Monday, January 7, 2008

Ask the Expert - Which Agent Writes the Offer?

Question: Last week I drove by a home that looked interesting. I called the agent whose name was on the sign and made an appointment with her to see the house. After looking it over and discussing the pros and cons with her, I told her I was interested in making an offer, but that I would be using my own agent. She seemed upset. Did I do something wrong?

Answer: In a word - "yes". Instead of calling the listing agent, you should have had your own agent make an appointment to show you the property. Look at it from the listing agent's point of view. She took the time to meet you at the property, show it to you, answer all your questions, maybe even give you pricing comparables for the house and advise you on the best structure for an offer. You used her time and her expertise. But you didn't want her to get paid for that. Instead, you handed the fruits of her work over to another agent. In effect, you said that her time and knowledge were worthless. Sure, she would still get part of the commission if you bought the home through another agent. But you increased her work without increasing her pay. And you took up her time that she could have spent working with her own clients. No wonder she was upset - wouldn't you be if someone did that to you?


Richard said...

Well, why is it that I am paying my agent 6% versus 3%? Is it just because she may have to pay another agent? And if she doesn't pay another agent,say a private party buys the property, do I get that 3% back?

Anonymous said...

In California, when you sign a listing agreement, you are agreeing to pay the Broker a commission, in your example 6% (in California commissions are negotiable). When the Broker puts the lising on the Multiple Listing Service, he is agreeing to pay a portion of that commission (typically 50%) to the buyer's Broker.

If your Broker represents both buyer and seller, the Broker is entitled to keep the full 6%. However, in California, this is called "dual agency" and a Broker may only do this with the consent of both the buyer and seller. If either party is uncomfortable with dual agency, then the buyer would need to find their own agent to represent them.

Richard said...

Awesome! Thank you for clearing that up. So, the best scenario is to find a broker to act as buyer and seller and negotiate that down to 4 or 5 percent... And, of course, get the buyer to agree to these terms as well.

Anonymous said...

That would certainly work, assuming the buyer is willing to accept dual agency. Also, you should be aware that some companies will not allow their agents to act as dual agents; the company does not want to accept the liability. One more idea - if you do hire a Broker who allows dual agency, you might want to negotiate a two tier commission structure when you give her the listing. One amount would be if two Brokers are involved, a second amount would be for dual agency. This way, you settle everything in the beginning so there is no misunderstanding later.