Non-agent agreement...good or bad?

Question

I just read an article by Michael Creel about using a non-agency agreement to receive SOC at closing. If I approach a listing agent with this, what might they say? Does anyone have any advice or disagreements about using this method to cover closing costs?

Kim Knox · Answer

@sandy blanton

This might make you laugh, but the Broker I worked for would have charged me money for the time I wasted of his to ask him if i should work for free.  He taught me the value of time.

If one of my agents asked me if they could work for free, I would make sure they never asked again.  Making money is worth discussing, going broke is not.

You are absolutely right. a Buyer can ask for no fiduciary, but that does not entitle the Seller to a reduced commission.

Buyers often mistake an agent as a largely vested party to the transaction.  No one has a bigger interest than a Seller and Buyer to negotiate.

Sandy Blanton · Answer

William Bannister  A deal is always easier when the parties "cooperate" vs. "combat."  If a deal is so tight that an investor buyer is worried about the average 2.5% a buyer broker is getting paid these days, he should find another deal.

Half of my business has been on the brokerage side, half on the investor end.  I have found a handful of "gem" buys where I was so desperate to get the listing under contract that I paid 10% over full list and let the listing agent keep ALL of the commission, even the my portion as the broker/buyer.  My goal in doing this was to get the listing agent on my side during what I expected would be a multi offer situation.

In the brokerage business, the top 10% of the agents make 90% of the money.  If a top seller's agent has a listing, it almost always means he/she took it only because it was priced where it would sell.  Hence, a buyer that's difficult is putting themselves in a less than ideal position to get the deal.  If it's priced right, the agent will have no trouble finding a buyer.  This is especially true with REO's and Short Sales.

In the case where a buyer is dealing with a starving, novice agent, they may be able to squeeze their paycheck but in the end that agent has little to give up.  Such an agent is likely on a 70% split with their broker, and in most cases I don't think a broker will allow an agent do drop seller commissions to give to a buyer.

Just my input folks.   I work both sides of the fence: broker and investor.  I know if I find a "steal of a deal," I don't care how much the brokers are earning.  :)

William Bannister · Answer

I think unless the broker or agent is going to be a principle in the deal trying to cut off peoples commissions seems cheap and probably a disservice to yourself. 1st the licensed  people in this field dont like working for free as most of us dont. I am about the cheapest person I know and if i want to be commission free I dont use agents or brokers for those deals. Im not an expert on my laws regarding tortious  interference but it seems either pretty close to that or seemingly on the edge? Brokers please do reply. 
   My thoughts are if your going to take away commission to reduce the  price of the deal dont be surprised if you are not treated well in the future when you deal with agents and deals in the mls. You would be shocked how fast news travels that your cheap when it comes to commissions. Im not saying your going to get black balled since thats probably not legal agents sure can treat you different then other clients if they think your a waste of there time. 
  To me its worth it to have a broker standing in between myself and a buyer of my property when I am ready to sell.
  I can sell but, il pay the 5 or 6%. Its every bit worth the fee.

Sandy Blanton · Answer

Kim Knox Good points Kim.  I rarely write up a buyer offer these days, but certainly an agent wants to get paid.  In reducing listing commissions to give to a buyer, I'm unsure how most traditional brokers would respond.  I spent my first decade in the business with a large national franchise broker.  They (my local franchise owner) had a very strict policy and didn't allow any buyer inducements from the seller's commission.

Kim Knox · Answer

A price reduction is available to the public, where motivation level is not.  Price reductions generate activity, and re-generate interest.  Who knows, a price reduction can create a bidding war.

Listing price should reflect current market value and the Seller's motivation level in combination.  Market value takes neighborhood desirability into consideration.

If this listing remains unsold, then perhaps you will let me write an offer, as a dual agent, asking the Seller to pay your closing costs.  If the Seller refuses, perhaps I would consider a reduction in pay to make a deal work.  You are trying to negotiate with people (agents) who negotiate for a living.

If I consider working for a reduction, I will be assessing your needs and the liability of working in a non-fiduciary capacity with you.  I will also be considering what this deal may ultimately cost.  It may cost me other paying buyers.  It may cost my Seller a more qualified buyer.  It may cost the ability to provide a smooth transaction.  You might refer your fiends to me, telling them I will work for free (yikes!).

Agents are independent contractors, so they do have the right to decide how they will work.  I will be interested to see what others have to say.

Sandy Blanton · Answer

The buyer nor the buyer agent has any input to what I charge a seller.  In Florida a buyer broker can share any of their commission with their buyer.  If a buyer comes directly to us and asks us to give them a cut of the commission, we just say "no."  It's rare for a buyer to ask such, in my 20 years in the business I think I've had maybe 4 ask for such.

Shara Carlton · Answer

Kim Knox, if a property has been on the market for too long (maybe because the neighborhood is not very marketable), wouldn't it be logical for the agent to go in on such an agreement for the sake of getting the property sold at a decent price as oppossed to continually lowering the price?

Wayne Brooks · Answer

I agree with Kim.
Also, I'm still going to have to hold your hand, walk you through normal procedures and answer all your questions, etc. for free.....no thanks.

Kim Knox · Answer

I would reject working for someone for free, for a few reasons.  Some obvious reasons, some not-so-obvious reasons.  =)

I had to google "Michael Creel non-agency soc" to find the article because I had no idea what your question meant without locating the source.

Michael's advice is essentially asking listing agents to enter into an agreement indicating no agency (fiduciary) relationship exists between listing agent and Buyer.  The Buyer asks the Listing Agent to work for them for free in a non-agency capacity.   The idea is that the savings in cost of what a Buyer’s Agent would earn in commission would be passed on as a credit towards closing costs to financially benefit the buyer.  Meaning, the Buyer has to come to the closing table with less money.

If a home is priced well, it sells.  What does the Seller care if the Buyer is represented or not if their net is still the same?  So, in a competitive situation, where the net is the similar between two parties.  One has professional representation, one does not.  As a Seller, which offer would you accept?

I am primarily a listing agent.  For the past several years, my largest clients are banks.  I list foreclosures on the market.  Foreclosures Clients always want a Buyer to have a fiduciary relationship with an agent (whether dual or otherwise) because of the increased liability assumed by the bank if the Buyer does not have a professional representing them.

Non-agent agreement...good or bad?

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