Selling promos

E - By-owner Co-op Commission: Should a fsbo offer a commission?

COOPERATING WITH AGENTS

Offering a commission to agents who represent buyers is referred to as a co-op or a co-op fee. If you decide to fsbo (sell by-owner) and at the same time offer to “cooperate” with agents, this could still save you at least half of a full commission. 

Advertising a commission:

If you advertise a commission, such as, “Will Co-op 3%” or “3% to Buyer’s Agent” while you FSBO, you'll find that buyers who see this in your ad could view the real asking price as being some 3% below the advertised price. The buyers may feel that they are doing the job of a buyer’s agent. If nothing else, they know that you’re able to come down 3% right off the top.

Here are three ways to approach this:

1. Don't offer a co-op fee in your ads. In a hot sellers market (fewer homes for sale), desperate agents may knock on your door. Evaluate your situation and motivation at that time. It could mean a quick sale. You can always negotiate a lower than normal fee. If the agent truly has a buyer, the agent knows that a lower fee (like 2%) is better than nothing. After all, the agent could lose the buyer and have zilch.
2. A second approach is to say in your ad, " Will co-op 1%". This will surely discourage agents from calling you and at the same time it suggests to buyers that you're negotiable for 1%, not a full 3%.
3. If you need a quicker sale and you haven't had any luck finding a discount agent or one who would post your home on the MLS for a flat fee, consider advertising " 4% to buyers agent". This will catch the attention of local agents. Do not sign a normal listing agreement with any of them, only a one-time listing for a buyer they bring.

In a down market, ask yourself, "Why on earth would an agent want to show my home when there are so many unsold houses on the market?" That's because the buyer is really interested in it. You've got something the listed houses don't have; location, style, neighborhood–something. Therefore, there's no need to offer a regular commission for doing the agent a favor. 

Forget about sending letters to agents and offices offering a co-op. The agents will either ignore them or call wanting to see your home. They may not have buyers, but they’re always looking for listings. Then they’ve got their foot in your door, and you know what that’s all about.

Agents have been known to use a shill or “fake buyer” to show your home. It’s an attempt to endear themselves to you, hoping to get your listing.  

The co-op agent works for the buyers:

Even though you’re the one paying the commission, the buyer’s agent is legally obligated to tell his buyer client everything he or she knows about you and your housing situation. So, do not reveal anything to a co-op agent. 

If an offer materializes, let the agent be the one to get the offer up to where you want it. The agent wants the sale; let the agent earn the commission.

An agent will want you to sign a “24-hour” listing agreement. This protects them from their buyers going directly to you. The buyer could persuade you to lower the price by eliminating the commission.

The agreement contains something like a 60-day period whereby you will owe a commission if you sell direct to those particular buyers during this time. These conditions are reasonable. Make sure the agreement specifies that it is for the one named buyer.