I said it is simple to structure things so you (the buyer) get a refund out of the purchase price to lower (not eliminate) the effective commission for the buyer's agent. The idea here is that the seller would be perfectly willing to agree to a deal that gets done at a price he likes if the deal gets done by taking some money out of the buyers agentâ€™s pocket (not the sellerâ€™s). Of course he wouldnâ€™t have the priceless psychic satisfaction of knowing that the buyer â€œwanted the home badly enoughâ€ to pay the buyers agent the full 3%, but he would have a deal.
Finally, Iâ€™d concede your point that it is hardly worth the effort for the buyers agent to spend the time "advising" their client to pay more out of sheer greed for a higher commission because the percentages are so small. I was just being glib when I suggested otherwise as an aside. But reverse is also true -- it is hardly worth the effort for the listing agent advise their client how to maximize the sale price. You've nicely illustrated my point below that the reality is that what motivates real estate agents first and foremost is closing a deal so they get paid, and whether or not you get the best price is completely irrelevant to that motivation.
I agreed that it takes some effort and experience for each transaction so let just say the effort is worth a couple of thousands. In the Bayarea, with the housing price so high, it's absurd to pay the agent 5 - 6 % which comes up to be way over $50,000 for each transaction especially since you can get all kinds of information from website like zillow and trulia or just go to the county public records online.
Depending on how badly you wanted the house, these days, even if you approach the seller's agent directly, he or she could tell you they need to represent the best interest for the seller and they would refer you to one of the agents that's either his or her friend or in the same real estate office to represent you. They would always proclaim it's for the best interest of both parties. In the end, you or the seller won't save anything.
So all you sellers and buyers out there, do your own home work first, pick a honest person to represent you as a seller or buyer but good luck...If you find one that tells a lot of truth, share it with us. Over the course of the last 13 years and in and out of selling/buying 3 houses, I had come across a lot of agents with nice personality but haven't not found one that tell the truth and that really bothers me. Maybe in their market, they simply cannot tell the truth.
If you need a good Realtor, I definitely can make a suggestion!
Personally, I believe that with so much information available to homeowners and prospective homeowners, the traditional method of selling and buying will need to "morph" as well. Having handled real estate transactions, I'm not certain I would advocate using the same listing agent to negotiate the purchase for you (as, in my opinion only, it is difficult to fairly serve two "masters"), but I'd certainly say that utilizing a qualified agent as a licensed "Purchasing Facilitator" is an idea whose time has come.
Unlike a full-service agent, the job duties of the Facilitator begins after the home buyer has found his/her dream home. The Facilitator would present an offer, handle all of the document processing for the buyer (so that "i's" are dotted, etc.), ensure that reports and inspections are scheduled, and that documents are forwarded to title. The purchaser would determine the price that he/she wishes to offer, obtains a loan, and be present at title for sign-off. This is an idea I've been thinking of for some time, and will be blogging about on my site at Active Rain and at the web address below. Frankly, I think the time has come to begin implementing some changes.
Course, this is just my two cents, so don't shoot the realtor (even though I am wearing a polka dot shirt that looks a lot like mini-targets on it)...
Thanks for your thought provoking question!
Grace Morioka, SRES, e-Pro
Area Pro Realty
Tel (408) 426-1616
I'm in the market myself right now and have talked to about a half-dozen agents from the usual big name brokerages in the area as well as some of the smaller ones. Despite all the brutal headlines about the property market, they all talked roses and sunshine and not one would seriously entertain the notion that now might not be a good time to buy -- it obviously would be counter to their interest to say that. And I don't think I've seen a single post here from any agent saying that. It seems incredibly unlikely that NO agent thinks it is a bad time to buy -- they just won't give you a straight answer on their view of current market conditions. So why should I be any more inclined to believe I'll get a straight answer about the fair value or desirability of the specific property I'm looking at. Sure, you'll get speeches about reputations, integrity and long term perspective. I only half-joked with my family that I would hire the first agent who told me he thinks I should wait 1 year before buying.
I even posted a thread on Trulia asking "how do I find a good agent" hoping to get input from consumers like me and instead got dozens of responses from agents posturing themselves and the market (with a couple of noble exceptions). It is like they've got reverse Turret's Syndrome and can't help blurting out good things about buying now and themselves.
All this is leading me to question, like you, the wisdom of using a buyer's agent at all. And it seems out of whack that a 3% commission represents fair value for what they bring to the table. Some agents will tell you that's paid by the seller anyway so you might as well get someone on your side. This is totally disingenuous; it is simple to structure things so you get a refund or such out of the purchase price to lower the effective commission for the buyer's agent. That is Redfin's business model. The seller has no interest in whether your agent gets the money or you do as long has he gets a sale at his price.
If the buyers agent doesn't get a good deal for you, they don't get paid. That's a lot of motivation for someone to work hard.
If you go direct to the selling agent and make an offer, if they come back with a counter offer would you know if you could have done better or not?
Good luck, if you need a referral to a buyers agent in your area, feel free to call or email me.
You do and want to have a Buyer's agent represent your best interests. The listing agent has a fiduciary relationship with the seller and must represent there best interests over your interests. Your Buyers agent will be able to negotiate better terms than you would otherwise. Unless you have negotiated more than 10 deals you probably don't every thing there is to ask of the Selling agent when it comes to disclosures, warranties, inspections, and other significate property info.
Find yourself a great buyers agent that will represent your best interest, be unbiased to whatever property you want to buy and be able to show you a comparative market analysis to give you a good idea of what buyers are willing to pay for similar homes.
Besides, the seller pays the broker fees: A Buyers agent is a WIN-WIN for you!
(A knowledgeable and qualified Buyers Agent)
Email me for the10 pitfalls when buying a home in todays market:
I'm curious to know why did you agree to pay "thousands of $$$ in agent commissions" if you thought the system was so bad (for your past sales transactions). Were there no agents willing to work on a more innovative / creative commission plan?
I agree with you that the effort required to sell a house in Texas is not that different than selling a house in Palo Alto, but I'm still curious why you couldn't find an agent who was more "reasonable" about his fees? Was it a cartel?
Jster and Alsolooking, the 2008 Gallup Poll ranks the honesty and ethics of real estate agents lower than bankers and lawyers. Remarkable. Only 17% surveyed rated real estate agents honesty as high or very high.
Here's the link: http://www.gallup.com/poll/1654/Honesty-Ethics-Professions.aspx. Hopefully those comprise the 20% Steven says do 80% of the business.
Sadly, I have to agree with you. It's pretty shocking how shameless and deceitful nearly every realtor I've met turns out to be in the end. I suppose it has to do with the incentive structure of the industry and the behavior that it encourages. It's kind of like buying cars. If you just believe everything you're told by the salespeople and don't try to negotiate anything or formulate any independent opinions, you'll have a pleasant, cordial experience, though you'll probably get fleeced for thousands of dollars. If you stick up for yourself and try to be an educated consumer, look out, the knives come out, and all the hostility, double-talk, and deception will rear its ugly head.
I know this sounds like hyperbole. I wish it was.
In the business world, obstructionist posturing is what kills deals. I'm pretty sure anyone who can afford a house in this area can smell it a mile away. I'll give you credit though for at least begrudgingly conceding that "if there is no way around it, the seller might just have to net the same amount and the buyer gets a little help to make the deal happen."
Whether or not you can get the rebate is purely a function of market conditions. Palo Alto is not in the same boat as miami. However, many homes here have been on and off the market for over a year. I am sure many sellers would be motivated to negotiate.
Personally I would fire my listing agent if he/she would not agree to this and it was costing me the sale.
If you are comfortable negotiating your own terms, it could make sense to contact the agent directly. During the negotiations you should be able to get the seller agent to agree to refund 3% back to you on top of whatever deal you can agree on. This would have been paid to another realtor anyway. That 3% would go a long way to furnish your new home.
If you are uncomfortable looking over the transaction details themselves, you could hire a real estate attorney on an hourly rate to review the terms in case you miss anything. Given the price of housing, this is a more affordable way to pay for due diligence in the transaction.
The previous answers are all good/accurate, but I don't feel like they explain one aspect clearly.
The selling agent's objective is to achieve the highest sale price for the home. The buyer's agent is working to get a home at the lowest price possible. There is an inherent tension here if it is the same agent working towards both ends.
Are their situations where it is a win-win to go down the dual agency path? Certainly! Just understand what you are getting into and the possible pitfalls if you choose this path.
Great question! Here's the short snarky answer:
Do you want the best friend, sister, business partner.... of the seller to represent you in the biggest financial transaction of your life? Or are you planning on representing yourself in the biggest financial transaction of your life and going through 3 inches worth of disclosures and inspections alone, hiring the inspectors alone, and getting through escrow alone?
Here is the longer, more serious answer:
When a seller hires a listing agent he or she sign a listing agreement that specifies that the agent is to represent the interest of the seller and has a duty to be fair and honest with the buyer's agent and the buyer. The seller and agent agree to a commission that will paid and how it is to be split between the seller's agent and the buyer's agent. The buyer's agent does not determine how much he or she is to get.
If you go directly to seller and try to represent yourself, the seller's agent may or may not agree to that. There has been case law that says if the buyer has no agent then the seller's agent is presumed to be also representing the buyer and therefore must act as a dual agent. If you ask the seller's agent to reresent you then you are also getting into a dual agency. This must be agreed to by all parties. In these circumstances the agent has a duty to represent the best interests of both the buyer and seller. You can see how this can be a problem and many agents refuse because it puts us in a very risky position legally and often does not allow us to to our best for out original client. At best you may get a few thousand dollars off the price of a house and at worst your interests are not being protected. there is a lot more to buying a home than just agreeing on a price.
Most lawsuites over residinetial real estate involve non disclosure, and most of those cases occur in a dual agency situation. It ends up being time consuming and financially bad for all parties involved.
That being said, it is not illegal, or by real estate standards unethical, but personally I think it is stupid. It does not help the buyer in many cases, and it certainly does not help the agent who does it, who generally makes no additional money off the deal and is at great risk for lawsuites. Sometimes it helps the seller get the house sold but sometimes it just makes them more likely to get sued.
Please forgive me for stealing this idea for a new blog post.
If you decide to have the Listing Agent represent you you will be asked to sign a Dual Agency Disclosure detailing that Agents responsibilities toward both you and the Seller. Despite what you may be advised here this is perfectly legal.
However, I would not advise it for a myriad of reasons, many of which you will hear about from other agents.