I very much enjoy this topic and your blog so thank you for the all of your time and discourse you are creating here. I think with the recent scrutiny on standard (board/association) forms and contracts, companies would be wise to get this right and develop their own. Especially the agency agreements (listings and buyer).
All of that said, I just do not believe the 'no-hook' buyer agreement stands the test of time.
You are an attorney, I am certainly not, so if you say that it is within the spirit of the settlement, I will defer on that point. However, I am a broker/owner, and I deal with the practical aspects of negotiating deals daily.
My main point against no-hook agreements (which were in my other comments) is simply that the buyer agent fee can be negotiated away with no recourse. I concede that as long as offers of compensation remain, the 'no-hook' agreement is a powerful tool to gain buyers. As you said, it will be wildly popular with buyers, I agree with that.
However, in a world where:
1) Offers of compensation eventually go away, which I believe will happen and you have said the same, resulting in:
2) The most common source of buyer agent compensation payment will be via a seller concession in the purchase agreement, then:
The buyer agent fee simply gets negotiated away by the listing agent and seller if it's optional.
When a buyer asks for a closing cost concession for lender/title fees, the seller and listing agent make it happen. They know that those parties must get paid for the deal to happen. It's simply not optional and if the buyer doesn't have the cash there is no deal without the concession.
Well what if lenders & title companies offered 'no-hook' services? What if the listing agent when presenting the offer to the seller said, 'The buyer wants you to pay $5k towards their lender and title company. You don't have to, they will still do the work and the deal would close even if you don't pay the concession.' How many sellers cough up that $5k?
So, I think if 'no-hook' agreements become common place (standard forms) or if a particular firm(s) advertises them publicly then the listing agent is going to know the buyer agent fee being requested is optional. As a fiduciary to their seller, they must and better give that seller all information that have for that negotiation.
So we end at:
Mr/Ms Seller, the buyer is requesting that you pay $15k for their buyer agent. Just so you are aware, the buyer is not under an obligation to pay this, just an obligation to let their agent request it as a concession. Now, if you decide to pay their agent, they will likely be motivated to keep this deal moving forward. If you don't, the agent may not be motivated. However, inventory is slim, it's a sellers market and the chance we go under contract and the buyer closes is high either way. What would you like to do, pay the $15k, pay nothing since no-one is obligated or offer a different amount?
Tell me how a prevalence of 'no-hook' agreements survives a few thousand of those negotiations in any local market?
That was my main point in the totality of my comments. Thanks again for your blog, I truly enjoy it and have learned much here.
Thanks Andrew -- really appreciate your well-thought out questions and commentary.
A small point I will make first. You write, "So, I think if 'no-hook' agreements become common place (standard forms) or if a particular firm(s) advertises them publicly then the listing agent is going to know the buyer agent fee being requested is optional." Isn't that the case today? Isn't the buyer agent compensation optional today, unless the listing agent has gone the "6% commission, 3% compensation" route? (And I have already addressed why that compensation-route is going bye-bye, due to competition.)
So I guess my first question would be, "Would listing agents and sellers really always negotiate away the buyer compensation?"
Let's assume the world as you have it setup. There are only two options here:
1. The offer requesting compensation is the only offer on the table;
2. There are multiple offers.
If #1, would the listing agent *really* tell the seller to hold fast on not paying buyer agent compensation to then wait and hope to see if another offer comes in?
If #2, because as you say, it's a low-inventory seller's market, wouldn't the listing agent simply compare the net proceeds to seller? Which is what is happening today, isn't it? (Or should be happening shortly.)
Now, the listing agent doing his fiduciary duty could try to negotiate the buyer agent fee lower, just like he would negotiate concession requests for repairs lower. But at the end of the day, the parties would come to agreement.
Maybe the buyer agent ends up taking a bit less -- 2% here, 1.75% there, 0.5% in another case. We will find out what the average rate is, then what the market share is. I could see top agents figuring out that by going no-hook, they do 25% more buyer business, at a lower *average* rate (say 1.75%), and that makes the math work to their advantage.
Or not. The market will tell us what will and won't work. But I do think buyers would prefer not to be locked in if they don't have to be, and that agents will offer no-lock-in because they want to compete.
I can see strong arguments for either of these two points. Only time will tell, and I can't wait to see how this develops. I think it will also be intersting to see how the large corporate brokers play this game. I would love to be a fly on the wall in their strategy meetings.
Thanks for discussing my comment, Rob! I will say, we are 100% in alignment on the substance of this. I certainly do read the rule change language to permit “no hook” agreements. You’ve helped me more fully flesh out my analysis and thoughts on it with this post, so I appreciate it.
My concern with an MLS interpreting it wrongly (which I concur would be wrong) is more my background working in government, enforcement, and with committees and boards making decisions. There are so many opportunities for bad decisions and wrong decisions, and there’s no shortage of examples out on the wild.
As someone who works directly with a lot of agents and brokers on these issues, there are so many questions and concerns, and now we are seeing some people uncover all the nuance that we all have to work through. I always want to make sure I uncover the gaps as much as I can.
I’ll say this, there aren’t a lot of opportunities to have this kind of higher level thought and discussion, so I again appreciate you pulling the comments and offering some deeper thoughts on the no hook agreement concept.
Thank you Notorious for your continued detailed analysis of a fluid situation and fostering this vibrant community of thoughtful participants. I particularly appreciate your second order thinking throughout your work and here to go beyond what's dictated by law or adherence to association rules to think about how natural market forces and human nature will shape outcomes.
In this spirit, I wonder if anyone here has formulated thoughts on how we might see an evolution in willingness of listing agents to take on dual agency roles when approached directly by buyers who either feel confident to act with some degree of independence or who balk at the idea of an "on the hook" agreement? Let's say for the sake of this thought experiment that we adhere to all enhanced disclosure requirements and we have a sophisticated buyer, seller, and dual agent who deem it fair to all share the benefits of an arrangement more or less equally: listing agent commission goes up 1% from 2.5% to 3.5%, seller saves 0.75% compared to a full pre-settlement prevailing market commission of 5.0%, and 0.75% cost reduction will accrue to the buyer who didn't seek their own independent representation.
It would seem that there's a potential issue where listing agent and seller have agreed privately to pay a full commission as per the prevailing ~5% rates in the pre-settlement era, but it's not clear that the mechanisms available to communicate to the market that buyer's agents will be able to earn cooperating commission splits out of seller costs is in fact = 2.5%. If an unrepresented buyer called a listing agent and asked for this arrangement, the listing agent would at that time only be a fiduciary to the seller and presumably incentivized to maximize their clients' interests which might be to say something like "I can ask my client if they're open to letting me dual represent, this will increase my work load, but I can offer some reduction and charge 3.5% as compared to 2.5% from each side if my client consents, and you and my client could each pay me 1.75%, saving you each 0.75% compared to what you would have otherwise paid as my client had not agreed to a set amount to compensate a buyer's agent." This could of course fail for all parties with the buyer just hiring an agent, requesting a full 2.5%, and offering an amount with the highest net proceeds to seller, at which point the listing agent and the buyer and the seller will have lost out on economic benefits.
This is where my thinking through of all the possible negotiation outcomes gets quite muddled: there could be some efficient outcome where the buyer just reduces their offer price by 2.5% when asked to split commission costs with seller at 1.75% / 1.75% to make up for the 0.75% saved by seller + 1.75% owed by buyer. The seller could accept the offer and the economics potentially benefited the buyer $ for $, but it seems more likely that in the back and forth over price, the 0.75% saved by seller and 1.75% owed by buyer isn't entirely swapped out $ for $ when an acceptable gross value of the property hasn't even been established through offer / counter-offer. This 1-2% spread is surely not ruining a deal for anyone who is primarily motivated to sell their house or buy their next home, but the complexity of the situation as compared to a universe where the unilateral offer to buyer's agent is crystal clear would make me think that dual agency may be too much brain damage and risk for a listing agent to be compelled to take on to make an extra ~1%?
This then leads to two related scenarios:
1/ Does listing agent just pass buyer to an independent buyer's agent from their brokerage, and is there a way that this could also result in a similar 4-way equitable advantage where buyer saves some cost, seller saves some cost, brokerage gains some benefit, and each individual agent makes more than they otherwise would have? Could the independent agents at the same brokerage agree to some fair sharing of benefits given that the listing agent effectively procured the buyer and handed them on a silver platter to the buyer's agent from their firm? Buyer's agent will still earn a commission for the work they'll be doing to get through closing the deal, but they might be happy with a slightly reduced rate of compensation given the handoff of the buyer client with the deal already identified? Is there some other conflict of interest issue this could lead to? It would not be uncommon of course for a listing agent to put a buyer's agent from their firm at an open house in the pre-settlement era, but I've generally seen this result in the expectation of two full commissions unless seller pre-negotiated for a reduction on their pay rate in the event of a double sided deal (I'm not sure this was ever a totally fair practice to sellers). Others with more experience and more appreciation of the nuance of the new rules and regulations would surely correct some mistake or over simplification in how I've set up this scenario.
2/ What happens now when a buyer engages their friend the hobbyist real estate agent who intends to earn a commission and rebate the majority of it to the buyer? There are increased disclosure requirements around rebates, and would these need to be shared prior to execution of a purchase and sale agreement to where selling team could reject the payment of a full pre-settlement prevailing market commission of 2.5% in light of the knowledge of the rebate? Alternatively, would it not be theoretically legal and permissible to enter into the contingency period and discover conditions that lead to requesting a defensible enough large price reduction, and then upon the rejection of that price reduction request for the buyer's agent to offer to reduce his commission share by ~0.5% and ask listing agent to do the same in order to compel seller to agree to a price reduction of 1% to "get the deal done". The hobbyist agent theoretically has no reputational concerns to manage and whatever verbal arrangement done between hobbyist and their friend the purchaser would not be discoverable. This is again a lot of brain damage for 1% savings on a transaction theoretically motivated by larger concerns than the last 1% of price, but I am based in a CA market where 1% of housing prices are a meaningful sum.
Thank you to anyone who took the time to read this long note and to anyone who responds. Hopefully this exploration of edge cases has some interest to others (and the scenarios presented do not reflect my misconstruing of what's permissible or within the realm of rational behavior).
I like your edge case hypotheticals. Thank you for those. It might be these take a bit more thought but for the sake of discussion, let me take a crack.
1. On the dual agency issue, I can't think of anybody in the industry who actually likes single agent dual agency. I know I don't. But for the sake of argument, let's say the seller will accept that.
My question there is, "Has the seller thought through this?" Is a 0.75% savings enough to forego having a fiduciary representative in what is likely the biggest transaction of his life?
I know there are states which allow for transaction agency; I also know that I would never accept such a thing. That consumers do is a bit puzzling, but that's because I know the industry. If I just wanted paperwork handled, instead of my interests represented, I'll hire a lawyer for $1,500. (And that lawyer would be a fiduciary to me.)
2. If a buyer is sophisticated enough to want to go without a buyer agent representing him (let's say he's an investor), why bother with dual agency or any agency? Just hire a lawyer for the paperwork and for protecting his legal interests. The seller shouldn't care: he's paying the contracted rate of 2.5% to his listing agent, and there will be no request for compensation from the buyer.
(But see above re: multiple offers and comparing net proceeds.)
3. On designated agency (i.e., single firm dual agency, with two different agents), there are those who argue against it. I am one of those, adhering to the vision from the history of NAR. My series on William North should be of interest here. (https://notoriousrob.substack.com/p/to-go-forward-we-must-go-back-part-3f5)
4. As to rebates... the reason why agents offer rebates is because of cooperative compensation. The only way to get money back to the buyer client was through rebates. In the new world, the buyer agent would simply charge less money, and request less from the seller. I'm not sure the hobbyist agent intending to rebate is a real issue going forward, at least in the long run.
Good topics! I'll have to consider them for future treatments.
This crack pretty comprehensively clears up the matter for me.
Your reason why you and those you know advise seller against dual agency makes complete sense.
I have come at this in the past from a position where I'm a full time "investor" at my day job and then something of an investment minded residential market participant whether it's for my home or an asset purchase. My (in hindsight after your post) naive approach to purchasing residential property was that I didn't feel like I needed advice on certain matters but paid for transaction services (form agreements filled properly, diligence vendor recommendations) while incentivizing listing agent to advocate for my offer by doing single firm dual agency or dual agency. Maybe this worked to my benefit, but it's worth always circling this back to the fiduciary disadvantages, and I could have just hired a lawyer for less and Googled for vendors.
I'm not totally convinced that the buyer agent rebate wouldn't have some psychological advantage in negotiation vs. a pure purchase price reduction with lower concessions, but I see your point the math should work out if folks are paying attention. Certainly your other work has led me to agree fully that the hobbyist agent will be a declining phenomenon.
Since discovering your work two weeks ago and becoming a voracious consumer of your content, my recent efforts toward understanding the business from an agent-centric perspective have benefited tremendously from your eloquent explorations grounded in academic sophistication, deep practical experience, and commitment to the highest standards of ethics.
On my listings in this new environment and being comfortable with dual agency, I feel I am an excellent mediator and have been effective in this role with both sides happy and commenting if it were not for my position the deal would have never happened., my seller clients have agreed that if I bring the buyer or an unrepresented buyer presents an acceptable offer I charge a total of 4%, down from 2.5 and the seller paying 2.5 to a buyer brokerage. One of my sellers suggested this. They suggested that if an unrepresented buyer showed up I should charge more. I agree. I have had a few unrepresented buyers call and suggest they would take the buyer broker fee. I explained to them that fee was not for them, but the seller would be happy to review an offer from them.
As long as the seller gives his informed consent, there is no problem. I am sure you are an excellent mediator.
I am merely saying that I personally would never allow it, as I want an agent who only represents my interests. I would not give that up for a mere 1%. But that's me, and others obviously feel differently.
Finally, I will note that William North thought dual-agency was extraordinarily difficult to pull off. See my series on his works.
I think you’re missing the point. if there’s no fee for the services then the services are free. but if there’s consideration, then you have a fiduciary duty to stick to that consideration. Stick to the dollar.
Am I missing the point? Or perhaps you are focusing too much on the no obligation to pay instead of the 2.5% negotiated compensation?
The State of Colorado had a clause in its buyer agency agreement that authorized the buyer agent to obtain payment from the listing broker or seller, and specified that the buyer was not obligated to pay. In fact, that was the default provision. No one had a problem with that agreement, and no one thought that a void contract for lack of consideration. Why is it different now?
A private settlement does not and can not rewrite basics of contract law.
The biggest issue that the state of Colorado had was that the agents were forcing buyer agency agreements for touring the house, which is unnecessary. Physical house tours aren’t brokerage services.
Which by the way Washington state is similar.
But getting back to the major point. I never said a settlement rewrites basics of contract law. Legally, you absolutely can have a contract for one dollar and have a no hook agreement. I am not disputing that. But you’re also a fiduciary. so stick to the dollar.
Otherwise, you are advertising your services are free.
Which I think we all agree is against the settlement.
If a buyer has no obligation to pay for the services, then the services are free.
The solution is not no hook agreements. Its non-exclusive agreements for a specific stated amount.
Rob, I don't believe a non-hook agreement is an agreement at all. I thought that all contracts have to have a cause (consideration) to be valid and binding. If the buyer is not obligated to pay anything, then it is not an agreement. At best it is a convoluted loophole to comply with the settlement. Several states state that the Zillow touring agreement was not valid. (Pre-settlement the binding agreement was the MLS, and most buyers had no obligation to remain loyal to their agent) If my BBA is the buyer simply authorizing me to negotiate my commission with the seller, then it doesn't seem to be in compliance with the settlement.
A bigger problem with this is that it is gets back to the old ways where the buyers agent is basically begging the seller and list agent to determine the buyer's agent's compensation, instead of the agent negotiating that with the buyer. I thought there was another thread here comparing that to commercial bribery???
We have this habit of trying to find out what the seller is "offering." The buyer's agent shouldn't care, they already agreed with the buyer what they will earn. Agents have begged for money from the list broker and seller for so long that we can't let go of it.
So this comment:
"Now, the listing agent doing his fiduciary duty could try to negotiate the buyer agent fee lower, just like he would negotiate concession requests for repairs lower. But at the end of the day, the parties would come to agreement."
I have a problem with that. The list agent's fiduciary duty is to get the deal done AND get the highest price & terms possible. These can be mutually exclusive goals; fighting over the last penny can lose the deal. The list agent and seller should evaluate the bottom line (net) and negotiate the top line (price). Buyers ask the seller to pay closing costs (and BB fee) because they are obligated to pay those fees, and are tight on cash. Telling the buyer you won't help with their fees can ruin the deal. HELPING the buyer finance their costs (via a slightly higher price) is how you keep the deal together. The repair cost analogy doesn't really apply, that is usually negotiated after inspections - a couple of weeks after the price is agreed.
But let's address your more interesting concern: that a no-hook agreement is begging the seller for payment instead of negotiating with the buyer. That is a legitimate objection.
My take on that issue is as follows:
- If we did not want the buyer's agent asking the seller for anything, in order to ensure that buyers and buyer agents negotiated fully, and the buyer agent's loyalty cannot be questioned at all, then we should move straight to no compensation, no concession, no nothing. Force the buyer to pay the agent out of pocket, period. Anything short of that would raise the issue of buyer agent loyalty.
- Since I'm in favor of buyer agents getting paid for their time and expertise on an hourly basis, you won't get much argument from me. But I suspect that the industry is simply not ready for that big of a leap.
- Commercial bribery is when the seller/listing agent is offering something to the buyer's agent to attempt to influence the agent. The agent requesting compensation *in an offer to purchase* seems outside of that -- and the DOJ agrees with my take so far. It should be noted that phone calls or text messages before submitting the offer is problematic, but I can't imagine that a buyer agent would submit an offer binding the buyer without at least discussing it -- and the concession request -- with the buyer.
As for the "I have a problem with that" -- I'm not sure what the problem is. Perhaps you can explain more fully. Seller concessions are seller concessions, no? What is the difference in your mind between one kind of seller concession and another?
Rob thanks for this - even though I may not agree with your crazy ideas, it gets the mental juices flowing and it is good to see the other thoughtful comments.
"My problem" in your scenario was that the buyer presumably lacks cash, and thus can't do the deal without the assistance. The seller (and envious list agent) may try to negotiate the BB fee after the offer is received *rather than the price.* That could cause the buyer to walk, and if it was the envious list agent who objected to the buyers agent getting more than the list agent, a violation of fiduciary. Evaluate the bottom line, negotiate the top line. HELP the deal come together by HELPING the buyer finance their expenses, not running them away. Just counter at a higher price, and agree to the buyer's request for assistance.
A minimum $1 may help the agreement be binding, but riddle me this: The compensation in a no-hook BB is x%, or whatever the seller will pay, but no less than $Y. Buyer may have to pay at least the $Y, but who knows until we negotiate? How does this meet the "objectively ascertainable and may not be open-ended" standard?
And if it is open ended, then is it "a gift or gratuitous promise..."? which under the Cornell link "cannot be a consideration for they have no bargaining."
Regardless, it gets us back to negotiating the fee with the counterparty or the counterparty's fiduciary instead of the buyer client. The BUYER negotiates that the seller will pay my fee by rolling it into the price; or the buyer authorizes me to negotiate my compensation with the seller. Subtle but important distinction.
- In the former, the buyer is in charge and already agreed with me what my compensation will be, they are just asking the seller to help them finance it. And if the seller declines to pay the full amount, and the parties can't agree to a higher price, then the buyer is on the hook for the balance (or the buyer walks). That's what the DOJ sees to prefer.
- In the latter scenario, the buyers agent is negotiating their comp with the other side. Buyer has no say (except the min and maybe the max their agent can earn. Does that meet the test of "bargaining"). That's the previous scenario that got us into trouble.
Finally, this CAN lead to working for free, or much less than one is willing. I signed an agreement where I have a fiduciary obligation to rep the buyer
- In the former scenario if the seller won't pay the buyer's expenses and the parties can't negotiate it into the price, and the buyer walks, well I haven't been paid (yet) for all that work. We go find another house.
- In the latter (no-hook) scenario, my pay is solely up to my ability to beg an adequate bribe from the buyer's counterparty. I have a fiduciary obligation to rep the buyer for as little as Rob's $1. I can't make the decision to drop the negotiations and move on to another house. I have no choice but to work (practically) for free.
Thanks for continuing the discussion and debate. Civil debate is how I learn things, so I really appreciate that. Let me see if I can try to answer a few points.
"The compensation in a no-hook BB is x%, or whatever the seller will pay, but no less than $Y. Buyer may have to pay at least the $Y, but who knows until we negotiate? How does this meet the "objectively ascertainable and may not be open-ended" standard?"
- The x% is objectively ascertainable. If it weren't then all BBA's would fail to pass muster. Whether the buyer is or is not on the hook for any shortfall does not change that x% is objectively ascertainable.
"Regardless, it gets us back to negotiating the fee with the counterparty or the counterparty's fiduciary instead of the buyer client. The BUYER negotiates that the seller will pay my fee by rolling it into the price; or the buyer authorizes me to negotiate my compensation with the seller. Subtle but important distinction."
- Recall that the DOJ, in the Nosalek case, said they were not opposed to sellers paying compensation to buyer agents. Their concern was not that sellers were paying, or that buyer agents negotiate their compensation with the seller. Their concern was STEERING. Their concern was on the *timing* of the compensation "negotiation." If the request is in the OFFER, then there has been so steering; the agent showed the house, discussed it with his buyer, and is now making an offer that contains a request for compensation.
I think we all lose sight of this point. The DOJ is not opposed to compensation; they're opposed to steering.
I have found no evidence that the DOJ wants the buyer to be on the hook for any shortfall between the x% negotiated in the BBA, and the $y that the seller would offer in negotiation.
"In the latter scenario, the buyers agent is negotiating their comp with the other side. Buyer has no say (except the min and maybe the max their agent can earn. Does that meet the test of "bargaining"). That's the previous scenario that got us into trouble."
- You're overthinking this. The settlement is clear that the agent can make LESS than the x% negotiated in the BBA; it just says the agent cannot make MORE. The negotiation of comp between the buyer and the buyer agent has already happened, and a cap has been put on what the agent can make, not a floor.
Yes, that CAN lead to working for free, or for far less. I pointed that out, but I think a lot of brokers and agents will take that risk, because they can make it up in volume. I could be wrong about that, but I do think competition is a real thing in our industry. We'll see.
"In the former scenario if the seller won't pay the buyer's expenses and the parties can't negotiate it into the price, and the buyer walks, well I haven't been paid (yet) for all that work. We go find another house."
- How does this change if the buyer is on the hook? Seller won't pay the buyer's expenses, the parties can't negotiate it into the price, except now the buyer has to come out of pocket to pay you. Why is he not walking then? Same result, no?
"my pay is solely up to my ability to beg an adequate bribe from the buyer's counterparty. I have a fiduciary obligation to rep the buyer for as little as Rob's $1. I can't make the decision to drop the negotiations and move on to another house. I have no choice but to work (practically) for free."
- Yes, that is the risk those going with no-hook will have to take. I firmly believe that the American consumer is not going to screw agents over who have worked with and for them for weeks and months to make their dream come true.
BUT, if you are concerned that your buyer is going to screw you, after working with them for a couple of weeks... fire them. Stop representing them. Obviously, there is no trust between you and the client. You can't represent that individual. Buyer agents fire their clients all the time today -- I don't see why it's so different with a no-hook agreement.
I think its disingenuous to not negotiate your fee with your buyer but say you services aren’t free because you can beg the seller for whatever you get.
Excellent response and aligns with my thinking as well. I am not going to work and put myself in the position of perhaps making nothing and not have the client invested in me representing them. I am a 1% broker and give solid value. Buyers are not obligated to view homes where no fee is offered by the seller. Buyers can go unrepresented. My busines model would not include no hook agreements. I don’t even like that term. Call it what it is, no cost. And if I make more fees than my competitors using no hook, but at a reduced fee out of alignment with my business model, I am working twice as hard, not my idea of success. I already work very hard. Maybe a broker who struggles with their value proposition would get traction from a no hook agreement. I feel it undermines our industry which is already being assaulted on many fronts. At some point we need to take a stand for our own personal integrity. We are working with the new model and things are fine. We don’t need to let buyers off the hook. They already have other options.
Nobody is telling you to work for free, or to do anything you don't want to do, Patricia. You do you, and power to you! I genuinely mean that. Good brokers and agents should be rewarded.
I am merely pointing out that human nature and incentives plus competition means you are likely to face competitors offering no-hook agreements. You don't have to, at all. But the free market tends to sort out winner and losers over time, and the choice is either to compete or... not. Or compete in a different way.
When I say "should", I am not taking a moral stance. I am doing competitive analysis, and assuming that most agents want to take market share, increase income, and be more successful tomorrow than they are today. My "should" above ought to be read in that way.
Finally, since you are a 1% broker, I did point out that perhaps we'd see the 1% on-hook agreements compete against the 3% off-hook agreements. I look forward to seeing what the market tells us over time.
Rob,
I very much enjoy this topic and your blog so thank you for the all of your time and discourse you are creating here. I think with the recent scrutiny on standard (board/association) forms and contracts, companies would be wise to get this right and develop their own. Especially the agency agreements (listings and buyer).
All of that said, I just do not believe the 'no-hook' buyer agreement stands the test of time.
You are an attorney, I am certainly not, so if you say that it is within the spirit of the settlement, I will defer on that point. However, I am a broker/owner, and I deal with the practical aspects of negotiating deals daily.
My main point against no-hook agreements (which were in my other comments) is simply that the buyer agent fee can be negotiated away with no recourse. I concede that as long as offers of compensation remain, the 'no-hook' agreement is a powerful tool to gain buyers. As you said, it will be wildly popular with buyers, I agree with that.
However, in a world where:
1) Offers of compensation eventually go away, which I believe will happen and you have said the same, resulting in:
2) The most common source of buyer agent compensation payment will be via a seller concession in the purchase agreement, then:
The buyer agent fee simply gets negotiated away by the listing agent and seller if it's optional.
When a buyer asks for a closing cost concession for lender/title fees, the seller and listing agent make it happen. They know that those parties must get paid for the deal to happen. It's simply not optional and if the buyer doesn't have the cash there is no deal without the concession.
Well what if lenders & title companies offered 'no-hook' services? What if the listing agent when presenting the offer to the seller said, 'The buyer wants you to pay $5k towards their lender and title company. You don't have to, they will still do the work and the deal would close even if you don't pay the concession.' How many sellers cough up that $5k?
So, I think if 'no-hook' agreements become common place (standard forms) or if a particular firm(s) advertises them publicly then the listing agent is going to know the buyer agent fee being requested is optional. As a fiduciary to their seller, they must and better give that seller all information that have for that negotiation.
So we end at:
Mr/Ms Seller, the buyer is requesting that you pay $15k for their buyer agent. Just so you are aware, the buyer is not under an obligation to pay this, just an obligation to let their agent request it as a concession. Now, if you decide to pay their agent, they will likely be motivated to keep this deal moving forward. If you don't, the agent may not be motivated. However, inventory is slim, it's a sellers market and the chance we go under contract and the buyer closes is high either way. What would you like to do, pay the $15k, pay nothing since no-one is obligated or offer a different amount?
Tell me how a prevalence of 'no-hook' agreements survives a few thousand of those negotiations in any local market?
That was my main point in the totality of my comments. Thanks again for your blog, I truly enjoy it and have learned much here.
Thanks Andrew -- really appreciate your well-thought out questions and commentary.
A small point I will make first. You write, "So, I think if 'no-hook' agreements become common place (standard forms) or if a particular firm(s) advertises them publicly then the listing agent is going to know the buyer agent fee being requested is optional." Isn't that the case today? Isn't the buyer agent compensation optional today, unless the listing agent has gone the "6% commission, 3% compensation" route? (And I have already addressed why that compensation-route is going bye-bye, due to competition.)
So I guess my first question would be, "Would listing agents and sellers really always negotiate away the buyer compensation?"
Let's assume the world as you have it setup. There are only two options here:
1. The offer requesting compensation is the only offer on the table;
2. There are multiple offers.
If #1, would the listing agent *really* tell the seller to hold fast on not paying buyer agent compensation to then wait and hope to see if another offer comes in?
If #2, because as you say, it's a low-inventory seller's market, wouldn't the listing agent simply compare the net proceeds to seller? Which is what is happening today, isn't it? (Or should be happening shortly.)
Now, the listing agent doing his fiduciary duty could try to negotiate the buyer agent fee lower, just like he would negotiate concession requests for repairs lower. But at the end of the day, the parties would come to agreement.
Maybe the buyer agent ends up taking a bit less -- 2% here, 1.75% there, 0.5% in another case. We will find out what the average rate is, then what the market share is. I could see top agents figuring out that by going no-hook, they do 25% more buyer business, at a lower *average* rate (say 1.75%), and that makes the math work to their advantage.
Or not. The market will tell us what will and won't work. But I do think buyers would prefer not to be locked in if they don't have to be, and that agents will offer no-lock-in because they want to compete.
I can see strong arguments for either of these two points. Only time will tell, and I can't wait to see how this develops. I think it will also be intersting to see how the large corporate brokers play this game. I would love to be a fly on the wall in their strategy meetings.
Thanks for discussing my comment, Rob! I will say, we are 100% in alignment on the substance of this. I certainly do read the rule change language to permit “no hook” agreements. You’ve helped me more fully flesh out my analysis and thoughts on it with this post, so I appreciate it.
My concern with an MLS interpreting it wrongly (which I concur would be wrong) is more my background working in government, enforcement, and with committees and boards making decisions. There are so many opportunities for bad decisions and wrong decisions, and there’s no shortage of examples out on the wild.
As someone who works directly with a lot of agents and brokers on these issues, there are so many questions and concerns, and now we are seeing some people uncover all the nuance that we all have to work through. I always want to make sure I uncover the gaps as much as I can.
I’ll say this, there aren’t a lot of opportunities to have this kind of higher level thought and discussion, so I again appreciate you pulling the comments and offering some deeper thoughts on the no hook agreement concept.
Thank you Notorious for your continued detailed analysis of a fluid situation and fostering this vibrant community of thoughtful participants. I particularly appreciate your second order thinking throughout your work and here to go beyond what's dictated by law or adherence to association rules to think about how natural market forces and human nature will shape outcomes.
In this spirit, I wonder if anyone here has formulated thoughts on how we might see an evolution in willingness of listing agents to take on dual agency roles when approached directly by buyers who either feel confident to act with some degree of independence or who balk at the idea of an "on the hook" agreement? Let's say for the sake of this thought experiment that we adhere to all enhanced disclosure requirements and we have a sophisticated buyer, seller, and dual agent who deem it fair to all share the benefits of an arrangement more or less equally: listing agent commission goes up 1% from 2.5% to 3.5%, seller saves 0.75% compared to a full pre-settlement prevailing market commission of 5.0%, and 0.75% cost reduction will accrue to the buyer who didn't seek their own independent representation.
It would seem that there's a potential issue where listing agent and seller have agreed privately to pay a full commission as per the prevailing ~5% rates in the pre-settlement era, but it's not clear that the mechanisms available to communicate to the market that buyer's agents will be able to earn cooperating commission splits out of seller costs is in fact = 2.5%. If an unrepresented buyer called a listing agent and asked for this arrangement, the listing agent would at that time only be a fiduciary to the seller and presumably incentivized to maximize their clients' interests which might be to say something like "I can ask my client if they're open to letting me dual represent, this will increase my work load, but I can offer some reduction and charge 3.5% as compared to 2.5% from each side if my client consents, and you and my client could each pay me 1.75%, saving you each 0.75% compared to what you would have otherwise paid as my client had not agreed to a set amount to compensate a buyer's agent." This could of course fail for all parties with the buyer just hiring an agent, requesting a full 2.5%, and offering an amount with the highest net proceeds to seller, at which point the listing agent and the buyer and the seller will have lost out on economic benefits.
This is where my thinking through of all the possible negotiation outcomes gets quite muddled: there could be some efficient outcome where the buyer just reduces their offer price by 2.5% when asked to split commission costs with seller at 1.75% / 1.75% to make up for the 0.75% saved by seller + 1.75% owed by buyer. The seller could accept the offer and the economics potentially benefited the buyer $ for $, but it seems more likely that in the back and forth over price, the 0.75% saved by seller and 1.75% owed by buyer isn't entirely swapped out $ for $ when an acceptable gross value of the property hasn't even been established through offer / counter-offer. This 1-2% spread is surely not ruining a deal for anyone who is primarily motivated to sell their house or buy their next home, but the complexity of the situation as compared to a universe where the unilateral offer to buyer's agent is crystal clear would make me think that dual agency may be too much brain damage and risk for a listing agent to be compelled to take on to make an extra ~1%?
This then leads to two related scenarios:
1/ Does listing agent just pass buyer to an independent buyer's agent from their brokerage, and is there a way that this could also result in a similar 4-way equitable advantage where buyer saves some cost, seller saves some cost, brokerage gains some benefit, and each individual agent makes more than they otherwise would have? Could the independent agents at the same brokerage agree to some fair sharing of benefits given that the listing agent effectively procured the buyer and handed them on a silver platter to the buyer's agent from their firm? Buyer's agent will still earn a commission for the work they'll be doing to get through closing the deal, but they might be happy with a slightly reduced rate of compensation given the handoff of the buyer client with the deal already identified? Is there some other conflict of interest issue this could lead to? It would not be uncommon of course for a listing agent to put a buyer's agent from their firm at an open house in the pre-settlement era, but I've generally seen this result in the expectation of two full commissions unless seller pre-negotiated for a reduction on their pay rate in the event of a double sided deal (I'm not sure this was ever a totally fair practice to sellers). Others with more experience and more appreciation of the nuance of the new rules and regulations would surely correct some mistake or over simplification in how I've set up this scenario.
2/ What happens now when a buyer engages their friend the hobbyist real estate agent who intends to earn a commission and rebate the majority of it to the buyer? There are increased disclosure requirements around rebates, and would these need to be shared prior to execution of a purchase and sale agreement to where selling team could reject the payment of a full pre-settlement prevailing market commission of 2.5% in light of the knowledge of the rebate? Alternatively, would it not be theoretically legal and permissible to enter into the contingency period and discover conditions that lead to requesting a defensible enough large price reduction, and then upon the rejection of that price reduction request for the buyer's agent to offer to reduce his commission share by ~0.5% and ask listing agent to do the same in order to compel seller to agree to a price reduction of 1% to "get the deal done". The hobbyist agent theoretically has no reputational concerns to manage and whatever verbal arrangement done between hobbyist and their friend the purchaser would not be discoverable. This is again a lot of brain damage for 1% savings on a transaction theoretically motivated by larger concerns than the last 1% of price, but I am based in a CA market where 1% of housing prices are a meaningful sum.
Thank you to anyone who took the time to read this long note and to anyone who responds. Hopefully this exploration of edge cases has some interest to others (and the scenarios presented do not reflect my misconstruing of what's permissible or within the realm of rational behavior).
I like your edge case hypotheticals. Thank you for those. It might be these take a bit more thought but for the sake of discussion, let me take a crack.
1. On the dual agency issue, I can't think of anybody in the industry who actually likes single agent dual agency. I know I don't. But for the sake of argument, let's say the seller will accept that.
My question there is, "Has the seller thought through this?" Is a 0.75% savings enough to forego having a fiduciary representative in what is likely the biggest transaction of his life?
I know there are states which allow for transaction agency; I also know that I would never accept such a thing. That consumers do is a bit puzzling, but that's because I know the industry. If I just wanted paperwork handled, instead of my interests represented, I'll hire a lawyer for $1,500. (And that lawyer would be a fiduciary to me.)
2. If a buyer is sophisticated enough to want to go without a buyer agent representing him (let's say he's an investor), why bother with dual agency or any agency? Just hire a lawyer for the paperwork and for protecting his legal interests. The seller shouldn't care: he's paying the contracted rate of 2.5% to his listing agent, and there will be no request for compensation from the buyer.
(But see above re: multiple offers and comparing net proceeds.)
3. On designated agency (i.e., single firm dual agency, with two different agents), there are those who argue against it. I am one of those, adhering to the vision from the history of NAR. My series on William North should be of interest here. (https://notoriousrob.substack.com/p/to-go-forward-we-must-go-back-part-3f5)
4. As to rebates... the reason why agents offer rebates is because of cooperative compensation. The only way to get money back to the buyer client was through rebates. In the new world, the buyer agent would simply charge less money, and request less from the seller. I'm not sure the hobbyist agent intending to rebate is a real issue going forward, at least in the long run.
Good topics! I'll have to consider them for future treatments.
This crack pretty comprehensively clears up the matter for me.
Your reason why you and those you know advise seller against dual agency makes complete sense.
I have come at this in the past from a position where I'm a full time "investor" at my day job and then something of an investment minded residential market participant whether it's for my home or an asset purchase. My (in hindsight after your post) naive approach to purchasing residential property was that I didn't feel like I needed advice on certain matters but paid for transaction services (form agreements filled properly, diligence vendor recommendations) while incentivizing listing agent to advocate for my offer by doing single firm dual agency or dual agency. Maybe this worked to my benefit, but it's worth always circling this back to the fiduciary disadvantages, and I could have just hired a lawyer for less and Googled for vendors.
I'm not totally convinced that the buyer agent rebate wouldn't have some psychological advantage in negotiation vs. a pure purchase price reduction with lower concessions, but I see your point the math should work out if folks are paying attention. Certainly your other work has led me to agree fully that the hobbyist agent will be a declining phenomenon.
Since discovering your work two weeks ago and becoming a voracious consumer of your content, my recent efforts toward understanding the business from an agent-centric perspective have benefited tremendously from your eloquent explorations grounded in academic sophistication, deep practical experience, and commitment to the highest standards of ethics.
Thank you for this blog and your podcast.
On my listings in this new environment and being comfortable with dual agency, I feel I am an excellent mediator and have been effective in this role with both sides happy and commenting if it were not for my position the deal would have never happened., my seller clients have agreed that if I bring the buyer or an unrepresented buyer presents an acceptable offer I charge a total of 4%, down from 2.5 and the seller paying 2.5 to a buyer brokerage. One of my sellers suggested this. They suggested that if an unrepresented buyer showed up I should charge more. I agree. I have had a few unrepresented buyers call and suggest they would take the buyer broker fee. I explained to them that fee was not for them, but the seller would be happy to review an offer from them.
As long as the seller gives his informed consent, there is no problem. I am sure you are an excellent mediator.
I am merely saying that I personally would never allow it, as I want an agent who only represents my interests. I would not give that up for a mere 1%. But that's me, and others obviously feel differently.
Finally, I will note that William North thought dual-agency was extraordinarily difficult to pull off. See my series on his works.
How is a “no hook” agreement an agreement? There’s no agreed upon consideration
I would consult your attorney.
But if you're actually curious, start here: https://www.law.cornell.edu/wex/consideration
Finally, if one wants to be super pedantic about it, here's the no-hook clause:
"If there is any shortfall between contract compensation and seller's contribution, the buyer's payment shall be limited to $1."
There. Consideration.
I think you’re missing the point. if there’s no fee for the services then the services are free. but if there’s consideration, then you have a fiduciary duty to stick to that consideration. Stick to the dollar.
Am I missing the point? Or perhaps you are focusing too much on the no obligation to pay instead of the 2.5% negotiated compensation?
The State of Colorado had a clause in its buyer agency agreement that authorized the buyer agent to obtain payment from the listing broker or seller, and specified that the buyer was not obligated to pay. In fact, that was the default provision. No one had a problem with that agreement, and no one thought that a void contract for lack of consideration. Why is it different now?
A private settlement does not and can not rewrite basics of contract law.
The biggest issue that the state of Colorado had was that the agents were forcing buyer agency agreements for touring the house, which is unnecessary. Physical house tours aren’t brokerage services.
Which by the way Washington state is similar.
But getting back to the major point. I never said a settlement rewrites basics of contract law. Legally, you absolutely can have a contract for one dollar and have a no hook agreement. I am not disputing that. But you’re also a fiduciary. so stick to the dollar.
Otherwise, you are advertising your services are free.
Which I think we all agree is against the settlement.
If a buyer has no obligation to pay for the services, then the services are free.
The solution is not no hook agreements. Its non-exclusive agreements for a specific stated amount.
Rob, I don't believe a non-hook agreement is an agreement at all. I thought that all contracts have to have a cause (consideration) to be valid and binding. If the buyer is not obligated to pay anything, then it is not an agreement. At best it is a convoluted loophole to comply with the settlement. Several states state that the Zillow touring agreement was not valid. (Pre-settlement the binding agreement was the MLS, and most buyers had no obligation to remain loyal to their agent) If my BBA is the buyer simply authorizing me to negotiate my commission with the seller, then it doesn't seem to be in compliance with the settlement.
A bigger problem with this is that it is gets back to the old ways where the buyers agent is basically begging the seller and list agent to determine the buyer's agent's compensation, instead of the agent negotiating that with the buyer. I thought there was another thread here comparing that to commercial bribery???
We have this habit of trying to find out what the seller is "offering." The buyer's agent shouldn't care, they already agreed with the buyer what they will earn. Agents have begged for money from the list broker and seller for so long that we can't let go of it.
So this comment:
"Now, the listing agent doing his fiduciary duty could try to negotiate the buyer agent fee lower, just like he would negotiate concession requests for repairs lower. But at the end of the day, the parties would come to agreement."
I have a problem with that. The list agent's fiduciary duty is to get the deal done AND get the highest price & terms possible. These can be mutually exclusive goals; fighting over the last penny can lose the deal. The list agent and seller should evaluate the bottom line (net) and negotiate the top line (price). Buyers ask the seller to pay closing costs (and BB fee) because they are obligated to pay those fees, and are tight on cash. Telling the buyer you won't help with their fees can ruin the deal. HELPING the buyer finance their costs (via a slightly higher price) is how you keep the deal together. The repair cost analogy doesn't really apply, that is usually negotiated after inspections - a couple of weeks after the price is agreed.
See above, re: consideration.
But let's address your more interesting concern: that a no-hook agreement is begging the seller for payment instead of negotiating with the buyer. That is a legitimate objection.
My take on that issue is as follows:
- If we did not want the buyer's agent asking the seller for anything, in order to ensure that buyers and buyer agents negotiated fully, and the buyer agent's loyalty cannot be questioned at all, then we should move straight to no compensation, no concession, no nothing. Force the buyer to pay the agent out of pocket, period. Anything short of that would raise the issue of buyer agent loyalty.
- Since I'm in favor of buyer agents getting paid for their time and expertise on an hourly basis, you won't get much argument from me. But I suspect that the industry is simply not ready for that big of a leap.
- Commercial bribery is when the seller/listing agent is offering something to the buyer's agent to attempt to influence the agent. The agent requesting compensation *in an offer to purchase* seems outside of that -- and the DOJ agrees with my take so far. It should be noted that phone calls or text messages before submitting the offer is problematic, but I can't imagine that a buyer agent would submit an offer binding the buyer without at least discussing it -- and the concession request -- with the buyer.
As for the "I have a problem with that" -- I'm not sure what the problem is. Perhaps you can explain more fully. Seller concessions are seller concessions, no? What is the difference in your mind between one kind of seller concession and another?
Rob thanks for this - even though I may not agree with your crazy ideas, it gets the mental juices flowing and it is good to see the other thoughtful comments.
"My problem" in your scenario was that the buyer presumably lacks cash, and thus can't do the deal without the assistance. The seller (and envious list agent) may try to negotiate the BB fee after the offer is received *rather than the price.* That could cause the buyer to walk, and if it was the envious list agent who objected to the buyers agent getting more than the list agent, a violation of fiduciary. Evaluate the bottom line, negotiate the top line. HELP the deal come together by HELPING the buyer finance their expenses, not running them away. Just counter at a higher price, and agree to the buyer's request for assistance.
A minimum $1 may help the agreement be binding, but riddle me this: The compensation in a no-hook BB is x%, or whatever the seller will pay, but no less than $Y. Buyer may have to pay at least the $Y, but who knows until we negotiate? How does this meet the "objectively ascertainable and may not be open-ended" standard?
And if it is open ended, then is it "a gift or gratuitous promise..."? which under the Cornell link "cannot be a consideration for they have no bargaining."
Regardless, it gets us back to negotiating the fee with the counterparty or the counterparty's fiduciary instead of the buyer client. The BUYER negotiates that the seller will pay my fee by rolling it into the price; or the buyer authorizes me to negotiate my compensation with the seller. Subtle but important distinction.
- In the former, the buyer is in charge and already agreed with me what my compensation will be, they are just asking the seller to help them finance it. And if the seller declines to pay the full amount, and the parties can't agree to a higher price, then the buyer is on the hook for the balance (or the buyer walks). That's what the DOJ sees to prefer.
- In the latter scenario, the buyers agent is negotiating their comp with the other side. Buyer has no say (except the min and maybe the max their agent can earn. Does that meet the test of "bargaining"). That's the previous scenario that got us into trouble.
Finally, this CAN lead to working for free, or much less than one is willing. I signed an agreement where I have a fiduciary obligation to rep the buyer
- In the former scenario if the seller won't pay the buyer's expenses and the parties can't negotiate it into the price, and the buyer walks, well I haven't been paid (yet) for all that work. We go find another house.
- In the latter (no-hook) scenario, my pay is solely up to my ability to beg an adequate bribe from the buyer's counterparty. I have a fiduciary obligation to rep the buyer for as little as Rob's $1. I can't make the decision to drop the negotiations and move on to another house. I have no choice but to work (practically) for free.
Thanks for continuing the discussion and debate. Civil debate is how I learn things, so I really appreciate that. Let me see if I can try to answer a few points.
"The compensation in a no-hook BB is x%, or whatever the seller will pay, but no less than $Y. Buyer may have to pay at least the $Y, but who knows until we negotiate? How does this meet the "objectively ascertainable and may not be open-ended" standard?"
- The x% is objectively ascertainable. If it weren't then all BBA's would fail to pass muster. Whether the buyer is or is not on the hook for any shortfall does not change that x% is objectively ascertainable.
"Regardless, it gets us back to negotiating the fee with the counterparty or the counterparty's fiduciary instead of the buyer client. The BUYER negotiates that the seller will pay my fee by rolling it into the price; or the buyer authorizes me to negotiate my compensation with the seller. Subtle but important distinction."
- Recall that the DOJ, in the Nosalek case, said they were not opposed to sellers paying compensation to buyer agents. Their concern was not that sellers were paying, or that buyer agents negotiate their compensation with the seller. Their concern was STEERING. Their concern was on the *timing* of the compensation "negotiation." If the request is in the OFFER, then there has been so steering; the agent showed the house, discussed it with his buyer, and is now making an offer that contains a request for compensation.
I think we all lose sight of this point. The DOJ is not opposed to compensation; they're opposed to steering.
I have found no evidence that the DOJ wants the buyer to be on the hook for any shortfall between the x% negotiated in the BBA, and the $y that the seller would offer in negotiation.
"In the latter scenario, the buyers agent is negotiating their comp with the other side. Buyer has no say (except the min and maybe the max their agent can earn. Does that meet the test of "bargaining"). That's the previous scenario that got us into trouble."
- You're overthinking this. The settlement is clear that the agent can make LESS than the x% negotiated in the BBA; it just says the agent cannot make MORE. The negotiation of comp between the buyer and the buyer agent has already happened, and a cap has been put on what the agent can make, not a floor.
Yes, that CAN lead to working for free, or for far less. I pointed that out, but I think a lot of brokers and agents will take that risk, because they can make it up in volume. I could be wrong about that, but I do think competition is a real thing in our industry. We'll see.
"In the former scenario if the seller won't pay the buyer's expenses and the parties can't negotiate it into the price, and the buyer walks, well I haven't been paid (yet) for all that work. We go find another house."
- How does this change if the buyer is on the hook? Seller won't pay the buyer's expenses, the parties can't negotiate it into the price, except now the buyer has to come out of pocket to pay you. Why is he not walking then? Same result, no?
"my pay is solely up to my ability to beg an adequate bribe from the buyer's counterparty. I have a fiduciary obligation to rep the buyer for as little as Rob's $1. I can't make the decision to drop the negotiations and move on to another house. I have no choice but to work (practically) for free."
- Yes, that is the risk those going with no-hook will have to take. I firmly believe that the American consumer is not going to screw agents over who have worked with and for them for weeks and months to make their dream come true.
BUT, if you are concerned that your buyer is going to screw you, after working with them for a couple of weeks... fire them. Stop representing them. Obviously, there is no trust between you and the client. You can't represent that individual. Buyer agents fire their clients all the time today -- I don't see why it's so different with a no-hook agreement.
I think its disingenuous to not negotiate your fee with your buyer but say you services aren’t free because you can beg the seller for whatever you get.
Excellent response and aligns with my thinking as well. I am not going to work and put myself in the position of perhaps making nothing and not have the client invested in me representing them. I am a 1% broker and give solid value. Buyers are not obligated to view homes where no fee is offered by the seller. Buyers can go unrepresented. My busines model would not include no hook agreements. I don’t even like that term. Call it what it is, no cost. And if I make more fees than my competitors using no hook, but at a reduced fee out of alignment with my business model, I am working twice as hard, not my idea of success. I already work very hard. Maybe a broker who struggles with their value proposition would get traction from a no hook agreement. I feel it undermines our industry which is already being assaulted on many fronts. At some point we need to take a stand for our own personal integrity. We are working with the new model and things are fine. We don’t need to let buyers off the hook. They already have other options.
Nobody is telling you to work for free, or to do anything you don't want to do, Patricia. You do you, and power to you! I genuinely mean that. Good brokers and agents should be rewarded.
I am merely pointing out that human nature and incentives plus competition means you are likely to face competitors offering no-hook agreements. You don't have to, at all. But the free market tends to sort out winner and losers over time, and the choice is either to compete or... not. Or compete in a different way.
When I say "should", I am not taking a moral stance. I am doing competitive analysis, and assuming that most agents want to take market share, increase income, and be more successful tomorrow than they are today. My "should" above ought to be read in that way.
Finally, since you are a 1% broker, I did point out that perhaps we'd see the 1% on-hook agreements compete against the 3% off-hook agreements. I look forward to seeing what the market tells us over time.