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Hi, have a question here, no offense to any buyer’s realtor, but my question is, if the buyer and seller’s agent will be sharing the commission cost from the selling price, why would the buyer’s agent truly look for the buyer? I would think they both are on the same boat instead of truly looking out for the buyer. Ok…say, I really like a house that’s selling and is located at a danger zone of whatever parts of the city with high crimes and just bad ratings period, but I love it to death, do you think my buyer’s agent will really recommend me NOT to buy it? Sure, she’ll probably tell me the bad parts of it and list them out, but if I really want it, she’ll be happy, because she can earn commission from the sale price. Again, no offense here, I’m just trying to understand the true benefits of using a buyer’s agent. Most of the seller’s agent I’ve seen so far when looking at homes always tell me that if I don’t bring in a realtor as a buyer rep, then I could instantly save 3% on the asking price, not to mention the rest of the negotiation process….see…if I’m personally paying my buyer agent, her fees are coming out from my pocket, I think that’s the case when she’ll really look out for me, not when her commission is coming out from the seller’s selling price of the house……thanks for sharing..
When I represent someone as a buyer, I handle the transaction as if it were my own. When we close, I receive 3% of the sales price. Now, why would I negotiate a price down if it affects my take? Say we're negotiating on a house listed at $200,000. Let's say that you're approved up to that amount, but want to pay no more than $180,000. That's a $20,000 difference. If I help you get the house down to $180,000, I don't get the 3% of $20,000, which is $600.
However, if you're happy with the way I represented you, you'll most likely refer me to friends. If I get just one referral from you, that's worth thousands to me.
When we sign a buyer representation agreement with you, we're signing a contract with you promising that we're looking out for your best interests, regardless of the pay. If we breach these contracts, we can have legal action brought against us, and worse, we lose our reputation in this business, which is all we have.
Now, when you talk about going into a deal without a buyer rep, there may be a few times that you might be able to get some of that percentage off the sales price, but that's rare. 9 times out of 10, the listing agent will be keeping the entire 6%, as there's a ton more work to do when someone comes in unrepresented, and a good majority of those deals never even get to closing because the buyer isn't properly educated in the process. If I have a buyer come to one of my listings without an agent representing them, I know that even with my full 6% commission, my seller is going to get much more money and probably not have to do many, if any repairs on the home. My sellers love it when someone comes in unrepresented.
Your concern is understandable. You want to be sure your agent will represent your best interest.
My business is based on referrals and I work hard to make sure my clients are happy. Pressuring them to buy one house over another because I would receive more commission would certainly not fit into that model. I negotiate hard on my buyers' behalf and pass any kind of agent bonus attached to a listing to my buyers. If you don't know anyone who can recommend a good buyer's agent to you, your best insurance is to sign an agency agreement with a buyer's agent. This agreement sets their commission to a set percentage point of the commission. If the selling commission of the home you end up purchasing is less, then you will pay the difference. If the selling commission is more, you receive the difference. With commission issues transparent and out of the way, you'll be assured that your agent will focus only on finding you the right home.
I hope this helps.
It's called ethics. Pure and simple. I would not sell my soul for a couple hundred extra bucks. I have an ethical obligation to my clients and I take it very seriously.
I guess it depends on what you believe about people. If you think all agents are short sighted and think that $200 or so is worth a potential lost referral, then you shouldn't use a buyer agent. If you think that all agents have no work ethic and are only interested in themselves, then you shouldn't use a buyer agent. If you think all agents are idiots and bring nothing to the table, then you shouldn't use a buyer agent.
Don't forget a buyer agent wants to sell you A house. They don't particularly care which one, but they do want to sell you one. So...if I can find you a house that you really like that meets your needs, of the 2,000 homes that are on my local market, why wouldn't I get you one that meets as many of your criteria as possible? It only makes good busines sense to have a satisfied customer for future referrals.
So...like I said, if you think all real estate agents have no business sense, then by all means...don't use one.
Last edited by Silverfall; 10-05-2008 at 01:43 PM..
Reason: typo
The best way for me to answer your question is to relate a story of a buyer of mine. We had been working together for a couple of months. during that time, I learned that he and his wife had sold their home during the Height of the frenzy... and they couldn't find anything they liked at a decent price so moved into military housing. And kept looking, casually. We weren't having great luck as they has pretty stringent wants and needs... LOL : )
anyway, we looked at some new construction that just seemed to fit the bill!! Excellent for her work commute, great space, and other needs. BUT the new construction had been built on an old burrow pit. I did plenty of due diligence for my client. Apparently the builder/developers had done all the testing and everything came back fine. In fact, great. The developer and a couple of his superintendents built their own homes there. lots of things to give the warm and fuzzys. I just didn't like it. I told my client, it is your home. We have done our research and are not finding any reason to say "NO", but if it were me I probably wouldn't do it. That is just my opinion." I then asked him to give me a few more days to see if I could come up with something.
Well, I did. Another new construction, on the other end of the wifes commute. Originally priced 30k over his target pricing. We were able to make a deal and he loves it.
So, as the other agents told you, it is ethics. I have to wake up in the morning and look at myself in the mirror and I can't do that if I haven't done my very best for my clients.... and someday he is going to call me and ask me to sell his house. I will be able to do my job much better with the house he bought versus the one at the burrow pit.
Basically, if you working honestly with your buyers agent, they KNOW they are going to sell you a house, they don't have to sell you the WRONG HOUSE. Now a listing agent can only sell you the house she/he has listed that you looked at. I would be more scared of that : )
Hueimo, if you have been offered a 3% price reduction if you don't have a buyer's agent, and if you feel confident that you can negotiate and close the deal, that is a big incentive for you to proceed without a buyer's agent. It happens a lot more often than folks around here would have you think. But, then again, you are asking a group of mostly real estate agents, God love 'em. On the other hand, it's a lot of work, and you can cut off your nose to spite your face, particularly if you aren't able to identify a fair price for the house without professional advice.
To answer your question directly, you're absolutely correct that there is a certain conflict of interest built in to the typical commission relationship because the agent only gets paid if you close, and it's not always in your best interest to close. Some of the agents who have answered your question have provided some legitimate ways that the conflict of interest can balanced out. In the end, it will come down to trusting your agent, so obviously picking the right one would be critical if that's the route you decide to go.
I could have written your post myself,, in fact I have before!
They are of course looking out for themselves THAT DOESNT MEAN SOME ARE NOT ETHICAL PEOPLE.
When an agent would say to me , Oh, I wouldnt do that for x amount of $$ then I always say great and see if they will change the parameters of the contract which can be amended at any time.
There are decent ones out there but you have to be on your toes
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