Realty Insider Blog

Time and time again I run into potential home buyers at open houses that insist that they will get a better deal buying on their own. Their logic usually boils down to some combination of the following:

a. Not using a Buyer’s Agent will get me a lower price as the seller will have to spend less on commission. A lower commission means they can agree to a lower price while still getting the same net.

b. Not using a Buyer’s Agent will get me a lower price as the Seller’s Agent will get all the commission and will be incentivized to work harder to get me a lower price.

c. Not using a Buyer’s Agent will get me a lower price as the Seller’s Agent will give me the commission they are saving by me not having an agent.

d. I hate agents. All they do is driving me around in their fancy car and letting me into homes with their fancy electronic key. I am going to teach  this Seller's Agent a lesson.

So, let me answer these seemingly logical arguments one by one:

Not using a Buyer’s Agent will get me a lower price as the seller will have to spend less on commission. A lower commission means they can agree to a lower price while still getting the same net.

Highly Unlikely. The vast majority of listing agreements (between the seller and a real estate brokerage) are for a fixed rate whether a buyer has a Buyer's Agent or not. So, a Listing Agreement states a total percent of the sales price due to the brokerage of the Seller's Agent (average 5% in this area) at settlement. There is then a separate clause in the agreement that states how much of those 5% the Seller Agent brokerage will offer to the Buyer Agent brokerage IF there is one. If there is no Buyer Agent brokerage, the full commission goes to the broker of the Seller Agent. So, the net to the seller will be the same whether you come with an agent or not.

There is one exception, and that is a variable commission. Some brokerages (usually smaller ones) allow their agents to negotiate a variable commission rate. A variable commission rate could say something like “If a buyer comes without an agent, the total commission will be reduced by 1%” - this is rare and I have run across very few agents doing that. There is really no way for you, as an unrepresented buyer, to know if the commission is variable and what the terms are.

Not using a Buyer’s Agent will get me a lower price as the Seller's Agent will get all the commission and will be incentivized to work harder to get me a lower price.

Unlikely. With an unrepresented purchaser, the Seller's Agent will usually have a great advantage. Sure, the Seller’s Agent will love to get the full commission (not really true, the broker gets the commission and the agent gets a percentage) but will also enjoy getting the seller a great price in the process (win-win.) A seller would easily see through an agent trying to push through a weak offer to ensure the larger commission. I would argue that agents will work even harder to get the seller a high price to get rid of any appearance of ulterior motives in such cases.

Also, many agents prefer to work with Buyer's Agents as opposed to unrepresented buyers. The chance of the deal closing is probably better, the work required educating the buyer on the process is less and the chances of a lawsuit are probably less as well. Agents do not like lawsuits - a court may find that a “poor unrepresented buyer” was taken advantage of by a skilled (and aggressive) listing agent getting his or her seller client a fantastic price.

Not using a Buyer’s Agent will get me a lower price as the Seller’s Agent will give me the commission they are saving by me not having an agent.

Highly Unlikely. The agent is not allowed to pay you commission. You could end up with a credit towards closing cost on your settlement statement. Odds are that the money would be paid by the sellers, not the agent. You may think that the agent giving you back 1% at settlement of 5%(average) shouldn’t be a big deal. However, agents are not the ones receiving the commission - their brokerage is. And the brokerage does not go around giving back commissions when a listing agreement cleary states they are entitled to it. Working with unrepresented buyers is usually a lot more work - agents expect to be compensated for that.

I hate agents. All they do is drive me around in their fancy car and letting me into homes with their fancy electronic key.

Uhhhmm. Not much to do to help these people. Generally they have had a bad experience with an agent in the past – or they are uneducated as to what a skilled and experienced buyers agent does. Please come and make an offer on one of my listings!

So, are Seller Agents evil?
No. They are simply doing the job they were hired and are paid to do: represent the interests of the seller and get the highest possible price.

What most unrepresented buyers don’t realize is that everything material you tell the agent like “I love the house”, “My financing is a bit shaky”, “I will offer $400,000 but will go up to $450,000 is the seller doesn’t accept”, he or she is obligated to tell the seller. Furthermore, the agent and sellers will use all the information gathered to get the seller the highest possible price.

Sure, the listing agent will be your best friend and offer to do your laundry and wash your car - but do not believe the listing agent is looking out for your interests and will help you get the best deal.

Why I can’t just read “Homebuying for Dummies”?
You should read “Homebuying for Dummies” – it has great information that will help you find a great home. However, there is really no reason to not use a buyer’s agent.

In almost all cases will the agent be fully paid by the seller (so it will cost you nothing.) An experienced buyer’s agent will look out for your interests only and guide you through the process. The agent will help you find a home you can afford, will help you prepare an offer – and will help you purchase a property for the lowest possible price.

You will also get access to all the comparable sold data (a listing agent will not give you information that is not beneficial to the seller) and general market information. Not to mention the advice and help on everything from inspections to strategies to make your move easy.

So, get that agent now before it is too late. We here at Partners Real Estate will be happy to help!