The cost of a free ride - why not to use a buyer's agent
Recently, my wife and I were house shopping and we decided to make an offer on a condo. It was advertised for $345,000, but we thought we could get a better deal by contacting the seller's agent first. It wasn't the first time we tried this trick — we had previously bought our house in Fresno with only one real estate agent, and it worked out great. So we threw out a low-ball offer of $325,000 and, to our surprise, the seller's agent was very eager to work with us. He negotiated on our behalf with the seller, and basically came back and said that if we could raise our offer to $327,000, we could have the deal. There was a pending offer of $335,000, but if we wanted it at $327,000, he would convince the seller to give it to us. Why would the seller's agent go so far for us? Why would he bend over backwards to try to make the deal happen, when we were offering a lower price? Was this a breach of his fiduciary duty?
It's called dual agency. That means the seller's agent can represent you (the buyer), and your adversary (the seller). It's completely nonsensical, but, so long as this system exists, you might as well use it.
There is a 6% commission in a real estate broker contract that is split 50/50 if two real estate agents are involved (buyer and seller's agents). If only the seller's agent is involved (that is, he or she finds the buyer and represents the seller), then such an agent gets 100% of the 6% pot. In my case, if the condo was sold for $335,000 in a two-agent deal, the seller would receive $314,900 in cash (after 6% reduction for commission) afterwards and the seller's agent would pocket $10,050 in cash (3% of sales price). However, if the condo was sold for $327,000 in a one-agent deal and the seller's agent was smart enough to reduce his or her commission (say, to 3.5%) to make the deal happen, everyone wins. The seller would receive $315,555 cash (after a 3.5% reduction for commission), the seller's agent would receive $11,445 cash (3.5% of sales price), and the buyers would receive an $8000 discount on the house.
If you haven't figured out the trick by now, I'm trying to say that you should call the seller's agent when looking at a house. To recap, here are the reasons why you should use only the seller's agent:
1. Reduce Commissions
They can reduce their commissions from 6% to 3% and still have it worth their while to do the deal with you. A 3% reduction in their commission represents thousands in savings!
2. They'll Persuade on Your Behalf
There is a huge incentive for the seller's agent to persuade the seller that you are the right person to close and that your offer is the best (sellers don't always look at the highest offer, they also care about which buyer is actually going to close the deal).
3. No Buyer's Agent Pressure
Buyer's agents are especially evil, not because of their moral character, but because of the incentive system. They don't make money unless you actually get your offer accepted. So there is incredible pressure on them to persuade you to overbid in you offer. If you overbid, there is a greater chance that your offer will be accepted. You don't need that kind of pressure when committing yourself to the most expensive purchase of your life.
4. Seller's Inside Info
The seller's agent actually has a lot of useful information that is helpful in the home-buying process. They know if the seller is motivated, whether other offers are pending, what complaints have been made about the house by other potential buyers, etc. Since the seller's agent also becomes your agent in the deal, they have a duty to advise you (and possibly even reveal this juicy info to you). However, if you use a buyer's agent, you have absolutely no access to the good information.
Tagged: Real Estate and Housing, buying a house, dual agency, real estate agents, seller's buyer's agent
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Not that your story doesn't make sense, because it does. However, I don't think you bought a damn thing and are using a cute story to prove a point. Regardless of that, the agent "told" you he had a $335,000 offer. While you think you are saving $8000 the agent is laughing all the way to the bank by not reducing his fee but selling a house that the owners wanted $315,000 for for your inflated offer of $327,000. If there really were an offer it was for less than you offered and if someone had offered $8000 more the agent would have sold it in a heartbeat. No homeowner is holding out for the extra $600 your "deal" made them.
Try try again.
"If there really were an offer it was for less than you offered and if someone had offered $8000 more the agent would have sold it in a heartbeat."
because:
"if the condo was sold for $335,000 in a two agent deal, the two agents would each pocket $10,050 in cash (3% of sales price). However, if the condo was sold for $327,000 in a one agent deal, the seller's agent would receive $11,445 cash (3.5% of sales price)."
i think $1400 is incentive for the seller's agent to try to convince the seller.
"No homeowner is holding out for the extra $600 your "deal" made them."
who's holding out. there's a reasonable amount of time for the seller to wait to see offers come in. and if in that period of time, the seller's agent asks which sale do you want - the one where you get $314,900 or the one where you get $327,000, how unreasonable is it to think that the seller would pick the one where they get $600 more?
i think you need to calm down and let people tell their cute stories and not make assumptions about the deal that "really happened" when you're really the one w/no clue. it must be tough doubting people and assuming everyone's lying to you, but if you don't like the advice, don't take it. if you got a raw deal by using a buyer's agent yourself, don't take it out on those who know better.
Get an agent that knows the area you are looking in and they won't overbid! If you want the house bad enough, payt a little more! It is worth it in the end! I lost seveal homes not wanting to hassle with the war but when I found my dream home, I paid what I could and what it was worth and got it!
That's how I bought my house.
Back in 2000 I was driving my wife around on a Sunday and she saw a 'house for sale' sign. We stopped in and saw this gorgeous house with a beautiful yard. The selling agent said the house hadn't even been listed yet but that two other people had already stopped in and were looking for their own agents so they could make offers. I had never bought a house so I thought, well, hell, I can make an offer right here, now, can't I? Sure! So, I did, I made an offer for the selling price. And, I got the house. Boy, those other people were pissed because they offered more!
PS: The agent told me that the people I bought the house from were selling because they were divorcing - they had bought the house only 9 months earlier. THEY were one of three offers made on the house the first day that it became available for sale and their offer was accepted because it was $5,000 over the asking price.
So, You can just walk in, make an offer and buy a house - that easy. Of course, your offer has to be contingent upon NOT finding any insect infestations, structural damage, etc.but the seller's agent understands that - no agent wants to be sued or get a bad reputation - and the agent will readily agree to that.
I have made many improvements to the house - 7 years later it's worth twice what I paid for it. And, it's MY house - rebuilt and renovated to suit ME. Color me happy.
My story was a bit different - I got burned by a few too many agents who had an "in" with each other... you know, the "I know Jim. Jim wouldn't lie. This deal is going through," when, in fact, Jim was orchestrating a bidding war between myself and another buyers.
When we finally found the place we wanted, we didn't want to bother finding another agent at all. The seller's agent did all the work for us, saving us what probably would have been several thousand dollars, and was helpful enough.
What I'm wondering is if I want a seller's agent when I SELL my place, or if I can do it all by my lonesome.
This all sounds really great but IMO it may not be worth the inherent conflict of interest the situation puts the agent in. We used an agent once, who I now realize is probably one of the best real estate agents out there, not just in terms of salesmanship but also professionalism and customer service, who refused to do deals representing both sides because she didn't want the possibility of having her ethics ever questioned. You might get into a situation where the agent won't disclose some potentially negative information in the interest of protecting one party to the detriment of the other. That's not to say that all buyer's agents are perfect, or anything close. In fact, we're buying a house right now and our agent leaves a bit to be desired. Still, he is well connected and has worked with many of the seller's agents in our area. He's been able to get us information on several properties just by using his contacts and rapport with his colleagues. That's not to say that I believe everything he says, or that he got us a great deal on the house we're buying. We probably could've gotten the house for a bit less but we made the decision to spend more in order to make sure we get the house. No agent talked us into that one.
Stop by my blog: http://just-a-teaspoon.blogspot.com/
Besides the fact that this is unethical and a clear breach of the seller's agent's duty to represent the seller by getting them the best price, this should be a watch out for buyers and sellers. If the process becomes more about getting commisions and less about the price of the house, then a level of distrust enters into the situation. For example, if the house has been on the market for more than 3 months and the seller puts in less effort or suggest significant price cuts so they can be rid of the listing, it may not be in the sellers best interest. Additionally, dual agency brings in a host of other issues. If the seller had a lower offer than yours, but told you they had a higher offer to boost their commision, would that be right? In my opinion no, so the inverse which you stated in your article is also neither ethical, nor right. Perhaps because I am an investor and have seen a lot of buyers get hosed with dual agency, I have a different perspective. I like your story, but I just want to let people know it does not always work out that way.
I'm going to assume this story is true.
Now, what makes you think there was really an offer for $8000 higher?
That listing agent dug a pit for you and you eagerly jumped into it because you thought you were saving some money. This is like gravity, it's so predictable.
PT Barnum drastically underestimated.
I could write an offer pending the Bill's winning the super bowl, the re-unification of south and north Korea, the average temp in Palm Beach being 32 degrees. Or pending the sale of home in a down market like Detroit.
##
Then again I love how you saved 8K off the pending offer. What was the market value of the home? Was it the 345,000. Or was what a real buyer was willing to pay. i.e. 327,000. ###In structuring your offer did you remove contingencies that the other offer had? Did you have a sooner close date, so the seller would not have to make two mortgage payments. Did you have a home inspection? Did you not have seller carry back? there are many many thing a buyer can do to make his or her offer worth more to a seller other then just giving more money. Not having a buyers agent could have cost you the the 3k between getting your original offer accepted VS. the offer the sellers agent talked you in to making.
In reading all these glowing accounts, I don't see any mention of these supposedly generous listing agents providing any data of comparable sales for the buyer to base his or her price from. Having the listing agent say "psst, if you just raise $2000 I think I can get you a deal" sounds more akin to a shady used car agent than a reputable real estate agent. Dual agency is legal in California but in my opinion neither side gets properly represented. I'm an agent and never, ever represent a buyer for one of my listings: the seller's confidentiality and trust is diminished, and the buyer establishes a price not based on market value but on what works to make the deal close, which may be thousands of dollars higher than fair market value (despite what the agent may tell the unsuspecting buyer). Not to mention the tremendous increase in liability - there is a reason most real estate lawsuits involve dual agency deals. I'd be wary of a listing agent offering to cut a "special" deal to an unsuspecting, unrepresented buyer... in the trade we call these types of agents "walking lawsuits." Would you really want to do business with one of these characters?
I don't see any mention of these supposedly generous listing agents providing any data of comparable sales for the buyer to base his or her price from.
Well, I didn't mention it my account because it seemed really superfluous to talk about all the things that the agent did for us when I bought my house. For one thing, I did actually view houses similar to mine that were selling mere blocks away for similar prices. Our agent gave us comparison sheets to see places that were selling around the city. I went on Zillow and did some investigating on homes that had sold or were selling in my area, and I'm convinced that I got a good deal. I didn't see anyone here say "Well, the guy in the shiny suit with the alligator shoes said we could trust him, so we did!".
I can see why you would want an agent on your side, but you have to be sure that they are really gunning for you, not just along for a chunk of change. I'm sure that a lot of buyer's agents are very dedicated, loyal to their customers, and trustworthy. I just managed to not come across one, so I'm happy with the way things turned out.
Listen DMF... Going around your agent is taking food off of his/her table. If you can sleep at night go ahead. I could never do that plus you never know what you are getting into without having someone represent you. Think you are saving money?? HAHA think again...
I wrote the article, and I appreciate everyone's comments. To clarify, we did not purchase the condo. It was actually sold for $335,000 as the real estate agent said it would be. That information is public record and available on websites, such as www.zillow.com. I don't think the seller's agent was lying when he said he had an offer for $335K, because it actually sold for $335K. However, I have purchased a home just 2 years before (I guess I'm a budding real estate investor) using the method of relying on only 1 seller's agent. I use the story as an illustration of the motivations of agents.
I realize that some people are scared of relying on the seller's agent's advice. These people want the experience of a buyer's agent on their side. However, honestly, you need to get an independent home inspector before closing escrow. Make sure that the inspector is certified and make sure you get that inspector on your own! Do not rely on the seller's agent's (or buyer's agent's) recommended home inspector(think about it, would the home inspector really be honest to you if he gets 100% of his business from referrals from the seller's agent?)
As for comparable pricing, there are very easy websites out there to use to determine that, including www.zillow.com, or simply by looking at comparable listings on www.realtor.com. Honestly, the listing price is going to be pretty close to the actual value. Here's why: the seller's agent only makes money if they actually sell the house. They have no incentive to price the home above market price, since it'll never sell and they could lose the contract to sell the house. They don't even want to mark it up an extra $10K or so because that's an extra $600 for an extra 2 months of work. It's just not worth it to them. So they want to list the home at a reasonable or even below market price. The only exception occurs when its a for-sale-by-owner situation. These people are too emotionally attached to the home and will typically list it at 10% over market price. It's generally a bad deal to buy directly through the owner, even though you're saving 6% commission.
I'm sure there are ethically honest salespeople. I use to be one too. But, we are all consumers and we weren't born yesterday. You have to understand the motivations of the salespeople before you buy an item (house or otherwise). I hope this article could be useful for some who wouldn't otherwise understand the motivations in real estate deal.
First off, yes the job of the listing agent is to get the home sold. Marking the property up $10,000 is not going to get the job done. Secondly, you can't compare what the home is going to sell for by using comparable listings. They don't mean squat! You have to use comparable sales (within the last 3 months in your subdivision if at all possible). Listings don't mean anything because they could be priced wrong. And finally, don't forget that when this home does get a contract on it, it now has to appraise for that amount (or higher) for the financing to go through (unless it's a cash deal, which we all love). So if the property is marked up $10,000 and we have to work an extra 2 months, it really did no one any good because it won't appraise for that amount. Appraised value comes from comparable sales (see my Second comment), and that is exactly why the listing price of your home should reflect what has sold in your area.
Part of any offer is to obviously have contingincies in place such as home inspections, radon tests, water tests, etc. A buyers agent is there to provide you with qualified people to perform all these tasks in a timely manner as time is of the essence in any offer. They can help eliviate much of the stress that comes with purchasing a home.
As far as the property that sold for 335k I was going to comment on how if it was pending they wouldn't be able to just "back out" of it to go with your offer of 327k. To each his own I suppose. A sellers agent has to disclose any known property defects with any property to everyone as well, that's why when you take a listing you need to have the seller fill out the property disclosure form for any and all potential buyers and their agents to view. It's nice to have someone on your side to help figure out how all this info will effect your offer. If a listing agent is telling you the owner is motivated and does not have the owners permission to do so I feel bad for that seller because it's against the law.
Best of luck in all future real estate endeavors..
You just totally gave away my upcoming article about Zillow. Why? Whyyyyyyyyyy?
Please write more about Zillow. I can't say how great it is. Before Zillow existed, I did it the old fashioned way. I took the listing price and divided by the square feet. The cheapest per sq ft cost warranted a second look. Now Zillow automates that for the poor people out there without a calculator. That is, they perform all the typical calculations and spit out an approximate value of the house. They even give you historical sales, comparable sales, everything!
Zillow does not work in parts of the country where sales prices are not disclosed. Sure, they will guess, but in my market, prices are posted at about 33-50% higher than they really are.
...just informed me that me house is worth even less than I thought. Great.
According to Zillow, mine doesn't exist!
We bought our house without using a buyer's agent. To do so, you should be aware that the seller's agent is not just representing your interests but if you are confident and aware of how things work (it was our third time through the process) it has the potential to save you a bundle. The first deal we set up on the house fell through when our current house did not sell quickly enough. We then got an offer for considerably less than we wanted. The house we wanted to buy still had not sold. We came in with a new offer for considerably less than our original offer reflecting the lower sales price of our house. The real estate agent waived half the commission, bringing the offer in line with the seller's needs and we closed shortly thereafter. We would not be in this house now if we had been using our own agent.
I found a place that was conditionally sold and told the agent if it fell through to call me.
A week later it did fall through and met with the agent and said I was willing to pay 155k, but the seller wanted 157k (that was what the last offer was so they were certain they could get it again).
I explained that without me having a buyers agent my offer was more than they wanted and said I would give them the same as the 157k offer they were holding out for.
So we agreed that I would "get the 2.5% buyer commission" towards the home so that my total offer was 157k, but almost 4k of that was the buyers commission they would have had to pay out anyways (the 2 other interested parties had buyer agents).
So I ended up with the place for a little over 153k so that all parties won. The seller got teh net amount he wanted, the agent got a few hundred more in commission than if they sold to a buyer agent, and I got the place I was willing to pay 155k for, for a little over 153k.
As an aside the home was listed at 167,500 and I really don't think a buyers agent could have saved me any money considering I spoke with a few friends who are realtors and they were shocked when they found out how cheap I got it and they all asked who my agent was that got me the deal. =)
Apart from the items already mentioned regarding ethics, representation, etc.. your story is not truly 'net positive' as you are forgetting one crucial thing.
While it is true that the seller would get more money, the buyer would get the home for cheaper and the agent gets 1/2 a percentage point higher commission than had another agent brought the offer there is one loser.
The agent. Why?
The agent in question helped the buyer:
- negotiating the buyer's position (questionably done correct given dual agency)
- dealt with the paper work on the buyer's behalf including law required filing, etc..
- helped the buyer with (possibly) arrange inspection, communication with other service providers, lawyers, etc..
- monitored the buyer's half of the closing
- presented the home to the buyer on possession
As an agent myself I can tell you that only 1/3 of the total time spent with buyers is spent looking for houses with the remainder focused on the above points. Not only this but the agent is effectively trippling their chances of being sued due to representing the extra party (this doubles it) and the dual agency arrangement (breach of fidicuary duty).
I don't know what profession you're in but I don't think you'ld accept almost double the workload and three times the risk for the same pay.
I know I won't.
You know it's funny - people get so hung up on what they *perceive* real estate agents are making and don't realize that financially the risk is all theirs. If people paid real estate agents hourly I would imagine that the cost to transact land would probably be cut by half or more. It's the general publics greed that ends up driving the rates up. The fact is that when you use a selling or a buying agent you are not compelled to buy. The financial risk/reward is fully the on the head of the agent.
Not only that, but what people don't realize is that the expenses in this business are so monumental that when an agent decides to 'throw in' $3000 to make a deal come together that might represent half of their profit.
This usually comes *after* half of the work is done. Imagine any other job where someone implicitly agress to pay you something and then half way through the process says "oh by the way, I'll only continue if you work for half the amount"
Some things to think about. Anyway, I'll leave you with two parting thoughts:
"It's takes a true professional to make something that is difficult appear effortless"
and
"If you pay peanuts, you get monkeys"
The facts in this are completly wrong.
Sorry but this story is obviously written by someone who doesn't know jack about real estate.
gotta love consumers who slick themselves into a worse market...
"you get what you pay for." but you also make it worse for everyone else, ie: cheapen the real estate profession, drive down the housing market, etc...
if the buyers have all cash, then hey, money talks, otherwise your slick offer scheming is gonna be just that, and have a low percentage of success.
you'd need to be quite experienced in scheming, which would make a person seem just as shady as the agent you assume to be so shady... the RE laws for agents are too strict to carry shady agents around for too long. they inevitably get busted.
please think before making agents sound like they are crooked. and then devising schemes against them because of some "story" or over one incident.
buyer beware of stupid stories....
Wow, that's not even close to a valuable critique of this article. I'm amazed at your reasoning - the bad guys usually get caught? Yeah. Sure they do. There's just so much justice in this world.
I think the use of the word 'inevitably' scares me enough. How many people get scammed in the meantime?
Here are some facts: 6% is not the norm! This is assumed by the public. Listings can be any amount, 4% or 5%, etc, with usually 3% to buyer’s broker. Your buyer or listing broker does not keep it all as it usually will have to be split with the company, anywhere from 50/50 on up depending upon the business model. For most average brokers, (in my state, there are no longer 'agents', just brokers or associate brokers, so when I say broker, I mean agent) 75/25 broker/company. So, in a purchase of $300K, buyer broker/company gets 3% or $9000.00. On this split, the broker gets $6750.00. Out of that, your broker will pay for all of their own expenses, such as car, marketing, insurances, continuing education, memberships to associations required to be a Realtor, MLS fees, and continuing education, not to mention their own taxes! (To be a successful broker, you must contact people continually, or starve- hence the constant contact from some Realtors)
The above is not to gain pity, but to point out that professionals get professional pay, well, for a reason. Anytime you work in a highly litigated field, you better know your stuff! Conversely, you should be paid for it, too! By the way, the national average for Realtors is 1, yes 1, transaction a month!
The point is this- Yes, Mr/Mrs Consumer, buy your own home, sell on your own, it's up to you and your comfort level. You can also do your own taxes for a $60 program, or pay a CPA $1000. You can do your own brakes for maybe $50 in parts, or your mechanic can do them for $600.
Do you want to risk an audit without a CPA? A brake job with your family in the car? It's up to you, but don't put down your Realtor because they get paid! It's not just a 'Free Ride'. You say this because you do not know, really, what's involved or what it takes to be a professional Realtor. Period. (this assumes that every industry has its share of bad apples…not talking about them here)
I used to refinish furniture for a living, quote $1500 to refinish grandmas ornate oak sideboard painted (with umpteen coats, no less) of paint. Then, get gripes about the price because they could do it for $50 in materials, after all, you just use some stripper, sand it, and brush on some color and finish, right? Wrong, but this is how you think, right Ken? (As a professional refinisher, with the right chemicals and tools and know how, I won't have to touch it with a lick of sandpaper, because that will ruin the patina! Yet, this is how most pieces came in after the consumer ruined a irreplaceable family heirloom) As someone said above, a true professional will make it look easy, and sometimes, for the professional, it is easy- which is what makes them an expert in their field. So, there's more to it than meets the eye, Ken. Don't put down what you don't know!
Finally, assuming you did save money now, what questions or actions did you miss because the seller’s agent did not volunteer it? Hmmm? You were obviously comfortable at this risk level, but, hopefully nothing was missed that would come back and bite you for maybe tens of thousands of dollars at a later date. (Was home built on a landfill? Projected highway coming through close by? Was it a meth house at one time? Are they building a new subdivision close by with low end, high density housing?) The seller’s broker may not know either, but a good, caring buyer’s broker (not the bad apples, now) would actually look after your well being before the commission! Why, because the true professional realizes that by taking care of their people, it will come back to them in a positive way, ten-fold over the years to come- and they can sleep at night, too!
(Sorry this was so long)
AMEN!
What everyone seems to be grossly unaware of is that the seller isn't represented by the seller's agent, they are represented by that agent's BROKER, who then pays the listing and selling agent. Commissions are set in a contract - a listing agreement between the seller and the listing agent's BROKER. Commissions aren't thrown out there on a dime, they are set at the time of listing.
In addition, many real estate agents are REALTORS - members of NAR with a strict Code of Ethics they have to abide by. There are bad apples but at some point those bad apples will lose their licences. Realtors are licensed professionals, not just hired off the street for the purposes of selling. Most importantly, being a REALTOR isn't about selling real estate and you won't make a successful career out of it if this is your approach.
I am reading this article and comments "5 years after" (should be 10). There are many good points on either side of the isle, but please don't use ETHICS as an alibi. What does RE ETHICS really mean in court? Ethics is long gone from medical profession, and I have to say I've never heard of SALES ETHICS. Why? Because there is no defintion of it. Broker business is to work with two or more parties to bring them closer with the objective of closing the deal in which everyone is happy, while at the same time covering few technicals to protect self. Is that what you call ETHICS?
How would your RE BROKER ETHICS work if you were a listing agent and I came to an open house, liked the house, opened the trunk of my car, counted 30% more CASH then the asking price, show you the withdrawl slip from my bank, and told you get this house empty for me by tomorrow 12PM sharp. Would it be ETHICAL to sell and take the money and run, or would you tell me, wait a second you are paying way too much, let me check with the seller if his ETHICS will allow him to take your offer?
It is 2012 now, mortgage rates are 3.5%, sellers are gone from the market, some people are testing the market with listings in Suffolk, LI that are 10-20% over the top.
BTW, I saw today on ZILLOW a house that sold for 1.4 millions on a cul-de-sac where all houses are just about the same, on the same size lot, two are listing for 525k, one was also sold recently for 485k and one that was listing for 399 (in bad shape) is under the contract. Few more discrepancies like this one could be seen. It looks to me that people that can do it, are fighting and finding ways to beat the system and one way or another recover some of the losses from their properties that were inflicted upon them.
Zillow is still showing property RE taxes for 2010, while 2011 taxes can readily be seen on most properties online.
How do you define RE BROKER'S ETHIC in this market? How do you gauge the right market price and right advice to a sell side and to a buy side? What price discovery methods do you use and what kind of analytics do you use to come up with right advice, while abiding traditional principles of your professional ETHICS?
If you're happy about buying a house for like 15,000 under the selling price in this economy you must be on drugs. 1st off, the seller's agent already has a signed contract with the seller. The pot is 6% AND she/he splits it with the BROKER. So essentially if there are 2 agents and 2 brokers, all get 1.5%.
So in this case, the agent would get the full 3%, HALF of the whole pot and double the norm.
So, being a buyer it is in your best interest to get a buyer's agent. For god's sake that's why they recently became a reality!
Everyone, don't listen to this fool. There is not a dime out of your pocket as a buyer to any agents and the only risk you take when dealing with the seller's agent is getting what you don't want them to tell them told. Have someone advise you and work the deal. In dual agency, the agent cannot give you recommendations for any bidding. You're on your own people.
I like the first guys comments, this is BS and just a fluff story. I personally thought it sucked but that's just my opinion, I could be wrong... ;)
Gosh, I sure got a good laugh out of this story. First and foremost, the commission percentage of 6% is never a set commission. That commission can vary as much as the weather in Texas, so to assume that is what was going on is definitely a huge assumption. Secondly, the story that the sellers agent told you is one of the oldest tricks in the book. You weren't represented by anyone so he/she could tell you anything she wanted and didn't have to prove it. That agent saw you coming a mile away. I am a real estate agent and any ethical real estate agent that does dual agency transactions will tell you that we end up being a transaction coordinator only. We are unable to talk price to you or our client (the seller). All we can do is present offers and counteroffers. If we represent both parties there is no way we can fulfill our fiduciary duty to either party under law. That is why we become transaction coordinators at that point. Very rarely, will I take a dual agency role, because of this situation. If I do take the role, then it is with clear understanding on both sides of the deal (buyer and seller) what I can and can't do and what I will and won't do. Otherwise you have violated the fiduciary duty that you have as well as your ethics. So having said all of this, that's why you get a Buyer's Agent, so an unethical agent (unfortunately they are out there) doesn't get the best of you, just like they did in this story!
I am both and investor and an agent and have bought and sold many properties for myself and clients.
The listing agent has a contract with the seller's to be their representative. Their fudiciary duty is first and foremost to the seller. Obviously their goal is to sell the house and they can't get more for it than what a buyer is willing to pay.
That being said, the seller's agree to a commission to the listing broker that covers both the listing agent's fees and the buyer's agents fee. Even if you don't use a buyer's agent, the fees have already been negotiated and contracted - as mentioned above.
As a buyer's agent, we negotiate for the buyer and write up contracts to protect and favor the buyers. As a seller's agent, we write up contracts and negotiate in favor of the sellers. When we represent both side (dual agency) we try to stay neutral and for the most part - we just try to get the deal done. As a dual agent, we are much more likely to let the two sides negotiate for themselves. This really could leave money on the table on either side.
I know when I represent just the buyers, I negotiate everything! From title and escrow (to get lower fees) to home inspections to having the sellers fix up and repair both major and minor issues with the home and of course the purchase price. I've even negotiated the sellers credit the buyers back thousands of dollars for potential issues that I would have NEVER done if I represented both sides - AND the buyers didn't even consider themselves because they didn't know they could negotiate those types of things. Since the seller's are paying the commissions NO Matter what, why wouldn't you want someone to represent your best interests as a buyer? Often times, it's not just the price, but potential issues that come up. I've had friends that tried to purchase on their own without an agent (in out of state purchases) and would have lost their deposit money if they didn't have me to call up and ask questions whe the deal went bad.
The couple of thousand you may save from the listing agent cutting their commission (maybe) could end up costing you significantly more in negotiating power.
When negotiating on behalf of my buyer-clients, I delve into certain data to assess how a particular home builder is negotiating with other buyers. When I'm armed with this data, it's merely a starting point to get a better deal for my buyer. By extrapolating the details of a new home transaction, there is potentially thousands to be saved.
Generally speaking, home builders protect realtor commissions for the sake of encouraging cooperation with Realtors; these professionals are a key part of providing exposure to theses builders’ new homes. Hence, a buyer would not save in this area.
However, if a builder agreed to give a special discount because a home buyer opted not to be represented, one must ask an important question: Is the builder trying to save the buyer money or himself? Would a good buyer’s agent expose something adverse that an unsuspecting buyer would simply be unaware of?
The pros of using a true buyer's agent for a new home purchase are innumerable; notice that I said true buyer's agent. I am a speaking about someone who is versed on new home and new construction matters. While I agree that you don’t need an incompetent agent to buy a new home, I would, however, disagree that you don’t need a qualified buyer’s agent to maximize one’s purchase.
A home buyer can research the new home buying process to a great extent and still miss out on many beneficial opportunities to maximize the purchase. I have seen this happen.
Lastly, FSBO's are generally trying to save themselves money, not the buyer; many are over-priced too.
To think that a Seller's Listing Broker is going to help you negotiate the lowest sales price is moronic. Their job is to obtain the highest and best offer for their seller. Any Buyer's Agent worth his salt is going to do his best job to get you the home you want at the lowest price. By the way, buyer's agent's negotiate their split too. You probably paid far more in the price than you saved in the commission.
I have always owned a house. Unfortunately, I sold in California just as I moved out of state, temporarily houseless in a very bad sellers market. I had plenty of cash, but over a period of a FEW days I read about the housing bubble in Fall 98! It was so bad in early 1998 after watching Realtors DO NOTHING, I sold my house myself over one weekend to my next door neighbor for the asking price. It took about 5 minutes. Of course the "do nothing" Realtor got his 6% and walked. Now I had, and have, cash and want to buy, but junk houses are selling for more than a nice house. So I have been saving and watching. I learned a new lesson. You CAN save more money than you can make playing the "move-up" housing game. The reason is that so many middlemen from Brokers to loan companies try to put their hands in your wallet. I have learned MORE about Real estate being a renter for the past 9 years, then buying and selling four houses the "move up" American way.
Here is the issue: Realtors ONLY GET PAID, when the deal closes. No close, no money. To put food on the table, they will do or say anything for their number one client--THEMSELVES.
Forget about the NAR and code of "ethics". Read THEIR NAR contract: "NOT RESPONSIBLE FOR ORAL STATEMENTS" of either agent. In other words lying is "ethical". If the NAR is "ethical", REMOVE this disclaimer!
Today my issue is: How can I, a cash buyer (because I saved and rented instead of paying it to Realtors and loan companies), find an HONEST agent to represent me?
Two events occur over and over:
1) If the deal is "good", the listing agent buys it for themselves---again PROVING who their client really is.
I watch the local MLS EACH DAY and call immediately when I see what I want. I am the "loan company" --- I don't need "permission" to buy a house. But the listing agents hide their listings (pocket listings) until the seller is weary and gives up. The Realtor then buys it themselves supposedly to "help" the seller, or they have a family member or straw buyer involved. Look at the steep discount a Realtor gets on THEIR OWN DEAL. Plus, blabbering sellers will have probably disclosed all the bad and ugly facts about the property that almost always exist.
2) The "Buyers" agent ONLY wants to represent prospects who can qualify to close or stupid enough to pay asking list price---OR ABOVE. In my area, Realtors have a new twist on an old scam. They will try to get sellers to list at a "lower" price (its already overpriced) to stimulate a pretend "bidding war" where they participate through shill "offers". I see this ALL THE TIME. Shill "buyers" (secretly working for the agents) will make low ball offers to break down the seller and/or they will make high ball offers that have poisonous AND impossible contingencies in them that will kill the deal. Of course on the surface it will look like a "legitimate offer", until you read all the "subject to's". The seller is ONLY looking at the dollar amount at first glance.
A cash buyer is extremely sensitive to PRICE, more than any other buyer. Its their money. All money brought to the table is their money. It is NOT OPM - Other Peoples Money. So the Escrow "closing party" of hungry vultures is paid for 100% by the buyer, and the buyer knows the second the ink is dry, that the house will have dropped a few thousand more. don't believe it? Ask a Realtor present at the "party" to tell you how much the house is worth NOW. They will offer an opinion of a lower amount even though they were sitting their divving up YOUR MONEY for their shenanigans.
Goal: Show me ONE Buyers agent who will Represent ONLY ME! I have not found one. If I chisel down the price---they buy it. EVERY TIME.
The MLS is filled with OVERPRICED JUNK. If they are NOT junk and priced correctly, Realtors grab them up.
THE MOST IMPORTANT FACTS for the buyer of ANY PROPERTY:
Why is the seller selling? ---what is the REAL reason?
If its the '5 D's of Realtors': Death, Destitution, Divorce, Disease, Disaster, than the seller must sell. ie THEY ARE TRULY MOTIVATED SELLERS. But only if they have REAL equity....not Realtor hype and dreams. Look only at the ink on the paper. If you don't see it--its not there.
I am looking for a house that was purchased BEFORE the fall of 1998, and has not been refinanced, Heloc'd or have liens on it. But as soon as the Realtor (sharks-or snakes) see these--they grab them up or hide them for "investor" friends.
These houses WILL have equity if the house has not been destroyed. If the seller is a "5D" seller, they will be happy to close the deal with cash. FAST !! I don't mind paying the sharks their commission- IF I GET A DEAL.
Okay "honest buyers agents" ---Here I am. To give you "your 3-6%". But where are you? Buying up the non-junk houses for yourselves.
Cohosh, I wish you were in my area. I represent buyers every day and am only looking out for them. I can't tell you the number of times I've given up portions of my commission (into the $1000s) to help seal the deal between buyer and seller so my buyer could get the house and price they wanted.
There are great buyer's agents out there. You've just been dealing with some bad apples apparently. I hate to hear that but don't think we're all like that.
Tpbrenn
My telephone rings off the hook---from buyers agents. But they don't impress. If I see a house I am interested in---THEY try to dictate "to me" --- "what" I will offer. All I want to see is that their Realtor asymmetrical knowledge and selfishness working for MY BENEFIT, not theirs. I ask them can you pay cash for that house? "Abaddee Abadee thats all folks." As I stated before I can pay cash for 3 houses with the money I saved for my "house fund" while renting the past 9 years. Cash through saving can really add up quickly. If I kept my house I sold in 1998 until today, I would have a cash equity of $200k for 9.5 years of mortgage and property tax payments. But ONLY IF I COULD SEEL THE HOUSE AT ZILLOW PRICES. I woul;d still have to slash the cash by at least 6% for Realtors.
My rent has always been less than my old house payments. So I figure deducting rent costs. Over the past 9 years I have paid about $90,000 to a landlord. The money is gone - poof! But I saved the difference between rent and PITI house payments.
Having a "real cash savings" is so much exciting fun, that we now SAVE MORE thast we ever could owning a house--- "a money pit". I save 100% of my after tax earnings. My wife saves about 70% of her after tax earnings. Our "house fund" is now over $600,000 of real cash. Try to think of all the money that Realtors would have scrapped off my savings if instead of renting my house, I was paying mortgage on it. The mortgage interest deduction isn't enough to matter. PLUS INTEREST MONEY IS LIKE TAX MONEY---I don't get to keep the money I worked for.
Come on honest Buyers agent- Realtor. Can you be aggressive enough for me to protect my money rather than spend it?
Are they out there? Sure, and so are money hungry Auto Mechanics, Carpet Cleaners, Plumbers, Roofers, CPA's, Attorneys, Doctors, etc. And, as the saying goes- a few bad apples spoil the whole bunch.
Look people, if you can do it yourself, no matter if it's your taxes, plumbing, selling your home, etc-- GO FOR WHAT YOU KNOW! As a Realtor, I do. I do my own plumbing because I am comfortable with it, but I won't do my own taxes. I hate paying my CPA in excess of $1500 to do them, however- why bash him because he is trained in his field? It's his profession. This is what he does. Sure, I can buy some PC program, and do it my self, but why would I want to risk it? Taxes are not my thing! I don't have a desire to learn them, either. Another thing I hate paying $500-600 for a brake job on my car, and I bet my mechanic wishes he kept it all- but after paying all his overhead- he will in fact, keep very little.
Same goes for Realtors. Now, not withstanding the bad apples- we have to split it with the brokerage, pay errors and omissions insurance, our MLS fees, NAR fees, Local Board Fees, Desk Fees, our own Advertising, car expenses, etc. YES- even Realtors under the umbrella of a brokerage, pay to be in their profession. Did I mention paying for continuing education? Bottom Line- I'm sick and tired of the general public thinking we make all kinds of money, no doubt- from them! We are like any other business; money is made through volume sales. So, yeah your Realtor drives a 'Power Car'. Bet he also works his a$# off for it, too!
Now- as for pricing a home, as a Sellers Broker- again, notwithstanding the 'bad apples'. Most Realtors simply run the numbers in the area, and suggest to the sellers an asking price. It is up to the seller to instruct the Realtor on what to ask. But, here is where the double edged sword come's in for us- that your typical consumer has no idea of- If you as a seller, want an amount that is way too high, or exceeds the condition or location of the home- then why in the world would we, as Realtors, want to spend our time, and our money- trying to market a home like this? It's not the consumers money being spent on marketing, it's ours. Then, if we suggest a lower price- we then have no idea how great 'their house' is, and we just want a quick sale! You know what- sell it yourself, then, if you know so much! (not to mention if it's overpriced, no one will look at it, and of course, it'll be the Realtors fault)
EXAMPLE- your brother is leaving the state, and asks you to sell his 1989 Chevy, 175,000 miles, faded paint. He says- 'It's a really reliable car, and whatever you sell it for over $2000, you can keep'. However, you being familiar with car values in your area, know the car is only worth $1500, tops. You with me? Why in the world would you bother to - run ads in the local newspapers with your money, take time to put in on the internet, run it to the corner intersection with a for sale sign in the window, etc. Hmmm??? Well???
Funny story- (well, I think it's funny, and pat myself on the back for it, everyday) I had a seller wanting to sell, tell me 'If you can get me $300K for my place, after your fees and other costs, I'd list with you today.' So- I said sure, but I needed $1500 non refundable marketing money up front, credited back at closing. Needless to say- I did not get the listing. By the way, the market comps came in at $260K- $270K. A few days later- it was on the market- for $339K!!! Wow- they found a sucker agent! Well, long story short, it's been 279 days on the market now, they are on their 3rd Realtor, and it's now listed for $289K. (of course reducing the price with each re-list) They are getting closer. But, what did I know? I just 'wanted to low ball it' for a quick sale! Yeah, right!
Oh- my other favorite- acting as a Buyers Broker- is the buyers that claim we want them to pay full price- so we Realtors can make more. Here's another double edged sword. No matter if it's a buyers or sellers market- if a buyer really expresses- I love this house- have to have it, what should I offer? Well, if we suggest full price, (after running comps, of course and confirming it is within marker value for what/where it is) - well then, it's because we are greedy. BUT, if we suggest a lower price, and truly another offer comes in higher- and they don't get it- now we're dirt'!!!
Well, which is it, MR/MRS Consumer? Do you want our help or not? Remember- if you know so much, go do it yourself. If you know all about what an FHA/VA appraiser will look for, or all about Lead Based Paint disclosures and the possible fines involked by the EPA- and understand the inspections and subject to's', and all your other options- THEN GO FOR WHAT YOU KNOW! But, don't bash us for making a living in a field that we, as Realtors, train for. We walk a fine line at being sued at the drop of a dime.
Besides, the difference between a $300K sale and a $290K sale, as a buyer broker being paid 3%, is only $300!! And that's BEFORE splitting the 3% with the brokerage!! For me, after my split, it would mean a whole extra $255! Now, and of course, most all the savvy Realtors like me, know this. If I can get my buyer a true deal, meaning they are willing to play hardball, and won't cry if they don't get the house, I know they will refer me to many friends, which in turn equates to tens of thousands of potential dollars in future commissions, rather than making an extra $255 now!
In conclusion, I'm tired of being bashed by ignorant consumers, and I do, in fact, sleep at night- because I truly am looking out for my buyers! Usually, most all of my past client become friends of mine. So, I think there are about as many Realtors that suck, as there are consumers that suck!!
I think I've heard the car mechanic analogy from about 6 realtors already...please...
Plain and simple, there are set "contract of sale" forms that need to be filled out, anyone that can read and has some brains can fill them out (they are different for every county).
Agents attempt to hide these forms from the public, but with some good internet research you can find them.
Put in there that you want 3% towards closing costs and that you also want the seller's agent's commission to be no more than 3%. Guess what, you just gave yourself the 3% you would have been giving your Buyers Agent (you got your closing costs paid for).
In this market, the seller's agent wants to (and probably desperately needs to) make the sale, so even though they aren't a dual agent, they are going to work hard to make it work.
Hire a real estate lawyer if you are really worried about the paperwork, they cost $500. Your broker and title company will take care of the rest.
The internet has ruined the Buyer's agent, they will be extinct in 5 years. You can find listings yourself, set up appointments yourself, and fill out the forms yourself. Glorified middlemen.
I would never work with someone like yourself as your buyers' agent. You would be a red flag right off the bat. In most markets, the buyers' agent doesn't make more than 3% (we don't even make that, it is usually less than half after our expenses, taxes, cut to our broker, gas, and the thousands in fees, insurance, locks useage, etc. to even be a realtor). Also, in most markets, a good buyers' agent and reasonable seller will allow for the seller to pay 3% of your closing costs anyway. Wanting that in writing is weird to me, and in 5 years I have never heard of such a thing. It would usually happen anyway. And hiring a real estate lawyer is sort of needless unless it is a very unique property, in an instance of just buying a home. This is because the title company is your lawyer, and you are already paying for that anyway. It is a waste of money. Be careful filling out forms yourself. We are carefully trained to know how to word contracts, while we are not attorneys of course. I have taken many classes on it and had many situations where I had to be creative and consult with experts on wording contracts to truly and properly represent my client. While it isn't rocket science, it isn't something most people would know how to do properly if you haven't written and closed 100 homes with all different situations. I once wrote a contract with 25 contingencies, all very carefully worded out, and it wasn't even a commercial deal! Most homes only require 3-10, but there are some instances where you need to be covered on all things that you may not even think of! You would be surprised. While the media says the market is so down, our area is not down in the price range I most normally work with and they are still selling for full price if fairly priced, and within 30-60 days or less! So, I am not desperate and lots of my realtor friends are not. We would never be desperate enough to work with someone like yourself who thinks you know more than us and is unappreciative of our help that actually protects you down the road! I hope you wise up and get over your poor attitude. Looks like maybe you have been burned before and are generalizing and putting us all into one category. We won't be extinct in five years. My clients are very thankful for what I do for them. I don't just write up a contract and get paid. It is a lot of responsibility, time limits, and making sure everything is done correctly for months usually. I save my clients LOTS of time and money! Our job isn't as easy as you may think. You don't see behind the scenes all that we actually do for you. I spend sometimes hours each day for EACH client for months at a time, working until midnight sometimes, or on Sundays. I have even missed going out of town on planned getaways because my clients need me. I feel it is my responsibility to protect and serve my clients the best i can. I hope you stop spreading bad things about us realtors and realize that we are very needed.
Your post indicated buyer's agents will be extinct in 5 years - written by you in 2008. Well it is 2012 and buyer's agents are still here and 100% positive they will be here in December 2013 - 5 years after this post was written.
In this current economic climate working with a buyer's agent is critical when working short sales, foreclosures, and traditional resales. I primarily list homes and do not perform dual agency and do not work with unrepresented buyers who call me up all the time wanting information, wanting to view properties, etc... Most listing agents will not work with buyer's to show them one property - are you nuts? They don't have the time to - the unrepresented buyer's are referred out to one of the buyer's agents working with the listing agent and even then most buyer's agents will not waste their time with an uncommitted buyer. Those unrepresented buyers lose out on so many opportunities it is unreal. My sellers have passed up many an offer from those type buyers and closed with buyers who were represented by an agent.
Disclosure: I am a real estate broker and I now exclusively act as a buyers agent.
Why I disagree with your story and feel that it is bad advice.
1: The sellers agent is acting illegally by not representing his sellers best interest or by doing any negotiating at all. If you move to a intermediary transaction(dual agency) you are not legally allowed to do any negotiating for either side. You essentially become the in-between. I do not know why so many people allow dual agency to happen in their transaction. You do not get a professional working on your behalf on either side. The agent in this transaction is working to make the highest commission for himself. If you ever encounter an agent or broker who suggests this BE VERY AWARE!!!!!
2: In a down or distressed market, which the entire US is experiencing, a REAL professional can guide you to the best deals, while also fighting to get your offer down to the lowest possible price. It is possible that in the same neighborhood that there is a like property that is in distress and could be bought for $290k. You would not find this, because you have not used an expert on your behalf. When I say say expert I mean someone who knows every possible detail about a specific market. This is also why you should do your research on who you use as a buyers agent. As example, I also buy and invest in properties in other markets. The first thing I do is find the most qualified buyers agent. I check there references. I interview them. I then pick the best of my findings.
By doing this I am giving myself the greatest amount of market knowledge possible. Remember I buy houses for a living and when I go to another market I hire a buyers agent. A good analogy would be; would you want a dentist doing heart surgery on you or a heart surgeon doing your dental work?
My summary is that a good buyers agent will save you more money and protect you with fiduciary responsibility.
Not sure what state this happened, but in MY state, UNETHICAL would be the first word that comes to mind. That listing agent didn't represent his client's best interest, which by the way, IS HIS JOB PER THE CONTRACT HE SIGNED WITH THE PEOPLE SELLING THE HOSUE. His number one priority is to get the seller's the most for their house, NOT HOW MUCH COMMISSION HE'S GOING TO MAKE.
Second of all, he told you there was a higher offer pending, yeah, okay, another unethical agent could have told you there were 2 other offers pending...
REALTOR's have their jobs. A listing agent represents the seller's. A buyer's agent represents the buyer's PERIOD.
Those two little words you like to throw around...Dual Agency, well, in a true dual agency agreement, the agent doesn't represent ANYONE in the transaction, not the buyer or the seller.
You were taking for a fool and you want to make it look like you got a great deal and did all by yourself! Congratulations, FOOL, you could have probably gotten that house for about 4-9 thousand dollars less than you did!!
Intelligent people do their research and let the professionals do their jobs. In a lawsuit, uou wouldn't use the same attorney hired to represent the other party in the lawsuit, why use the same agent in the purchase of a house!!
GOOD LUCK RESALING YOUR HOUSE! Maybe you can do it yourself!
Sell FSBO & buy without a buyers agent. Save $$$. yet over 80% of all homes are sold by agents.. why is that..?
I am a realtor and have seen a lot of folks get burned by not using a buyers' agent. Here in TN, most of the agencies will not allow DUAL AGENCY! We consider it very unethical here in the friendly south. So, the problem this guy has with dual agency is void here. There are many reasons why you need a buyers' agent. Being unrepresented is like using the same divorce attorney as your spouse! The other agent here in TN is bound by law to represent the seller ONLY. While they will hold your hand, be sweet, do a lot for you, etc. they are not representing you, but ARE representing the seller. They will be extra nice because they will make double the money because they don't have to split it with a buyers' agent. The ethical thing to do is for that realtor to still fully explain to you that you have the option by law to be appointed a buyers' agent. Reasons you should use a buyers' agent:
1. If experienced, they know what is good for resale (believe me, it isn't just common myths and things you THINK are good for resale, or things you learn on HGTV!). There are quirky things you will not know to look out for that we have experience seeing that make homes hard to sell later!
2. Easements, encroachments, fencelines, powerlines, growth and chances of something being built by you like a stinky papermill, garbage dump, carlot, or many weird things like this need to be researched and looked out for (no guarantees things won't change in the future, but at least have them looked at and evaluated).
3. HOA transfer fees and HOA problems with insurance, etc. (THIS is a big one that many realtors don't even research, but I do look heavily into all aspects on the WHAT-IFS b/c they are so important. Other agents call me paranoid, but I am just extra careful in making sure my buyers do not run into something bad later if I can help it. Plus, they may call me later to help sell it and I need to be able to sell it!
3. Appreciation rates. This takes me hours to figure and while no one has a crystal ball, we can show you the trends for that area, type of house, or neighborhood so that you can plan for how long you think you may stay in that home.
4. Are you paying a fair price? A good buyers' agent that truly cares will thoroughly research the TRUE comps, not just zillow or other online sites that pull any old house nearby. A true comp has to have many comparisons to the subject property and it is a square foot exact pricing, not just that this house sold for this and the other for that. That is in no way a way of determining value. My CMA's are very, VERY detailed and compare features, lot size, how many stories, materials used, year built, square footage, style, if there is a bedroom downstairs, fence, pool, patio, porch, and SO many more factors to consider. The condition of the home is one also.
5. A good realtor with a good contact list can refer you to reputable people that can make sure you are covered such as the title agency, loan officer, inspector, etc. If you use your own loan officer, that is fine, but a lot of times the realtor sends a lot of business to a good one that will make you priority for him/her. Your agent can make sure that you are not being charged junk fees and know how to read those confusing Good Faith Estimates better. This is SO important. Most people look at the rate only and this can be a huge mistake! Someone with a 5.5% rate vs. someone with a 6% rate can be deceiving if you don't know how to read it.
As an experienced agent, I would use a buyers' agent in another state that I am unfamiliar with. The main reason for this is that the agents have the real deal access to comps and values. I would interview agents until I felt that one was as honest as I could find that truly cared to help me out. I do this for many of my clients, friends, and family around the country-interview agents to find them the right one. I just did it for my parents who bought their retirement home in KY and they had a great experience!
Get a buyers' agent! Have an agent you trust interview agents for you in another state too. We agents know what to look for. There are some great agents out there, but it is just a matter of finding them. Some states are not big on buyers' agents, like TX for instance. I helped a seller I had here find a buyers' agent there, and I am convinced it was the only true buyers' agent that ethically performs for a buyer in that area. They like to sell their own listings there. I work either as a buyers' agent or a listing agent. It depends on if I am working with a buyer or seller. If I am already working for a seller, I will appoint a buyers' agent to the buyer if they want. If they don't want, that is great because I make double, but usually when they understand they have the right to one, they want one. That is the right thing to do!
Hope this helps protect someone in the future from making costly or stressful mistakes! Oh, and also, ALWAYS get a professional home inspection, ESPECIALLY on new builds or spec homes!!! These usually turn out with the worst results!
First of all, dual agency is illegal in many states. A listing agent has a fiduciary duty to represent the seller. In my state, the listing agent will drop to a facilitator status in the situation where a buyer calls them, directly.
The listing agent in the story has done more than one unethical thing. Representing both parties is unethical, if not illegal in that state and so is telling a buyer that there is another offer on the table if there is not one. Why on earth would a seller take a lower offer if both buyers were preapproved for a mortgage? Why would a listing agent want to work twice as hard for 3% when another agent working with the buyer can make the job so much simpler. You're very gullible to believe this to be true. There is no standard for commission percentages and it's not always 50/50. You think you know so much but, truly, you're making it up as you go along. Your "trick" to makes me want to hurl. I wonder what you do for a living and hope you aren't an attorney or a doctor or anyone who can hurt others by your unethical outlooks.
There are many reasons to use a buyer's agent. A buyer's agent must sign an agreement stating that s/he will represent the buyer to the exclusion of any seller. S/he will work together with the lender and the closing agency from beginning to close to make sure everything goes smoothly. A buyer's agent must provide all listings that suit the buyer's needs, research the history of the property and find actual sold properties that compare to the subject property before making an offer. A buyer's agent has no reason to lie to a buyer and no incentive to coerce a buyer into purchasing a particular property. A buyer's agent will know what to negotiate into the contract while the listing agent IS, and regardless of what you think, working for the seller. After all, they have already established a relationship.
And zillow...is INACCURATE INFORMATION. Comparing home values takes skill and knowledge which is why agents and appraisers are licensed and educated. Homes must match age, construction and size by a small margin to get proper value. Zillow uses area alone, regardless of size of home, construction or age AND tax records are oftentimes incorrect about square footage so price per square foot is inaccurately being calculated. Values from one subdivision to one half a mile away can vary drastically.
So take advantage of buyer representation, people. The agent will not only provide you with values of sold properties, S/he will negotiate in your behalf, knowing what terms are to your benefit and follow through to the closing and be there for you after, for as long as you need. It's true that there are bad apples in every bunch but this is the exception, not the rule. Think of what you do for a living and ask yourself if what people deem the worst of your profession pertains to you before you label any one group.
My wife and I have been considering buying a home. We watch the multilist and craigslist on a regular basis. When we see a home that we have a question about, I email the listing agent. What annoys me is that any agent I email a question to expects to immediately start acting as my buyer's agent. They drive me nuts. I am not ready to buy. When I am ready, I will find an agent that is not going to blow me off because I don't come with a letter from the bank telling them I am a qualified buyer.
Another thing that drives me nuts is when I ask about a listing only to be told...That one is gone, but I can help you find a similar one. Guess what mister "Bait and Switch", I wouldn't buy a dog house from you. Take that stupid listing off of Yahoo, Craigslist, ect.
I don't want someone finding a home for me. I am a big boy who can read the multilist myself. When I find a home that I want, I will be ready for an agent. They can keep the sales pitch for someone else. What I want is someone to take care of stuff like hiring and inspector, title company, helping me get my ducks in a row for the contract.
The idea that somehow a real estate agent is going to find me a listing that I can't find for myself on the multilist doesn't make sense. This industry has taken great pains to keep information out of the hands of buyers. The multilist scam is a joke. I have seen the lengths that these companies go to keep the information private. If a selling agent wants to sell a home why wouldn't they make everything available to the public?
As far as the whole professionals deserve professional pay garbage. Does this profession require a 4 year degree? Why does a real estate agent think that they are worth more than a doctor per hour? If I find my own home, how many hours is a buyer's agent really going to spend on my deal? What does that work out to hourly. My guess is that you expect to get paid more than my doctor and I am sure their insurance and overhead is quite a bit higher. To me this is nothing but another overpaid profession with lobbyists to push laws that protect thier cash cow.
my feelings, exactly.
It's a cute story, but I wonder if the writer signed a dual-agency agreement before being offered the $327,000 "deal"? If there was no dual-agency agreement, the listing agent had no obligation whatsoever to disclose material information that did not support the listing price.
For instance...
- Did the $335,000 offer include $25K in concessions, like a new roof, new floors, and new HVAC, or a pre-payment of property taxes?
- Did the seller kick-in some cash at closing to buy down the buyer's mortgage rate?
- Did a comparable neighbor's house recently sell for $300K or less, but has not yet been reported in the public record?
etc...
A listing agent has no legal or ethical obligation to disclose these to an unrepresented buyer. And AFTER the sign a dual-agency agreement, they are supposed to "protect both sides", which mostly means keeping quiet about any negative information that they can reasonably claim they didn't know about ("plausible deniability").
Back in the bubble days, a lot of people overpaid handsomely for property because they did not have a Buyers' Agent to advise them of all the concessions everybody else was getting.
Prices shown in the "sold" record are sometimes very far off from what actually transpired, once you taken into account all buyer/seller concessions (it can go either way).
I agree that I wouldn't want to go into a real estate transaction either (a) with the sellers agent acting under "dual agency; or (b) without advice from someone experienced with real estate transactions.
That said - if I know the market, the comps, etc. why wouldn't I just use an attorney experienced in real estate transactions and pay him either hourly or with a flat fee -- one that would be considerably less than the 3% commission rate.
In my case, I'm looking at a much more expensive property ($900K) -- so there's potentially real savings there. The house is in an area I know well, I have very good comp information, I have full information about the house's sale history as well as when it was put on the market and the price reductions (three) that have already happened, and I've bought several houses.
I know I need legal representation from someone with experience - but it seems to me that $1,000 (or even $2,000) would take care of it - and I'd still potentially save $8,000 to $18,000.
I'm not required by law to use a realtor, am I?
You have so many errors and assumptions in your story, it is insane. First, you assume that all agents are charging 6%, which is untrue about 50% of the time. You fail to see the VALUE of an established relationship with somebody who works JUST for you.
And...Zillow is off base.
Sorry but there are many things wrong with this picture:
* To think that the listing agent is working on your behalf. First and foremost, his/her responsibility is to the seller. Dual agency is applicable even if two agents who work for the same broker are performing a transaction.
* To think a listing agent would lower his commission from 6% to 3.5%. There is variable commission (which is not always applicable), but it would normally entail 0.5 to 1 percent.
* A 'free ride'? Sorry, too easy.
There are many other fallacies to point out in your story but I'd rather just leave it at that. Good luck with your home and future purchases.
Dual Agency is legal here in Texas as well and I also will not represent buyers on my listings. It's just not right and does cause distrust. Imagine using the attorney who is representing the other side to also represent you. Although I do see how the above scenario could take place in most cases the listing agent would just keep the full 6%.
It's funny... critiques of this article come in 2 forms.
1. Buyer's agents/real estate agents in general are not crooks. There always some bad apples, but they put your interests above their own.
2. The listing agent will do everything they can to screw an unsuspecting buyer without his own agent. You are a FOOL to buy a house without a buyers agent to represent you (with all those greedy/immoral listing agents out there)
You can't have it both ways. Either real estate agents are people you can trust or they aren't. I don't buy this BS that you can trust the lsiting agent if you are the seller, and you can trust the buyers agent if you are the buyer. What seems much more likely is that everyone is working for their own interest.
Real estate agents have a reputation for being crooks for a reason. Not ALL real estate agents are crooks, but MANY of them are.
It is interesting how your story calls the agent a crock whos only interest is his own pocket, and yet you are willing to believe him. Do you realize that you call him unethical in the very story you tell. If he was ethical his interest would be working for that seller and if there are two offers on the table your first offer or an increase of 2k should not have been accepted. I choose to work with those who always choose the high road, be it my doctor, lawyer, cpa, or real estate agent. I call it karma.
This article is absurd, and I think a total fabrication as well.Likely written by a listing agent.
First of all, the listing agent has already contracted for their commission with the seller of the property. If you think they are going to turn over half of their pay, to benefit you ..you are wrong! The commission stays the same, you get poor representation that is one sided and the agent gets double the normal commission.
Dual Agency is legal..but ethical?.....hardly.
Smart...Not.
In a dual agency situation, the listing agent's primary fiduciary duty is still to the seller, not the buyer. In reality, given the absurd compensation mechanism for real estate transactions, if an agent represents both buyer and seller, the agent's REAL focus is going to be making sure the deal gets done so they can get paid extra commission, even if it is .5% more. They may fudge on their fiduciary duty a little because of the extra financial incentive. Bottom line - the buyer ends up making the biggest purchase of their life thinking they have representation that is just as good, and that could backfire. An $8,000 "savings" could be a drop in the bucket if there is a serious issue with the property.
As I stated in another post,, most agents do not understand agency law. Your statement that the agent's primary fiduciary duty is still to the seller is simply not correct. Dual agency by definition means the agents can not advise either party. To do so is illegal in any state.
I don't buy your theory, and this is why. The selling agent's number one duty is and allways will be to the seller, whether it's a private party or a bank in the case of an REO. The buyer will miss out on the due dilligence that a buyer's agent will do to find any potential problems that the homebuyer should be aware of such as additional taxes, problems with the home, etc. The buyer will also not get the benefit of having someone to fight for them if there are repairs needed on the property or in terms of getting closing costs paid by the seller. I had a client that was represented by a nice caucasian (as he described her) selling agent and she not only sold him an overpriced home but she convinced him to list his home with her and she double ended his listing too and when he got into trouble with the house she sold him later down the line, she told him he was on his own.
I did not read this whole post because it started out with a huge fallacy. Dual agency DOES NOT get you representation. It gets NEITHER side representation. Both the buyer and seller are on their own with regards to "advice". The agent becomes a paper pusher and it is ILLEGAL for the agent to give any kind of advice to either party. If they did, it was against the law. I didn't finish the article because after you made that statement, it put the credibility of everything else you said in question. It's not surprising that you did jot understand what was going on, because frankly, many agents do not either.
I was a Real Estate agent and taught agency law for years. I know whereof I speak.
Yes I agree completely, not only do many agents not understand, then buyers and sellers have no chance of understanding. Dual agency can get you representation, depending on the definition by state and is different than Intermediary or transactional broker. Dual agency is practiced when two agents in one office represent each the buyer and seller, a third agent, maintains the confidences. I am licensed in 4 states, dual is dual. Each is represented, as much as the honor of the agent allows. Intermediary or transactional is not an agent or representative yet still an agency relationship. They do not negotiate, they are required to maintain confidences of both parties, buyer and seller, in a specific set of confidences which vary slightly state to state, but basically, why you are buying or selling, what you will buy or sell for other than that in writing, and any material information unless required by disclosure. Buyers and Sellers should be pro-active, they are their own best advocate. Ask the person across the desk who they are working for, then ask for it in writing. Have them circle on the brokerage disclosure the relationship they are telling you they have.
Your article is dangerous and misleading for a number of reasons:
1.It is a breach of the listing agent's fudiciary responsibility to the seller to disclose the contents of other offers to anyone other than the seller.
2.Based on your story, buyers will assume that a listing agent will be working on their behalf. Dual agency does not support this. While it is legal for the listing agent to handle both sides of the transaction, they can legally only represent the seller. They are not obligated to buyer in any way as they do not and cannot have a buyer agency relationship under dual agency.
3.The agent will never reduce the commission by half. There may be a reduction but it will not be half. Get it in writing in the offer.
What a SAP! If you think that working with a listing agent who has a fiduciary responsibility to the seller first, and probably has a relationship with him/her is going to get you a "good" deal...you're nuts. Maybe 1 in 1,000,000 can separate the buyer and seller in the negotiation and be fair....but not likely. What about disclosures and repairs needed? Inspections and recommendations for inspections? No way can one agent representing both, do a great job for both. I would suspect buyer almost always gets the short end. I sure hope you did!
Are you a real estate agent?
A sellers agent who represents the buyer owes a fiduciary relationship to each party. If the sellers agent in your situation revealed "juicy" information to you about the home and the seller's motivation then they were very unethical and should lose their license. They were probably telling the seller information about you that shouldn't have been passed back to them. That is the reason for a buyers agent. To protect your best interests.
The sellers agent cannot legally represent you, the buyer, Everything you tell him, he has to let the sellers know about. Why the sellers were willing to take your offer, he is not allowed to tell you, because he owes THEM confidetiallity. He owes them the best possible price.
I'm not sure where you got your information from. It it's all wrong. A buyers agent would try to get you the lowest price possible. And the listing agent would still get the 6 % even if there was a dual agency unless there was a special deal between the seller and the listing agent. But usually the dual agent if they sell the property they (and rightfully so) they recieve both commissions. They do all the work. Al's last but certainly not least your are way off on representation. A dual agent represent the seller. He/must be honest with the buyer but they work for the seller. Make no bones about that. It always always pays a buyer (especially since you don't pay for it) to just get a good agent who works and represents only you. Who has your best interest at heart. Who knows the business. Please next time you post something know what you speak of. I've been in this. Usi was for 35 years and it my profession and I take it seriously.
Hrm. We did a deal with an agent here in Ontario Canada who represented a builder (as the seller) and us (as the buyer).
After having completed the deal, waited for the build to complete and moved in, we found out there is an easement on the property. The agent didn't tell us about that at any point. Did he know about it? I can't know for sure, but I suspect he did. And even if he didn't, I don't think he carried out his due diligence to us in representing us as the buyer's agent in not discovering it.
When we sold the house we moved away from the buyer's agent in that case asked us for a survey. I can't imagine what else they would have wanted that for other than to discover easements, etc.
I that when that agent is representing clients solely as a buyer agent and not in a dual-representation situation, he gets the survey and discovers things like easements for his clients.
It makes me wonder how much resale value we have lost with that easement being there. That makes me wonder if I should be suing that agent for breach of contract.
I'm curious. What brokerage listed a home for only 3% commission? Most charge 6%, 3% for each side of the transaction. If the listing agent handles both sides, he/she gets the 6%.
That said, dual agency is illegal in Florida. You cannot represent both sides. How can you ethically try to get the highest price for the seller and the lowest price for the buyer at the same time? Therefore the seller would have to sign a new listing agreement identifying the brokerage as a transaction broker. At that point the agent would be legally bound to handle the transaction, but could not provide any advice to either party. And... would receive the 6% commission.
On top of that, considering the small difference in price between a better or worse price for the buyer, it is not in the buyer's agent best interest for the buyer to pay more than necessary for a property. Successful agents are ones who provide the caliber of service they would want for themselves regardless of which side of the transaction they're on. Do right by a client and they will refer others to you; that alone will more than make up for any minimal gain you make when you figure in not only the split between brokers, but the percentage of that that actually goes to the agent.
When your name is tarnished, what do you have?
As for agents having an "in" with each other, a listing agent who tells another agent the price of an existing offer is liable to lose their license. If you list your home with an agent or work with a buyer's agent, they owe you complete confidentiality, like a lawyer or therapist or doctor. So if one agent tells you they got info from the other... RUN.
And, you should report them to the state Real Estate Commission too.
Only an idiot agent would reduce their contracted, agreed upon commission to work both sides of the transaction for one side if the commission. If a buyer consults with a real estate attorney first, they would be advised to hire a buyer agent just as you would not use the same divorce attorney as your spouse ...
THE most important issue about most real estate transactions is WHY the seller is selling. There are very few good reasons to sell. Most the reasons are the FIVE D's of real estate. Once you as a buyer find out the REAL reason the house is for sale, you have a potential deal. The listing agent knows this reason 95% of the time and they are NOT inclined to divulge that information to a buyer no matter how highly qualified the buyer may be. Dual agency can be a fast way to end up in court, and that's expensive. I have a twist on the theme that works better. Here goes. First contact the listing agent and act stupid about real estate, but you must also show that you are a MOTIVATED AND QUALIFIED BUYER and seriously interested in buying the subject property. YOU MUST conduct due diligence and KNOW thew local market and the most likely appraisal value of the property. About 50% of all pending sales collapse because the house was not appraised high enough for the loan company . This is a GOOD thing. All it means is that you could have easily paid more than the house is really worth. Buddy up and butter up the listing agent AND BE SLY AND SMART. THEY KNOW WHAT YOU NEED TO KNOW---and its NOT all about price. Motivation of the seller is PRIME. Once you get all the information you need from the listing agent you must locate an HONEST and aggressive buyers agent. THIS IS THE HARD PART. You may only find one of these characteristics in any agent. There are other tricks as well. NEVER EVER bid against your self. IF any agent says "highest and best", run for the hills. You are most likely being setup in an ASYMMETRICAL NON TRANSPARENT TRAP.
Instead I come in with KNOWLEDGE of the property and market as well as the MOTIVATION of the seller. Once you have these elements I offer NO CONTINGENCIES and AS IS with a 10-17 day rescission period. I can walk for any reason without losing my earnest deposit. Most sellers prefer a FAST Controlled sale with NO contingencies even with a lower price. Motivation of the seller is IMPORTANT. I just offered 30% under asking and was the LOWEST of all the offers...but MY OFFER was selected. It was because I stipulated NO termite reports, no inspection reports, no roof reports AS IS, I pay for any inspection fees---and mandatory repairs. My fees and repairs cost me MUCH less than the 30% discount that I received by bidding LOW and no contingencies. You do have to have strong financial ability with no requirements for seconds etc. It WORKS and you offer stands out. In my latest deal, the seller made no effort to counter. THEY WANTED OUT by selling.
I am completely agree with that. Why do you need to pay the agent if you can search house in RealityLink call to the agent see the property, ask for all Sells for the last year and give your own price.
It is against the fiduciary duty of the seller agent to do what you said they did in this case and can lose their license. Most wont risk that for a few hundred bucks. I agree with webmasterx, this is phoney.
buyer agents are essentially free to the buyer, and will have market expertise the buyer doesnt have. USE IT!
Wow, you are way off. Not all agents will reduce their commission and the agent that is the listing agent doesn't "technically work for you". They work for the seller or if you sign a buyer's agency with them they are a dual agent and are neutral. The agent doesn't get the full commission in most cases either, they have to split it with their broker. You might have saved even more if you would have had your own buyers agent.
My wife and I met with a buyers agent only to learn they can't legally tell you if the home is in a good area, if it was a meth house, and they can't give legal advice. To me it seems all they are allowed to do is find houses and negotiate the price.
Using Zillow, Trulia, etc, we found a few homes we were interested in and made offers without using a buyers agent. We didn't get attached to any of the homes so we just made very low offers on them. If they didn't accept we just moved on to the next house. Eventually we ran across home owners who were motivated to sell and they accepted 20k less then the asking price. Using the comparables in the area and the county assessors website it's fairly easy to determine market value for a home and to figure out if it's a good deal. Lot's of homes these days are built by the same builder in the same area, with the exact same layout, giving you information on what the market is doing.
After making our offer the listing agent called us to confirm there was no other agent involved who would get part of the commission. I can't say for certain they look less money to get the deal done. We then paid a real estate attorney $250 dollars to fill out the contract for us and verify we got everything we asked for.
Not using a buyers agent probably isn't right for everyone but it worked out well for us.
Interesting article. This is actually a path I’m considering. The house I’m looking at now already has an offer, contingent on the buyer selling their own house. And because of this, it’s been difficult getting a hold of the listing agent and the owner. I guess in their mind it’s already sold. And I have a feeling the price on this offer was a pretty good one.
Now the listing agent did tell me that the contract they signed still gives them the ability to accept another offer that is without this contingency. So I’m thinking that dual agency might give the extra “juice” needed to get the deal done. I won’t be able to offer the same price as the first offer, but my won’t be contingent on selling my house. And if the listing agent stands to make a lot more on this deal than the other, then I think they can convince the owner to put some serious thought into my offer.
After all, it's highly subjective which is the better offer. To me it doesn't matter what the other party offered, because if they don’t sell their house for their asking price, that deal doesn't go through. It's zero risk to them to offer that price. I have no idea why the owner even accepted this contingency in the first place.
Read through all the comments, summarized: all the posts said need a buyer agents were all from agents. We all know how easy to become a realtor agent. It doesn't really need to take long training (compare other jobs) and easy to get the license. I know a lot of agents who used to be housewife or lost their jobs and then begin to work as agents. And for me living in NewJersey and NewYork, the house is very expensive on some areas (1-1.5 hour commute to NYC) , it will cost 500K-1M, 3% is big money(15K-30K). There are e-agents here, you do the research by yourself, the e-agent give you suggestion, put offer and negatioate price .... It like most people do tax return via software today. You can get all the information from Internet. The history price, neighour prices..... I don't think there are a lot of values of using a buyer agent. They play tricky too.
This agent cannot cut his commission if there is another offer on the table. There are laws to prevent any unfair advantage or bias, especially in multiple offer situations. Of course the seller wants to pay less commission, which gives your offer more leverage. When there are multiple offers, real estate brokers cannot, by law, reduce their commission - all offers must be given equal footing so that price and conditions are the factors at play.
Cam I get a different agent than my husband? Great article!
This article gives false info. In dual agency the agent is rendered neutral.This means no judgement,advice,or counsel to either party. The agent just becomes the facilitator of the deal. The neutral agent can't legally give you juicy tidings. However when you contact a selling agent they are not automatically made dual agents. They still represent the seller and you have no representation. The agent can reveal anything they know about your financial info or offer strategy to the seller and still collect both commissions.Dual Agency usually occurs when the agents already contracted buyer client wishes to buy one of their own listings.
This is the MOST Ignorant thing I have ever heard!
This is like going to the doctor and telling them you will use them if they rebate part of the insurance claim back to you. Good luck on you medical care!!
Any agent who does this should loose their license.
http://www.realtor.com/advice/buyer-agents-work-free/
Guess we should start a new Real Estate company Dumb and Dumber Realty
Sellers agent works for the Seller, they do not have to give you advise or give you anything that they know about the house. They have a responsibility to the seller only. The largest investment your making in your life are you really that stupid to think this is the way to do it.
I had a friend who did this and the house had water damage. The seller agent did not recommend the proper inspections. And did not tell the buyer anything they knew about the home. Because they represented the seller Had the buyer pay fees that the seller would of normally paid if they had a buyers agent helping them.
This is the most ignorant advise anyone can give.
Doctors are educated and ethical. Real estate agents are greedy and only require a high school degree.
:Buyer's agents are especially evil"
What a joke.
Seller's agents and legally and ethically bound to represent the seller first. If you're working with one that's willing to negotiate on your behalf instead on the client they're already contractually bound to, then you've found a real skunk. They aren't allowed to share info like that, and it's telling that you'd encourage that behavior.
You got had, and you don't even realize it.