However, you are forgetting that when a house is listed with an agent (sellers agent), they usually have an agreement that each a sellers agent and a buyers agent will get 3% commission. You are trying to get rid of the buyers agent to save extra 3% to the sellers (and thus reduce the price for yourself). However, most often the sellers agent wouldl then try to KEEP entire 6% of the commission for writing you an offer (dual representation). That way you are not winning at all.
The best solution is to do your research but find an agent to write you an offer. Have an agreement with her that she will rebate you a percentage of her commission at closing. So if she gets 3% on a 500K house, you will get 5K for using her, and that way you will have someone who will be liable in case there is an issue and the agent did not do her job properly.
If your supposition were true (the buyer is paying the real estate agent since the seller receives money net of the real estate commission), then the following must also be true:
The buyer is paying off the seller's mortgage(s).
The buyer is paying the seller's transaction taxes.
The buyer is paying the seller's property taxes up to the day of the sale as well as the property taxes after taking possession.
The buyer is paying for all improvements the seller has ever made to the home.
The buyer is paying for all repairs ever made to the home.
The buyer is paying for the seller's increase in asset value.
The buyer is paying for the seller's original construction costs.
Isolating the real estate commission as an added expense to the transaction, while ignoring all of the other costs the seller has elected to incur since the home was built, is faulty logic.
If the supposition that a real estate commission increases the cost of the home to the borrower is true, then all expenses born by the seller in the trasaction as well as all construction, repairs, and improvements have likewise increased the cost of the home to the buyer.
The logic of the supposition breaks down when ALL costs born by the seller that result from the sale of the home are deducted from the seller's gross proceeds because once those costs are deducted, the only thing left is the seller's cost of the original unimproved lot.
In other words, you're expecting the seller to offer the home for exactly what he or she paid for the vacant lot since the decision by the seller to incur mortgage debt, build a house, improve a house, repair a house, and hire a sales professional to sell the house have all contributed to the difference between the original cost of the lot and the price you have negotiated with the seller.
The obverse of your supposition would also then be true: If the elimination of the real estate commission results in the ability of the seller to accept a lower price, then the elimination of the seller's other elective decisions: to build, to borrow, to improve, and to repair would result in a further price reduction back to the original price paid by the seller for the vacant lot.
I don't know about you, but I wouldn't want to participate in a market in which sellers would be required to give away all improvements of a vacant lot to a buyer becuase the buyer felt that the seller shouldn't recover costs to build and improve, costs to borrow, and costs to sell.
But then again, I will gladly purchase any house you have to sell for exactly what the orginal lot cost you, since your decision to build, borrow, improve (and perhaps hire a real estate agent to sell) resulted in you trying to collect a higher price from me as a result of those decisions, and by your supposotion I shouldn't pay for those decisions.
I'm not trying to annoy... I just can't fathom the argument that the decision of a seller to hire a professional to sell a home is somehow detrimental to the buyer since the logic of such a supposition is so obviously flawed.
I like the comment Amanda made about hiring an expert. I don't do my own taxes, because I don't know all the laws and would certainly miss deductions that I didn't know I could take, so why not leave it to the experts!
Most homes on the market are sold using agents so the fee is built into the market. Just because a home is for slae by owner, doesn't mean you get a price reduction - the seller makes the money.
And just because you work with the listing agent, doesn't mean you get a huge price reduction (50% of the total commission). The listing agent has an agreement with the seller for a certain commission and perhaps they'll give you some sort of a deal but what you miss out on is all the advice, the guidance and the experience of a real buyers agent which can ultimately cost you more than what you saved.
In a market this tough, it doesn't make much sense to try to sell your house by yourself, then make 10% less than you would by using a Realtor. Also, when your house is listed, you have 100's or thousands of Realtors helping to sell the home. If you list it yourself, there is one person trying to sell it. You. Some people win the lottery I guess........
Agents are here to professionally help you make one of the biggest purchases you'll make in your lifetime. We take pride in what we do and we continuously are educated to make sure we have the best knowledge to represent you.
The sellers agree to what the amount of commission at the time the listing is taken and therefore agree to pay (out of their share) the commission. That is why many of the agents here are saying it is free to the buyer.
I have seen too many cases where people purchased directly from a seller and overpaid for the homes they bought. When they turned around and tried to sell they were double-hit by the initial overpayment and the declining market values.
With that said, by having an agent represent you as a buyer, you are having a professional representing your best interest to avoid such a scenario. A good agent will find properties that should appeal to you and meet your needs, will do a price comparison to determine if the home you like is worth the asking price, will advise you and recommend a realistic starting offer, negotiate the best deal on your behalf, will re-negotiate over any home inspection issues, and can assist you in finding reputable lenders, home repair specialists, movers, etc.
Many buyers refer to various websites to see what homes sold for thinking that will give them a good idea of home values. What they don't see is the fact that the sale included a significant credit refunded to the buyer to offset the buyer's closing costs quite often padding the purchase price by thousands of dollars.
In Connecticut's statewide MLS system, any credit given is to be noted in the information in the system at the time the listing is closed out. Even if the listing agent fails to enter this information, an experienced agent should be able to tell if a credit was most likely included in the purchase price recorded.
So, unless you see a home truly priced low for the local market and the home's condition it's safe to assume the home is no bargain. Even if you continue to believe you are paying the commission, you shouldn't underestimate the value of the services a good Realtor provides for your protection.
If you do your own research online, and can get to open houses on your own, I highly recommend doing what I did to save some money. It is also really nice to get cash at the end of the transaction to help with moving expenses , setting up a new house, etc. All that stuff adds up on TOP of your down payment and closing costs, which in this market, you should have the seller covering your closing costs.
When I sold the place, I used an aquaintance I trusted who was a local real estate agent, our dog walker, and lived she on our street so it was easy for her to show our house at a moments notice. We used a 4% commission again, but this time, the buyers agent got a 1/2 percent higher commission, which looking back was unneccessary. We were fortunate our place sold in 1 week, but that was Jan of 07 right before things started to crumble, and our home was located in a very desirable westside LA beach community.
Thanks for the dialogue...
How accurate do you think the seller will price the home without an agent? If they use Zillow, it might be overpriced by $50,000. Then you would check Zillow since you like to do it your self and you would come up with the same wrong price. Then you get an appraisal and find out its 50,000 less the seller says he won't sell for that amount, get a better appraiser or the deal is off
Besides the fact that the seller is doing it himself to avoid all of the disclosures those RE agents use, it would be bad if he had to disclose that there is a sinkhole, how can you market a sinkhole..
So you buy the house it falls in a sinkhole...How much have you saved...LOL...LMAO
See Video San Francisco House Collapses Into Sink Hole @ Yahoo! Video
Ok, so lets say the seller listed with an Agent at 4%. The Listing Agent will give the buyers agent 2-3% for bringing the buyer (the agent who actually sells the house). However, if a buyer comes unrepresented, the listing agent may keep the full 4%. Either way the seller will pay the 4% and net the same amount.
At the end of the day, the seller needs to find that perfect buyer who loves the property the most. And you usually don't find that buyer without a large pool of buyers from the MLS, Realtor.com and offering a buyers agent a commission.
The seller gets $500,000 from you... pays the bank $600,000 and then pays his agent $25,000.
now, without any derogatory comments about how "stupid" the seller might be... who's paying the commission then?