Home Buying in 94301>Question Details

Gayle, Home Buyer in 90042

Do you need an agent to buy a house? Why not just call the selling agent directly and negotiate from there?

Asked by Gayle, 90042 Thu Apr 23, 2009

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Matt I’d agree with you that that at least some listing agents wouldn’t want to simply credit the buyer the 3% commission that traditionally has gone to the buyers agent -- because listing agents also act as buyers agents and they want to preserve for as long as possible the industry pricing structure that gives buyers agents the full 3%. So I don’t doubt that some would advise their clients to sell to a different buyer merely because he was willing to pay the buyers agent the full 3%. Fair enough, I can’t fault you or anyone for trying to act in their long term economic interest (though I wonder if repeatedly demonstrating this so transparently on a website filled with potential clients is the most astute way to go about this). But in any case, I never said the listing agent should simply credit the full 3% buyers commission to the buyer.
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 agent’s pocket (not the seller’s). Of course he wouldn’t have the priceless psychic satisfaction of knowing that the buyer “wanted the home badly enough” to pay the buyers agent the full 3%, but he would have a deal.

Finally, I’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.
2 votes Thank Flag Link Sat May 2, 2009
The 80/20 rule applies here. 20% of the agents do 80% of the business. So you get a desperate bunch, the 80%, trying to fight over the 20% that's left. The barriers to entry and education requirements are almost nil. Just check any broker office web site, there are 50-100 agents. How many of these actually can make a real living off real estate. Only a few. If you really want a good realtor, find the 20% that are actually working.
1 vote Thank Flag Link Sat May 9, 2009
I'm one of those home buyers who do my own research a lot, perhaps more than any agent based on the answers that I got from them. Most of the agents, seller's or buyer's would not tell the whole truth, they tell some of the obvious truth but will not tell u all that they know about the property, especially if it's negative.
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.
1 vote Thank Flag Link Fri May 8, 2009
Absolutely you need an agent! My Realtor is the best! I have purchased 7 homes with him and he has made me a very wealthy person. In 2005 he advised me to sell all of my assets! He explained that real estate like any investment has a cycle. He also suggested that starting around 2006 that the state of California, in particular would witness something unprecedented! According to him this cycle will not correct until around 2013, because of the actual fundamentals, unemployment, bank failures, etc. I did exactly what he suggested and parlayed my newfound wealth four more times! A good Realtor is worth his or her weight in gold. But, like any profession chose wisely! Don't choose the one that talks a good game! Look at their personal wealth and situation to determine if you should emulate their investment behavior!
If you need a good Realtor, I definitely can make a suggestion!
1 vote Thank Flag Link Tue Apr 28, 2009
Hi Gayle and thanks for your question.

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!

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
Tel (408) 426-1616
1 vote Thank Flag Link Tue Apr 28, 2009
This is a question I've been asking myself too. I did the normal thing and used an agent and really all he did was provide me, a first time buyer, assurance that the things that seemed normal were in fact normal and the things that seemed off were in fact off. It isn't rocket science. His value add in terms of helping negotiate the deal and input on "fair value" etc was, in retrospect, probably worse than useless because in very subtle ways he would read the situation and always affirm the reasonableness of paying more to close the deal. Despite all the claims by buyer agents about their duty to represent your interest, the reality is that what motivates them 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 (well, not totally irrelevant since the higher the price you pay, the more money they make!). Some agents are more skilled than others at getting you to suspend your (and perhaps their own) disbelief about this.

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.
1 vote Thank Flag Link Tue Apr 28, 2009
You could Gayle, But you would never know if you got the best price possible. Wouldn't it make more sense to have one person looking out for "YOUR" best interest who wouldn't be compensated unless they achieved your goal?

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.

Dave Tapper
Realtor
Cashin Company
http://www.DavidTapper.com
redt4u@aol.com
650-403-6252
Web Reference: http://www.DavidTapper.com
1 vote Thank Flag Link Thu Apr 23, 2009
Hi Gayle,

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:

james@wbreal.com
1 vote Thank Flag Link Thu Apr 23, 2009
The selling/listing agent first loyalty is to the seller, while they may be able to conduct or represent both buyar and seller in a single transcaction, it is better for the buyer to have complete loyalty and confidentiality from their buyer's agent who will negotiate especially on your behalf. Your agent must be trustworthy! Would you choose your opponent's lawyer to represent you in the same case?
0 votes Thank Flag Link Tue Nov 16, 2010
"Alsolooking" -

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?
0 votes Thank Flag Link Sun May 10, 2009
Thank you all for your answers. Seriously I think in the bayarea, we need some sort of reform to the compensation to the real estate agents. There should be a cap on how much we pay to them say $15,000 for transaction under 1 million and so on. If they're marketing for some high end property - houses that cost multi-millions then it's up to them to negotiate with the owners for higher commission if their marketing cost is higher. For those houses that I sold, the agent that earned tens of thousands from me did not pay much out of their own pockets. I paid for the painting, remodeling, landscaping, staging - all these just made their job easier. The listing agent only paid for the inspection report, do a comp and listed the house on MLS which by the way I found out you can pay a few hundreds just to list it on MLS as well as some local real estate magazines and newsletters. They had a few open house, most of the time, it's hosted by other agents in their office, that way, if there's a potential buyer that walkin without an agent, the hosting agent can conveniently represent the buyer. In the good time, a house in reasonable condition sells itself. In the bad time, the agent will tell you that it's tough out there and the seller has to be realistic and the only strategy is to lower the price. We in the bayarea are always in the forefront of being innovative but I did not see much of that in the real estate agents. The Zillow and Trulia are set up by techies and not real estate agents. Yes, I'm mad that the barrier to enter the real estate business is so low that it sucks to deal with some inexperience and unethical real estate agents, same thing goes for the unethical loan brokers and home inspectors. It's time we consumers got bill out from these suckers who together help creates some of the housing mess we're in today. Looks like I should start a new thread of discussion on what's a fair compensation to real estate agents in the bayarea? The effort to sell a $200,000 single family home in Austin, Texas VS selling a $1,200,000 in Cupertino, CA is not so different - the compensation should tie more to the effort and less to the price of the house. Even if adjusted for the cost of living, a job in Texas that earns $50,000 a year, in bayarea, it probably earns $60,000 but definitely not $300,000.
0 votes Thank Flag Link Sat May 9, 2009
Matt, please don't put words in my mouth. I don't know that is a rare situation, but if it were that's still not the point. I do know that you appear keen to create the perception that it is against the seller's interest to do deals with a buyer who is not interested in a full 3% of his money going to pay his own agent to drive him around in a nice car. I don't agree with that view -- it just obstructs deals and increases transactions costs to the benefit of agents and detriment of both sellers and buyers.

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.
0 votes Thank Flag Link Sat May 9, 2009
Alsolooking,

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.
0 votes Thank Flag Link Fri May 8, 2009
No Matt, I didn't misinterpret your response. Again, I'm not faulting you or anyone from trying to make a buck --you're not a charity. And it is natural that you want to preserve the old school 6% commission structure by convincing others (and perhaps yourself) that there are problems with structuring a transaction so that the buyer gets a refund out of the purchase price via a lower effective commission for the buyer's agent. You make it sound as if you're trying to protect the interest of the seller because "it will end up being the seller who pays the bill," when in fact money is fungible and it is simple to structure the deal so that the 6% bill itself is smaller because the buyer's agent gets less. That way the buyer pays less, the seller gets his price, and the deal gets done.

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."
0 votes Thank Flag Link Thu May 7, 2009
You are wrong Matthew. The seller already is obligated to part with a 6% commission. Nothing changed in his return from the sale. The amount is coming from the total pool allocated to the agents.
0 votes Thank Flag Link Tue May 5, 2009
FYI, I was recently involved in the purchase of a block sale of distressed condos in miami. We hired a law firm to represent us received back higher than 3% commision rebate from multiple listing agents. The developers were more than happy to oblige.

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.
0 votes Thank Flag Link Mon May 4, 2009
I think I found Dave Walker's realtor: http://www.condohouse.com/davidlwalker.html
0 votes Thank Flag Link Fri May 1, 2009
Dave walker, I'll be interested in your realtor too. can you pls tell his name/contact (in an email to hikelifeAT gmail DOT com) thanks!!
0 votes Thank Flag Link Fri May 1, 2009
OK Dave Walker, you've sold me on your Realtor. Do tell, who is it?
0 votes Thank Flag Link Tue Apr 28, 2009
Gayle,

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.
0 votes Thank Flag Link Tue Apr 28, 2009
Hi Gayle,

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.

Good Luck,

John Barman
Coldwell Banker
0 votes Thank Flag Link Thu Apr 23, 2009
As you can see, most agents agree that a dual agenecy isn't in your best interest. A relationship with an agent is built on trust and an agent trying to honestly do both sides of a deal puts themselve in a difficult position. One thing goes wrong and you are going to feel the agent wasn't protecting you. It is human nature.
0 votes Thank Flag Link Thu Apr 23, 2009
Gayle,
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.

Marcy
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Thu Apr 23, 2009
To answer your question; you do not have to have an agent for any part of a Real Estate Transaction. If you believe you know all that's needed then feel free to represent yourself.
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.
Bill
0 votes Thank Flag Link Thu Apr 23, 2009
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