Seller/Listing agent vs Buyer agent

[LiveBelowMeans]

I just bought a house and went thru this exact issue. DW and I debated using an agent or not. We decided to go it alone. We did all the research ourselves on Zillow, Realtor.com etc. We called the listing agents in all cases to see the homes we were interested in. We found the perfect home and learned a lot from all the listing agents in the process. When it came time to make the offer, I told the listing agent that we had done all the leg work on our side and expected her to help by reducing her commission to the sellers to make our offer more appealing. She reduced her commission from 6 to 5 % and when we were still slightly apart on price she kicked in another $3750 as a rebate to me at the close to close the deal. However, this only works, if you are very hands on and understand the market in which you are buying. Good luck. I think it is also important to understand that in a tight market, as a buyer working directly with the listing agent you have the upper hand if there are competing offers as the listing agent will go to bat for you. They want that double commission.

 

[MJ]

I believe that in my area, because it is a buyer's market, when I make an offer that is much lower than the asking price, I don't really care where the price difference will come from, seller, agent or both.

 

[AJ520]

I am a part time real estate agent, mainly got the license because I do real estate investments. I agree a 100% that you need to do some research to find a good agent and also ur own research to learn about the Neighborhood that you will be buying in!!! Agents were created to protect buyers mostly so there are people there to help prevent fraud and discrimination of sorts. And yes, most people depends on this trade as their means of living. If you want to save money on buying houses, look into sweat equity more than savings on commission. Buy a house that needs work so you are in better position to negotiate a deal. And do ask your agent for a refund when possible. However, juts know that experience sellers don't like dual agency.

 

[AJ520]

Plus, it is illegal for the sellers agent to hide better offers from the seller over yours, just because the sellers agent want the 5-6% commission. The sellers agent is by law requires to present all offers to seller. Do not get yourself an agent that will be sue for breaking the law because you will be on the hook too!

 

[Fishingmn]

I've been a Realtor for 7+ years. Lots of interesting information in this thread.

First off, the prevailing assumption seems to be that we are all unethical and only represent our own interests. I've seen that a couple times but in the vast majority of transactions I've been involved in (100+) this is not the case at all. Do you assume that accountants and lawyers are only representing their own interests? Realtors are subject to the same fiduciary duties & laws as those professions.

"Even if you get your own agent, I think you'll find he's actually working for the seller."

A buyer who has signed a Buyer Representation Agreement has hired a broker/agent who is bound to only represent their interests - not the sellers.

"IMO realtors are a waste of money for anyone local to the sale who has access to the internet and reasonable intelligence"

If you live in a market where there are lots of For Sale by Owner homes go for it. If the house is listed on MLS the compensation to the listing agent has already been determined so there's no reason to not engage an agent. Certainly, the model for whether people should list their homes with agents can be debated as can the compensation model.

"I have used the seller agent to buy a place, and the only advantage to me as a buyer was the agent made double sure to make the sale"

That's not how it's supposed to work (your experience may differ). If an agent is in a dual agency situation they can't negotiate on behalf of either party. In practice that means I present offers to each party and can't provide any other guidance. That's literally how it works. This is why I think having a Buyer's Agent is better as they can actively negotiate on your behalf.

Now you could try to negotiate with the listing agent if they get both sides for a rebate or reduction in commission. You'll have to decide if the negotiation on their commission is worth the full representation and negotiation you'd get if you weren't in dual agency.

"their allegiance is to the seller and they would have a duty to report what you said to the seller."

No - this would be immediate grounds for a lawsuit or, if reported to NAR, a fine or loss of license.

"Now with the internet, sites like Zillow, Realtor.com, Trulia ....not much real value is delivered for the price, IMHO"

First off, I agree that commissions are too high. I normally charge just 4.7%. That said, the statement above is what I find funny.

Without Realtors there's no MLS, no Zillow, no uniform database of real estate values & transactions to base sales prices on. MLS is paid for by Realtors in the form of quarterly fees. It is also policed by Realtors to provide strict rules on providing accurate sales & home details. Zillow (and the others) get all of their data feeds from MLS's and then makes all of their money by selling back buyer leads to these same Realtors. With no Realtors Zillow has no data and no revenue.

It does sound like some have had bad experiences. I do agree with those who have said to do your due diligence and meet with multiple agents. It's interesting to me that so few do that. When we do a large home remodel we always meet with multiple contractors and ask for references. Can't recall anyone asking for references, even for those that don't know me ahead of time.

 

[zinger1457]

Without Realtors there's no MLS, no Zillow, no uniform database of real estate values & transactions to base sales prices on. MLS is paid for by Realtors in the form of quarterly fees. It is also policed by Realtors to provide strict rules on providing accurate sales & home details. Zillow (and the others) get all of their data feeds from MLS's and then makes all of their money by selling back buyer leads to these same Realtors. With no Realtors Zillow has no data and no revenue.

That is really the problem, the realtors have too much control over the current house buying/selling system. Don't believe the major issue is realtors being unethical, it's that many of us that have been through the process don't see the value in the fees that we paid. Unfortunately there are few good alternatives available and I'm sure realtors are doing their best to see it stays that way.

 

[photoguy]

I'm not as experienced home buyer/seller as many on this forum, but I just bought a home (with agent) and here is what I see as the advantages/disadvantages:

Advantages:
1. Guides you through the process
2. Handles paperwork (although maybe you could argue the title company does most of this)
3. Can you have useful local knowledge not available in MLS listing or other online source
4. Makes it easier to actually see the property physically in a timely fashion
5. May be able to find listings before they hit MLS
6. May be good at teasing out information from the other side for negotiation (conversely they may leak information about you)

Disadvantages:

1. Even though an agent may be legally bound to act in a fiduciary manner, in practice this isn't always the case. This is a well studied problem, that the incentives of the principal and agent don't align. The danger is that an agent may encourage you to take a deal now instead of holding out for something better. Even if you are aware of this, it can be difficult to counter act. Do a search for "freakonomics real estate" to find out more. I think cases of outright malpractice (e.g. failing to inform buyer about a material fact like a condo special assessment) are rare (but I don't have any stats on this).

2. The agent adds transactions costs. To some extent these are unavoidable due to the fact that the vast majority of sellers list on MLS. But there may be opportunity to reduce this as per travelover or going with a discount agent that gives a rebate on fees

3. Expanding on point 2, in particular a buyer's agent makes it more expensive to buy FSBO houses which are beoming more common

 

[travelover]

That is really the problem, the realtors have too much control over the current house buying/selling system. Don't believe the major issue is realtors being unethical, it's that many of us that have been through the process don't see the value in the fees that we paid. Unfortunately there are few good alternatives available and I'm sure realtors are doing their best to see it stays that way.

Well said. I really object to the commission being a percentage of the sale price. The work involved in selling a $400,000 house is not twice the work to sell a $200,000 house and when you get into the million dollar plus range, it is totally ridiculous, especially in a hot market.

 

[exnavynuke]

"IMO realtors are a waste of money for anyone local to the sale who has access to the internet and reasonable intelligence"

If you live in a market where there are lots of For Sale by Owner homes go for it. If the house is listed on MLS the compensation to the listing agent has already been determined so there's no reason to not engage an agent. Certainly, the model for whether people should list their homes with agents can be debated as can the compensation model.

Compensation can be negotiated even after they signed the original agreement (I've known of realtors willing to reduce their commission percentage when presented with a buyer who was representing themselves). Also, more and more agents and other services are listing homes on the MLS for nominal fees and/or providing realtor services for flat fees that are typically much less than the % charges traditional realtors use. In any of those situations, avoiding a buyer's agent (assuming the buyer can negotiate on their own behalf intelligently) can save significant money.

"Now with the internet, sites like Zillow, Realtor.com, Trulia ....not much real value is delivered for the price, IMHO"

First off, I agree that commissions are too high. I normally charge just 4.7%. That said, the statement above is what I find funny.

Without Realtors there's no MLS, no Zillow, no uniform database of real estate values & transactions to base sales prices on. MLS is paid for by Realtors in the form of quarterly fees. It is also policed by Realtors to provide strict rules on providing accurate sales & home details. Zillow (and the others) get all of their data feeds from MLS's and then makes all of their money by selling back buyer leads to these same Realtors. With no Realtors Zillow has no data and no revenue.

It does sound like some have had bad experiences. I do agree with those who have said to do your due diligence and meet with multiple agents. It's interesting to me that so few do that. When we do a large home remodel we always meet with multiple contractors and ask for references. Can't recall anyone asking for references, even for those that don't know me ahead of time.

I have no problems with realtors in general and believe the stuff mentioned here is worth engaging a realtor. I just don't believe that the pricing structure traditional realtors use is one that people should accept. The person who looks at 4 houses and ends up buying/selling a $500,000 house didn't get "more" or "better" work from their realtor than the person who did the exact same thing while buying/selling a $200,000 house, but they'll pay 2.5 times as much money for that work. That seems like a huge waste of money to many people (myself included).

As far as I'm concerned, the only reason it's accepted (i.e. people are willing to hire them with that pricing structure) is that years back the internet didn't exist and people couldn't do it without them (with any ease anyway) and so that's been the norm so long that people are only slowly pushing back. The rise of the "MLS listing" and "flat fee" realtors is a response to the unwillingness of people to pay more than others for the same thing imo. I think we're maybe 10-15 years away from that pricing structure being completely replaced with "package costs" that change cost only based on additional services (more pictures, more signs, more open houses etc for selling or more negotiations and more showings etc for buying). I hope I'm right, but I could be wrong.

 

[Fishingmn]

I just don't believe that the pricing structure traditional realtors use is one that people should accept. The person who looks at 4 houses and ends up buying/selling a $500,000 house didn't get "more" or "better" work from their realtor than the person who did the exact same thing while buying/selling a $200,000 house, but they'll pay 2.5 times as much money for that work. That seems like a huge waste of money to many people (myself included).

So you want to move to an hourly model then. Do you think many buyer's would be willing to spend $100-150/hour whether they purchase a home or not? How will that affect entry level home buyer's since I assume you charge the same to all buyer's? Won't that have the affect of having people look at fewer homes and overpaying in an effort to reduce the time required to find a home?

I've had buyer's look at 3 homes and I've had buyer's look at 85 homes. Under the current model they both seemed happy - guessing that the satisfaction of the 2nd client would be impacted when they got my bill. How upset would entry level buyer's be when they lose out on a multiple offer situation. Start all over from scratch with nothing but a $500 invoice?

Here's an actual real estate broker charging an hourly fee which is where I got the numbers from - HOURLY FEE OPTIONS | Real Estate Cafe

 

[travelover]

Compensation can be negotiated even after they signed the original agreement (I've known of realtors willing to reduce their commission percentage when presented with a buyer who was representing themselves). Also, more and more agents and other services are listing homes on the MLS for nominal fees and/or providing realtor services for flat fees that are typically much less than the % charges traditional realtors use. In any of those situations, avoiding a buyer's agent (assuming the buyer can negotiate on their own behalf intelligently) can save significant money.



I have no problems with realtors in general and believe the stuff mentioned here is worth engaging a realtor. I just don't believe that the pricing structure traditional realtors use is one that people should accept. The person who looks at 4 houses and ends up buying/selling a $500,000 house didn't get "more" or "better" work from their realtor than the person who did the exact same thing while buying/selling a $200,000 house, but they'll pay 2.5 times as much money for that work. That seems like a huge waste of money to many people (myself included).

As far as I'm concerned, the only reason it's accepted (i.e. people are willing to hire them with that pricing structure) is that years back the internet didn't exist and people couldn't do it without them (with any ease anyway) and so that's been the norm so long that people are only slowly pushing back. The rise of the "MLS listing" and "flat fee" realtors is a response to the unwillingness of people to pay more than others for the same thing imo. I think we're maybe 10-15 years away from that pricing structure being completely replaced with "package costs" that change cost only based on additional services (more pictures, more signs, more open houses etc for selling or more negotiations and more showings etc for buying). I hope I'm right, but I could be wrong.

I totally agree. It is only a matter of time before the efficiency of the internet displaces the flat % based compensation of real estate agents. I think it will start on the seller's side as they are the most directly impacted by the current fee structure, though of course, the buyer shares it, too, as it is baked in to every sale. It all comes down to value and on an hourly basis, real estate agents just don't provide value for their fees on moderate to expensive homes.

 

[socca]

As I've mentioned on this board before, I was handed a Buyer Representation Agreement in Denver and found it ridiculously restrictive. Be careful - read the fine print!!

 

[karen1972]

When I'm buying I know I prefer an agent, but I have one I trust. Yes, they get a portion fo the proceeds, but I've yet to see one where you got any less really by NOT having an agent unless you both don't have an agent (ie for sale by owner).

Personally, I like someone following up and doing all the work with the paperwork, sending me info for utilities, who I need to contact, what unique stupid fees/taxes/forms I need to fill out, chase the HOA which won't want to provide you the details you want, etc. My agents have always taken care of absolutely everything and since I was usually working and had a million things at work and well packing to do, an extra hand is useful. Here in NC, they also try to close in 2-3 weeks, they say they can even close in 7 days if you use their people (which I don't). So that's a short time to figure it all out and make sure you don't miss anything. It's not like this is something I do every day.

Though it does depend immensely on the state, in some states the agents do most of the work, in other states, it's the lawyers so it's not a simple one situation fits all. For one thing, I had NO idea what the heck a due diligence fee was and had I made an offer on my own, I would have skipped it and lost the house... as everyone does it here, it's money that ensures they can safely take it off the market and has different rules than escrow money.

 

[travelover]

............Personally, I like someone following up and doing all the work with the paperwork, sending me info for utilities, who I need to contact, what unique stupid fees/taxes/forms I need to fill out, chase the HOA which won't want to provide you the details you want, etc. .........

That's fine. Some people like to have a financial advisor take care of every detail, too, and they just gladly pay the cost. I'm not one of them. We all get to choose and I appreciate a forum like this where we can explore all the options and choose what is best for us, personally.

 

[pb4uski]

....A buyer who has signed a Buyer Representation Agreement has hired a broker/agent who is bound to only represent their interests - not the sellers. .....

"their allegiance is to the seller and they would have a duty to report what you said to the seller."

No - this would be immediate grounds for a lawsuit or, if reported to NAR, a fine or loss of license. ....

I stand corrected.... that is very different from when I took the real estate exam over 40 years ago... back then, all agents' allegiance was to the seller/client.

 

[RobbieB]

I buy lots of stuff on the internet, but a house would not be on the list.

I'll pay the dough for some professional help on that transaction.

 

[MJ]

I buy lots of stuff on the internet, but a house would not be on the list.

I'll pay the dough for some professional help on that transaction.

You generally don't buy a house on the internet. These sites are not like eBay. They just provide information about potential properties which includes agent contacts. On rear occasions, the owner is selling their property directly.

 

[MooreBonds]

When I made an offer on my current home and didn't have an agent representing me, I met the seller's agent at her office. In a somewhat underhanded move, she voluntarily "just so happened" to have various other listings printed up that she showed me of other homes that slightly matched the listing I was making an offer on (even though I told her that I was representing myself in the explicit goal of factoring it into my offers, and did not want her to represent me in any capacity on any other deals-and never asked her to search for other possible properties).

If you do approach a home listed for sale representing yourself, and want to make an offer, make sure you put in writing to the agent that you are representing yourself, and yourself only...and that your interaction with the seller's agent is limited to this one offer/transaction only, and you do not want them representing you in any other transaction.

If the agent just so happened to show me a printout of a different home than the one I was making an offer on, even if I had browsed it previously on my own and already knew about the home - if I ended up actually buying this other home that she handed me a piece of paper on, she could have a claim that she allegedly "put me onto" the other home, and she could try to weasel her way into the buyer's agent's commission....even though I never asked her to show me any properties, nor asked her to represent me in any other transactions, and even already knew about the home from my own research.

 

[exnavynuke]

So you want to move to an hourly model then. Do you think many buyer's would be willing to spend $100-150/hour whether they purchase a home or not? How will that affect entry level home buyer's since I assume you charge the same to all buyer's? Won't that have the affect of having people look at fewer homes and overpaying in an effort to reduce the time required to find a home?

I've had buyer's look at 3 homes and I've had buyer's look at 85 homes. Under the current model they both seemed happy - guessing that the satisfaction of the 2nd client would be impacted when they got my bill. How upset would entry level buyer's be when they lose out on a multiple offer situation. Start all over from scratch with nothing but a $500 invoice?

Here's an actual real estate broker charging an hourly fee which is where I got the numbers from - HOURLY FEE OPTIONS | Real Estate Cafe

I didn't say anything about charging by the hour, I said not charging a percentage. "Flat fee" realtor services (including "full service") are popping up around the country such as Flat Fee Real Estate - Sell Your Home For $2500 | Redefy and Commission Free Real Estate etc

 

[jfn111]

There is all sorts of models out there and you have to figure out what works for you.
I had a closing yesterday, with one of my investors, where my commission was $500 flat fee. I found him the property last Thursday, wholesale deal with assignable contract, and we closed 4 days latter.
I have a closing today with traditional buyers where I showed them 20+ properties and my commission will be 2.7% (Paid by the seller).
I don't have my buyer's sign a buyer's rep contract until they are ready to make an offer. I have no intention of trapping anyone and they're free to work with another agent if they feel it's a better fit.
It's important to look around and find the right fit for you. I work with a lady who's a listing monster. She sells 75-100 houses a year (average in our brokerage is 24) and if you contact her directly she will refer you to me (her buyer's rep). She doesn't like the conflict of interest that can arise out of representing both the the buyer and seller and would rather lose some commission then put her reputation at risk.

 

[photoguy]

If the agent just so happened to show me a printout of a different home than the one I was making an offer on, even if I had browsed it previously on my own and already knew about the home - if I ended up actually buying this other home that she handed me a piece of paper on, she could have a claim that she allegedly "put me onto" the other home, and she could try to weasel her way into the buyer's agent's commission....even though I never asked her to show me any properties, nor asked her to represent me in any other transactions, and even already knew about the home from my own research.

I think the term is procuring cause. It can also be an issue if you see a house with a listing agent and then use say redfin or other discount agent to get a buyer rebate.




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