Reducing agent commission/dual-agent

[Alex S.]

I am on the verge of an offer on a SS property in Northern California.  I think the property is worth $465K, but the listing agent already has an approved short sale from a previous buyer that walked out at $475K.  So, obviously he wants me to pay the $475K and be done with it.  He says we'll hear from the bank in 20 days and then close 45 days after that.

I am not an agent and I don't have an agent representing me.  Can I ask the listing agent to take 3% and act as a dual agent?  Thereby saving the other 3% of the commission.

Maybe I'm wrong, but it seems like there are far less conflicts of interest with a dual agent on a short sale than on a traditional home sale.

That would get the price down below $465K, the agent gets a solid buyer, and the bank/lien holders would still get the exact same amount they previously negotiated at $475K. Right?

2nd question: 

Does California allow you to cancel a short sale contract and keep your earnest money?

You folks on this forum are awesome...no no really, there isn't any place on the internet quite as helpful as BP and I learn so much by reading. Thank you!

[Will Barnard]

I don't agree with everything and everybody above. I won't get into detail on it all but will point out a few things (that appear to have misconceptions from others above). It is NOT illegal for dual agency in CA NOR is it "frowned upon". Any such statements are absurd. The CAR forms have specific documents specifically for disclosure of dual agency. Brokers in CA will NOT assign another agent to handle half the deal (that may be true in other states but not here in CA).

The bank does set the commission amount that they will pay. In a short sale situation, the bank is deciding on how much less they will accept than is owed so they are already taking a haircut. Most banks will only offer 5% total commission or less and most listings will specify in the private agent remarks that any reduction in commissions by the bank will result in both agents commissions being reduced accordingly. In a dual agency transaction, the bank may very well reduce the commission to 4%.

As for asking for the agent to take some kind of reduction in commission to do dual agency so that your purchase amount could be at the price you need it for the deal to make sense, I see nothing wrong with asking. Some other replies appear to be outraged at such a proposal and that shows me a lack of out of the box thinking or negotiating skills. Ask away, worst that can be said is no. I would however recommend you ask for it in a different manner. Since the bank is the one that has the control over this amount, your request to reduce would likely just get the bank more money and not you. I would suggest you ask the agent to pay some of your closing costs from the fee rather than a commission reduction. This accomplishes what you are trying to do without having the bank involved. Secondly, most of the short sale work by the agent is on the listing side so performing the dual agency is simply adding the buyers docs to the transaction (not a whole lot more work), though it does add additional liability to the agent which needs to be covered by their E&O insurance. They may want a tad more for this over the 2.5% single side representation likely offered by the bank.

Lastly, there was a comment about being penny wise and pound foolish. While I agree such a thing exists and should be avoided, this may not be that situation. If your price of $465k is what you have determined to be your max amount you can pay for this deal to pencil out for you, then that is what it is. Paying an additional $10k and taking on added risk of possibly working for free or losing money is not smart either. I would rather "risk" losing the deal and not doing a deal too tight than taking this at a price of $10k more than I fel comfortable with just for the sake of "not losing the deal". It is only a deal if you make money at the end of the day. WIth that in mind, proceed accordingly.