devices such as auctions, sale by set date etc. are not used by negotiators – they’re alternatives to negotiation, and they’re the reason why real estate agents achieve poor results.

  • Hi Rainer,

    If you personally know any lawyers who are in the position of having to pander to real estate agents, and who would like to compete with estate agents instead, get them to contact me.

  • http:// says:

    I had a buyers’ advocate (he’s a friend and a client) assist me when selling my house. He not only ensured that I received at least $100,000 more than I would have had he not been at the auction — the auctioneer came in at one point and said he’d gone as high as he could; only to be told that if another $100,000 wasn’t forthcoming, he could forget it — he also took over post-auction negotiation, which the agent was very reluctant to do (he said it was a “done deal” and wanted to get on to the next auction). We agreed an extended settlement date which saved me the hassle and cost of bridging finance in return for the purchaser gaining access pre-settlement so that his architect could start work immediately. The agent was interested only in the sale; the advocate was interested in what could work for everyone and had the nous to ask for terms I didn’t know were possible. I would not buy, or sell, without an advocate.

  • Hi Jape,

    OK, I understand that this buyer’s advocate is a friend, but I must question his judgement if he allowed you to put your property up for auction – an auction is a surefire way for a vendor to lose money on a sale.

    This is confirmed by the fact that you would have received $100K less if your friend hadn’t been involved.  What was your property worth at current market value?  Did your friend know?  Did your friend advise you to find out?  If your friend had been a competent vendor’s advocate (i.e. a lawyer) he would have told you to obtain an independent valuation before deciding to sell (lawyers are required to protect their clients in this way).  I suspect that an independent valuation would have revealed that your property was worth at least $100K more, without your having to rely on your friend’s intuition.

    How did you choose such an incompetent estate agent to act as your auctioneer (you should refuse to pay his commission and report his incompetence to CAV if he told you that he couldn’t get any more for your property, and then your friend immediately got another $100K).

    The deal your friend worked out for you is the basic stuff that lawyers negotiate regularly; but usually post-settlement, after the real estate agent has had a chew on it (estate agents, be they vendor’s agents or buyer’s agents rarely admit that their clients need the assistance of a lawyer – they’re usually too over-confident and/or insecure).

    Who drafted the special condition to ensure that the pre-settlement access would not set you up for problems between sale and settlement – if your friend did it, he has let you down by exceeding his level of competence, if the estate agent did he has committed a criminal offence; and neither your friend nor the estate agent would have professional indemnity insurance to protect them or you if the special condition was not properly drafted.

    While your friend appears to have done wonderful things, in my opinion he has let you down badly.

    I do agree that you should not buy or sell without an advocate, but I would add that the advocate should be a lawyer, and not an vendor’s estate agent turned buyer’s estate agent.

    Consider this Jape: What if the incompetent vendor estate agent who, in your words, “was only interested in the sale” were to become a buyer’s estate agent?

  • http:// says:

    In fairness to my friend the advocate, I only involved him after we had already appointed the selling agent and when the ‘conditioning’ process had begun. That is, the agent had suggested a price was achievable prior to our signing with him and, as the sales campaign progressed was suggesting lack of interest, etc, and asking us to revise our price expectation. It’s then that we fell out of trust. Your other points may be valid; but as all this happened in 2002, I fear it’s too late now.

  • Hi Jape,

    OK, that puts a different complexion on things.

    I have had quite a lot of experience with real estate agents, both as vendors’ advocates and as buyers’ advocates, and the fact of the matter is that real estate agents are lousy advocates and utterly useless in formal negotiations.

    I have no problem with an estate agent who investigates properties for sale in order to source one for a client. But once the property has been found, the agent should leave the negotiation to the negotiation experts – the parties’ lawyers.

  • http:// says:

    Tell me nothing about non-negotiating agents, Peter.

    Only yesterday a seller client came to me with a signed contract offer presented to him for signing by his real estate agent. Needless to say, the careless agent did not have his client obtain advice on the following:

    *the offer was less than the list price

    *the deposit was less than 10%, was in fact less than 3% and – wait for it – would not be paid by the buyer until 10 days after the seller signed, and…

    *instead of the usual 30 days, the settlement date was 60 days (from the contract date).

  • http:// says:

    But wait, there’s more.

    After my client told his non-negotiating and less-than-helpful agent about my concerns, the agent contacted me to advise that the buyer had now agreed to pay a modest initial deposit and the rest (still pitifully low) in 10 days.

    The previously undisclosed reason for the 60 day settlement was that the agent (who was also the managing agent of this investment property) would need to give a notice to vacate to the tenants who would hopefully move out before the settlement. The buyers, the agent explained to me, wanted to occupy the property immediately after they settled. No matter there was nothing in the contract about this and, because the agent had included the tenancy details in the contract, vacant possession need not be given by the seller on settlement.

    I’ve now given this dumb agent instructions on behalf of his commission-paying seller to prepare a fresh contract with suitable amendments drafted by me.

  • http:// says:

    Me again.

    Clients who came to see me today with a signed contract offer presented to them by their agent (without a word of comment) were horrified when I pointed out that their buyers proposed to pay a miserly deposit of $1500 on a $310,000 purchase.

    The clients were then mortified when I explained further that the buyers proposed to pay this token sum, not on signing the contract, but rather two days after their finance was approved under a 21-day finance condition. Yes, the deal was that the sellers should take their property off the market for more than three weeks with the buyers having put up zilch to show their sincerity.

    Needless to say, my clients have told the useless agent not to waste their time, my time and his own with such offensive offers.

  • http:// says:

    “But wait there’s more” so where are the set of steak knives for the seller?  I know the answer is that the buyer gets them in 60 days.

    I have recently had a real estate agent tell me that, “you have to know that WORLD ECONOMIC CONDITIONS have forced a change in the market”.

    I told him that is rubbish and just an excuse!

  • http:// says:

    You can fool some of the people all of the time, all of the people some of the time and, as Richard Nixon reputedly observed, “two out of three ain’t bad.”

    The clients mentioned above, who were yesterday going to tell their agent not to waste their time etc, phoned me first thing this morning.

    Yes, you guessed it. After talking with their agent, they were now going to sign the contract!

  • http:// says:

    Well Tim are you sure you were right and the real estate agent was wrong because it looks as though your clients thought more of the estate agents advice and that he negotiated them into the house they wanted.

  • Hi Richard,

    I don’t know that it’s a matter of the estate agent having “negotiated” anything. What appears to have happened is that the vendors have made the decision to sell, even though the offer is not as good as it should be. The point to be made is that they have had the benefit of legal advice, they are now aware that the contract is a rather wonky, but they have made an informed choice to proceed. Had it been left to the estate agent the choice to proceed would not have been an informed choice.

  • How’s this for an example of real estate agent negotiation:

    The real estate agent received the purchaser’s offer to buy subject to finance. The real estate agent then prepared a formal contract with a finance condition in it, and had the purchaser sign it. The real estate agent then removed the

    page with the finance condition in it, and replaced it with a page that had no finance condition, then had the vendor accept the offer. The switch didn’t come to light until the purchaser sought to have the finance condition extended.

    The purchaser’s solicitor had been engaged by the purchaser on the basis of a referral from the real estate agent. When the purchaser complained to the solicitor about the switching of the contract page the solicitor announced that he could not longer act for the purchaser – why? Because the estate agent who referred the purchaser to the solicitor was married to the solicitor!

    This anecdote links well to a previous posting about real estate agent “referrals” and bribes.

  • A further example of real estate agent negotiation is provided  by this definition from an estate agent coaching website:

    “Q. What is the number one skill required of Australasian sales agents at the moment?

    A. Negotiation. The ability to bring about a successful compromise between a vendor with unrealistic expectations and a purchaser who doesn’t want to increase the offer.”

    I just love the way real estate agents invent their own definitions.

  • http:// says:

    Our first comment on negotiation is that, contrary to popular belief, estate agents are not skilled negotiators. In fact, estate agents are not negotiators at all. Estate agents are simply facilitators. They bring two parties together and thereby facilitate the sale, but they cannot negotiate the sale.

  • http:// says:

    Dear Peter, I have read all your posts and you are seriously an ego driven head case. Personally, i dont think you could negotiate a snake into biting you and I have my doubts to your competence as a conveyancer…..let alone a lawyer.
    I think you just may be simply JEALOUS of Agents who have far superior negotiating skills not to mention far superior people skils and its simply sour grapes on your behalf as you miss out on all the action to good estate practices such as Barry Plant & Ric Ruston’s team.

  • Hi Kev,

    You’ve convinced me that you have a way with words and that you are indeed a polished negotiator.

  • http:// says:

    ha ha Kev it looks like Peter has put a stake thru your heart
    no wait a minute you have put it thru your heart yourself with your anger and your rotten spelling
    i bet you bully and abuse your way thru your negotiations as well
    your just like fletcher who is probably your hero

  • http:// says:

    Peter. You could learn a few good negotiating tips from Ian Reid. Now there is a good operator.

  • Hi Geoff,

    I assume that this is the same Ian Reid you worship as a “good operator”:

    Estate Agent’s Finance Condition

    Estate Agent’s Gazumping Condition

    Writing nasty special conditions into a contract on behalf of a trusting purchaser is not the hallmark of a “good operator”.

    Reid also tips a bucket on you and your mates in:

    Ian Reid Takes Aim At Fellow Agents

    What Reid discloses about your rotten industry while promoting his own alternative sales method indicates that “double agent” is a concept that is not limited to the world of international espionage!

    So Geoff, are you still on your knees in front of the great Ian Reid?

  • This posting has attracted the usual barrage of abuse from anonymous real estate agents, such as the eloquent and erudite “Kev” above, whose attack on “Goody” had to be moderated because of its obscenity (hopefully not one of the tools in Kev’s negotiation strategy kit).

    As I have asked in previous postings over the years, is there a real estate agent out there who can provide an example of how he or she negotiated a sale on behalf of a vendor while staying within the law? (i.e. without providing legal advice to either party, and without telling lies).

  • http:// says:

    Peter. Much as it hurts me to say this I have to agree that the things Ian Reid has done that you described show he is not really a good operator after all. He does a lot of advertising on TV and it makes him look good and maybe too good to be true.

  • Hi Geoff,

    I must congratulate you on going to the trouble of looking into Ian Reid and his methods a bit further.

    Are you able to offer any concrete examples of estate agent “negotiation skills”? Kev (see above) has demonstrated the tactics of abuse and bullying as methods convincing others, but I have had no other examples put forward to show that estate agents can actually negotiate.

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