Dual agency discount?

Question

I'm going in the morning to look at an mls listed property.  I already own a rental on the same street and know the area very well. Houses are all built by same builder and issues with one are predictable with others.   All that to say, I'd be perfectly happy to do the deal without the services of a buyers agent if the sellers agent would agree to a reduced commission.  I think dual agency is legal in TN, although often frowned upon.  My question is if this is worth pursuing to bring the cost down a bit or should I just resign to using my own agent.  In addition to saving money, I'm finding that agents are getting less motivated to work with investors because they are busy selling expensive homes, and the ones who aren't usually are new and know much less than I do.  This results in a lot of foot dragging on negotiations and poor responsiveness from agents.  Thoughts, suggestions, or experiences in not using a buyers agent for the sake of a discount?

Steve Vaughan · Answer

Congrats on what sounds like a great purchase!

For experienced investors, I have used this discount strategy as well.  While a buyer's agent can bring great value to the purchase process, it is not 'free.'

If I am completely comfortable with the process and asset type like @Wesley C. in this case, I lower my offer by 3% more than I would with an agent.  I then say in my offer that I am not represented in this transaction, but reserve the right to obtain a selling agent if the offer is countered.  Most aren't.  The LA gets both sides and I get the discount.  If the price needs to come up within a couple %, the LA will usually take the hit if I remain solo.

When I was new, I did not do this.  I obtained my own agent. Again, this isn't for new folks.  Cheers!

Bill Gulley · Answer

Are you sure you understand agency law and who is owing what to who? In a dual agency, no servant can serve two masters. That agent may be bound to communicate any significant information to the owner, while they will owe you no such duty. You have a slip up in saying something, like I'm qualified to $150,000 and the asking price was $145,000, the seller may get that tid bit!

That's why newbies need to be represented, they often don't know what the can or can't say and it can cost you.

Now, if you know the ins and outs of brokerage representations and elect to go it alone, a few points:

remind the agent they have less liability in the deal as they don't represent you.

remind the agent their broker isn't splitting with another broker.

remind them the deal will or should go much quicker with only them facilitating the deal, they aren't waiting on a buyer's agent to coordinate settlement requirements.

and, remind them that you have less recourse toward their activities as they are only responsible for facilitating the requirements, if you didn't see the three foot hole in the kitchen floor as you stepped over it.....tough!

So, there are good reasons they shouldn't charge as much for full services with responsibilities.......now, if you can sell that, great. Just don't screw up! :)

Wesley C. · Answer

Here's the update.  I'm grateful for you guys thoughts on this one, but I'm glad I didn't listen to you!  After looking at the property I informed the agent that I have an agent if he would prefer I use him and then ask him open endedly how he would like to proceed.  He then said he would prefer to be the intermediary and offered to take a 4% commission rather than the 6%.  Those were his terms, not mine.  I told him that sounded like a reasonable way to proceed.  So, now there is a reasonable chunk of money left in the seller's pocket and mine.  He seemed like he was eager to do this and says he has done it this way many times before.  We all left the showing amicably and I think all parties are on board.  Before negotiations even begin, I've already reduced the seller's cost.  The seller is also an investor.

I share all this because it is a strategy that others may want to try.  As I explained before, it is a win-win-win for all parties involved.  If for some reason it happens to be a negative experience in the end I'll post that as well.

Jeff Wallace · Answer

@Wesley C.

Jeff Wallace · Answer

I can see how that scenario might work at the end of a negotiation when both parties are stuck and only a few thousand dollars apart, but it seems like you would be using this as an opening strategy??... And if that is the case, how much more do you think you can negotiate the price down when you are using the listing agent and you just started the process by taking money out of his pocket (This will be his perception of your request even if he would be making 1% more with you vs a represented buyer). That makes me ask, is a 2% discount is all you are looking for? Submit an offer at the price you want to pay and let the seller and the agent reduce the commission if they need to in order to make your offer work.

Personally, I was very loyal to my agent (even including agent info on online auctions that paid a commission when the agent didn't do any work) and found that my loyalty was rewarded with diligence and hard work... Many times, I asked for a dozen offers to go out and the agent never grumbled ..... A smart agent knows that a loyal investor will carry them through the rough times when retail buyers are riding out a rough market.

Justin Tahilramani · Answer

Wow - this thread is 4 years old...... Anyways, I often go directly to the listing agent to make offers. My theory is that many agents will be motivated to earn a double commission. It's also a timing thing for me - in hot markets the quicker you get an offer in front of a seller - the better.

Some agents/brokers will not serve as dual agents, others will - YMMV.

Will Fraser · Answer

Hey @Wesley C.!  I wanted to speak only towards the relationship you have and will have with agents . . . if you have been well served by your agent so far, or if there is an agent in your market you KNOW you want to work with because they'll serve you excellently, then you'd be best served over the long haul to feed this business to them.  If you dislike your current agent and don't intend to work with them any more, then it's a moot point.

If it were an off-market deal agents can often understand the nature of that, but when I have had clients go through the listing agent in order to save money on the commission (which almost always is shown to be a non-reality once you see the settlement statement), it has clarified to me that they don't need OR want me to labor for their best interests.

Ultimately this game is one of relationships and excellence, and if you want to grow the relationship with a particular agent, an ON-market deal that you know the numbers on (and therefore are bound to be a low-maintenance buyer) is low-hanging fruit for that relationship.

I'm hopeful that this angle is helpful to you.  Good luck in the scaling journey :)

Grey Stone · Answer

I would say it depends.

Many agents want to earn more commissions and you are providing them that opportunity. From one property the agent will get two commissions. Similar to having a client sell their home to buy another with that same agent. BUT better in your scenario because if the buyer were to have issues with financing or still looking at other properties, the agent would have a front row seat to that info.

If the list price is close to what you are wanting to pay, if it's a hot market, if it's an out of town or inexperienced agent or if you are experienced this can work in your favor. Some agents will immediately tell you they may offer a reduction of their commission or they will "make sure" your offer gets accepted.

Some agents are slime balls and can be incredibly deceptive. It would be hard for any person to remain neutral and "fair". Sometimes you will even see some agents cut throat to both parties and only care about getting their commission.

Essentially, you will become your own advocate. So make sure you have all correspondence in writing, double check all contracts before signing. If at any time you feel uncomfortable, contact local attorneys that specialize in real estate to see if you can ask questions. If you run into a serious problem, you can also contact the real estate board.

Sometimes dual agency can work beautifully and other times it can become a war. For anyone looking to do it, just be careful.

Bill Gulley · Answer

Great!

Yes, different states may have different names but the agency laws are pretty well standardized. Good that you knew where you were and yes, I speak to everyone or try to.

No, it is common here to shave the commission some, if that is okay with the broker's policy. Agents are free to negotiate, they may or may not, in such a situation it won't hurt to ask, IMO. Good luck :)

Bill Gulley · Answer

All that said, then use the points I laid out and play off of those. :)

Dual agency discount?

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