Dual agency discount?

12 Replies

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?

@Wesley C. why do you think you would get a discount without using an agent? Do you have your license? Just because you don't want to use an agent doesn't mean you get to save on the commission. Also, usually the commission is already negotiated between the seller and the owner and likely won't be changed because a buyer wants a discount. It may be different out there and w/ single family homes. 

@Tyson Cross

"why do you think you would get a discount without using an agent? Do you have your license?"

Maybe I didn't explain this in clear enough terms, but if you don't see how this could work, let me explain.  The seller and agent agree to a 6% commission.  2.5% of this goes to buyers agent.  If I don't use my own agent, seller's agent gets the whole 6%. My question was a matter of making it a win-win-win.  What if I let the seller's agent do the whole deal, but instead of the whole 6% he agrees to something like 4%.  If he doesn't agree to this, then I bring my agent to the table and his commission drops to 3.5%.  You see, 4% is better than 3.5%.  This lower 4% commission is passed along to the seller which ultimately results in a price drop for me and nets the agent with a better cut than if I had used my own agent.  Understand now?  

I know this happens and there is no reason the agreement between seller and seller's agent can't be amended.  The reason I asked the question was to see if anyone has tried this approach and can share advice or experiences.  

@Wesley C.

You are better off using your own agent. I doubt the listing agent would be willing to drop his/her commission because you did not have an agent.

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.  

Use your own agent. Good luck.

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.

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!

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! :)  

@Bill Gulley

I'm not sure if you were speaking to me, or just educating in general, but thanks for the input.  In this case, there was no need to do a sales pitch as he offered before I could even finish my sentence.  The agent I met today was very aware of all of this, which is why he jumped at the opportunity.  And it was very pragmatic of him to do so I might add.  Had I been a newbie or didn't know completely what I was getting into, I wouldn't have tried this and I'm sure he wouldn't have offered as this could be a huge headache for him if I were a first timer asking a million questions and calling him 100 times a day.  He and I spoke and he explained the terms and I communicated my expectations.   He explained to me that in TN it is no longer called dual agency, but rather he becomes an "intermediary" and thus is unable to provide expert advice or guidance.  The seller is also an investor, so the agent in question doesn't have to do much heavy lifting.  As you stated, there are very good reasons indeed for him to go along with this, especially in this case.

Now, I'm not saying I will approach future deals this way, but if the seller's agent has any common sense and I'm ultra comfortable with the property in question, I'll probably try this again.  Several people on here seemed to insinuate I'd be taking money from this agent's pocket or that I'd insult him.  I'm a pretty nice guy usually and I'm presenting someone a way to actually make more money, so I'm not sure how that would be poorly accepted.  

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

Originally posted by @Wesley C. :

@Bill Gulley

I'm not sure if you were speaking to me, or just educating in general, but thanks for the input.  In this case, there was no need to do a sales pitch as he offered before I could even finish my sentence.  The agent I met today was very aware of all of this, which is why he jumped at the opportunity.  And it was very pragmatic of him to do so I might add.  Had I been a newbie or didn't know completely what I was getting into, I wouldn't have tried this and I'm sure he wouldn't have offered as this could be a huge headache for him if I were a first timer asking a million questions and calling him 100 times a day.  He and I spoke and he explained the terms and I communicated my expectations.   He explained to me that in TN it is no longer called dual agency, but rather he becomes an "intermediary" and thus is unable to provide expert advice or guidance.  The seller is also an investor, so the agent in question doesn't have to do much heavy lifting.  As you stated, there are very good reasons indeed for him to go along with this, especially in this case.

Now, I'm not saying I will approach future deals this way, but if the seller's agent has any common sense and I'm ultra comfortable with the property in question, I'll probably try this again.  Several people on here seemed to insinuate I'd be taking money from this agent's pocket or that I'd insult him.  I'm a pretty nice guy usually and I'm presenting someone a way to actually make more money, so I'm not sure how that would be poorly accepted.  

 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 :)

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