Three Questions (“Good,” “Better,” “Best”), or
“Highest and Best?” Not Exactly
As a Buyer’s agent, doing a good job for a client competing for a home in multiple offers means giving them good advice.
In turn, that means knowing “the lay of the land” — at least to the extent that the listing agent is obliged to divulge anything.
In that vein, here’s what good Buyers’ agents should ask the listing agent (representing the Seller):
Good: Are there any other offers?
Better: Are any of the other offers yours?
Best: If so . . . are you charging a variable rate commission?
Defining Terms
What’s the significance of that last question — and exactly what is a “variable rate commission?”
The listing agent and Seller can contractually agree that, if the listing agent also represents the Buyer (called “dual agency”) . . . the listing agent will reduce their commission.
The significance of that — at least in the context of multiple offers — is the playing field is suddenly not so level for Buyers not represented by the listing agent.
Unlevel Playing Field
The foregoing is best illustrated with some concrete numbers.
So, consider a $500k home that receives three offers — for $500k, $510k, and $520k, respectively, none of which is represented by the listing agent.
Assuming all other terms equal (financing, closing date, etc.) . . . the $520k Buyer wins.
Obvious, right?
Scenario #2
Now, however, assume that the $510k Buyer is also represented by the listing agent, and the agent’s listing contract stipulates that the agent will only charge 5% instead of 7% in the event of dual agency.
Suddenly, the $510k offer beats the $520k offer, after factoring in the lower commission.
Is that legal?
At least in states that allow dual agency (Minnesota does) . . . “you betcha!” (as the locals like to say).
Multiple Offer Math
Is that fair or right?
I doubt the $520k Buyer (or their agent) thinks so.
Just one more reason that I don’t believe dual agency should be allowed — my consistent position since becoming a Realtor 12 years ago.
See also, Perils of Dual Agency: Exhibit A”; “Awkward Dual Agent Moment #24″; and “Dual Agent vs. Double Agent.”
P.S.: So, to return to the Buyer in multiple offers who now knows that one of the Buyers they’re competing against is also represented by the listing agent — exactly what are they supposed to do with that knowledge?
Offer more.
Specifically, to beat a $510k offer with a variable rate commission, the “arms-length” Buyer would need to offer $521k.
