Yesterday I talked about why you should have a realtor if you’re selling. But I think you need one just as much if you’re buying.
I’ve heard prospective buyers say that if they go to an Open House and find a house they like, they’ll simply negotiate a reduced commission with the listing agent and save some money. I’ve never really understood the reasoning.
If you’re a prospective buyer, having an agent represent you (a buyer’s agent) costs you nothing. The seller pays the commission. S/he has already assessed that cost and is ready to absorb it.
But if you have your own agent, that agent will make sure you see a number of listings that meet your criteria. She can set up auto-notifications so that those properties land in your inbox as soon as they hit MLX. She will take you to viewings, talk to you about the pros and cons of the properties you see, and help you determine what it is that you really want.
Once you find a property, your agent will check the sales history of that property and comparables, and discuss how to go about making an offer that meets your best interests.
She will make sure that offer protects you with all the necessary clauses to ensure that appropriate warranties, covenants, and conditions are spelled out clearly. She will negotiate on your behalf and advise you when to give, and when to walk away. She will protect your interests to the fullest extent possible; that’s the buyer’s agent’s role.
If you choose to deal with the listing agent instead, be aware that they do not owe you the same fiduciary duty. The listing agent’s duty to you is one of honesty and fairness, but you are not their client. Their primary duties are to the seller. They have to act in their client’s best interests, not yours.
And this is where there is a potential for conflict of interest.
The seller wants the best price for their home; you want to pay as little as possible. To come up with a list price, the listing agent will probably have done a comparative market analysis for the seller with a recommended list and sale price. You won’t have this kind of analysis if you don’t have your own agent. And without that kind of information, you may be flying blind. Saving some money on commission is a false economy if you pay more than what you should for your new home.
There are other possible conflicts of interest. The seller may want a quick closing; you may need time to sell your house or to give notice to a landlord. You may want the appliances; the seller may want to exclude them.
So yes, you may be able to negotiate a reduced commission if you deal with the listing agent and lots of people do. There’s nothing wrong with an agent double-ending a real estate deal, provided everyone agrees. It’s fine as long as you understand that you are their customer, not their client. And that this can sometimes be problematic if something goes wrong.
As a buyer’s agent, I sold a house last year that flooded in the interval between the accepted offer and closing. If you asked my clients, they’d tell you how grateful they were to have someone acting on their behalf to sort that one out. I’ll bet the buyers are relieved they had their own agent, too.
Even so, dealing with a listing agent directly as a buyer is still better than going it alone. Some buyers think as long as their lawyer handles the transaction, there’s no problem. They’re wrong.
I’ve bought homes privately twice in my life. I was a lot younger then and naive. If I was doing it again, I wouldn’t do it at all.
I paid far more than I should have in one transaction because I didn’t know what fair market value was. I paid what the owner wanted, which was not what the house was worth. It wasn’t up to my lawyer to search the comparables to see if I’d paid too much. If I’d a realtor, I’d have known. It took years before what I’d paid for the the property caught up with its true value.
And both cases, I didn’t insist on a home inspection because I was trying to save a few dollars.
That meant I was unaware of the home-wiring job a previous owner had done in one house. A realtor would have made sure I either had a home inspection or that I fully understood the risks of not having one. At the end of the day, given what I paid to get the house re-wired properly, I didn’t save anything by going it alone.
So whatever you choose to do, think about it carefully. I trained at Harvard in Negotiations and we were encouraged to always think about the long term, and to be prepared for all contingencies. In the short term, sure, you may save a little money by not having your agent. But at what cost?