Excuse me for asking, but do you have any intention of doing ANYTHING correctly during this negotiation?

My business partner has been working with some high-end home buyers over the past several months.  As you might well imagine, the buyers are very...particular about their needs/wants, so it took awhile to find the perfect home.  They made an offer about a week ago on a brand-new custom home, and since it had been on the market for quite awhile, and the listing agent indicated that they were negotiable, the offer was about 5% less than the asking price. 

For the sake of example (i.e. not the real numbers), let's say that they offered $45,000 less than the asking price of $899,000.  Not bad under the circumstances, right?  We also asked for a few modifications, including some cosmetic upgrades.

Well, the initial counteroffer seemed decent enough, with the exception of the fact that the builder put us in a rather awkward and unenviable position.  Along with his counteroffer, he indicated that he would pay less commission to us and his own agent if the price were under $880,000 (again, not the real number).  Since we have a fiduciary responsibility to our client, we clearly want him to get the best deal possible.  Why offer one commission rate in the MLS only to immediately go for the jugular when you get an actual offer in hand? 

Every time that this happens to me, I make a point to tell the other agent that it is not appreciated and, furthermore, that it simply isn't necessary this early in the game.  Why would the builder and the listing agent risk upsetting the buyer's agent so quickly?  I never give up commission during negotiations unless I am positive of two things:

• The negotiation will fail if I don't do it
• There is not an acceptable alternative home available right now for my buyers

But wait!  There's more!

We managed to get past that part of the discussion without sacrificing anything, and we were still working to arrive at an acceptable price.  Yesterday, the listing agent gave us a written counteroffer with a "fuse" on it (time deadline for our response) of today at 5pm. 

Here's the part that left me in disbelief today:  The other agent wrote an email stating that they were also negotiating another offer, and that they had another counteroffer out on this home.

Quick quiz: What is wrong with this scenario?  What if BOTH buyers sign off on the TWO existing written counteroffers without making any changes?

Simply put, that would mean that they just sold the home to two different buyers.  That is ripe for a lawsuit.  I was shocked that they admitted that they had done this, especially since she actually put it in writing in the email to my partner. 

Not surprisingly, our buyer decided that he didn't like being forced into a corner by the builder and the other agent, so he didn't change anything and he instructed us to tell them that his original offer stands.  More than likely, we will be looking for another home for him and his wife.

The lessons that we can all learn here:

• Losing future business over a relatively small amount of money is just plain foolish.  We will likely never show or sell another home built by this particular guy.
• Negotiating with more than one party is not proper unless one of them is a backup offer only and that is clearly established.
• No matter who your client is (in this case, the builder), you will likely offend the other agent by trying to take away his/her commission once the rate has been advertised.

When I have taken listings for a lower commission, I haven't EVER asked the other agent to share in the discount with me.  When a client asks me if this is an acceptable strategy during negotiations, I tell them that I think it is highly unwise to even bring it up, and I haven't had anyone pursue it further. 

Truthfully, this sale would probably have closed if not for the shoddy and potentially illegal actions of the builder and his clueless agent. 

Thanks for taking the time to read this one. 

Austin Real Estate  Copyright 2008