Q: I am a Buyer and I’ve been working with a Realtor who’s shown me a few homes. I saw a house today that’s not even on the market yet but had a sign out front. Shouldn’t I just call the Listing Agent to see it? Won’t I get a better deal by going through them anyway?
A: No, and definitely not.
Think of it this way. Let’s say you are a business person and you are working on a very complex business deal, having your attorney review every document, every contract, to make sure you get a fair shake. Of course, the other party on the other side of the deal has his own attorney reviewing everything too. This way the two sides negotiate and the attorney’s make sure their client’s best interests are protected.
I’m not saying I’m an attorney, but I am an expert when it comes to real estate, and my job if I represent you as your buyer’s agent is to make sure you don’t get taken advantage of by the other side. And after all, for most people, their home is their biggest asset and worthy of protection – so shouldn’t you do it right? This is, after all, a major business transaction.
If the listing agent shows you the home, they become what is called the “procuring cause” in real estate – meaning they are entitled to the commission on both the buyer’s and seller’s side. The Seller typically pays the commission in a real estate transaction.
Let’s say the commission agreed upon was 6% between the Seller and the listing agent. In a normal sale, a buyer’s agent may bring a buyer to see a home, and the buyer’s agent and the seller’s agent split the 6% commission, so it’s 3% to each agent if they write a contract and the house sells. But if you as the buyer go directly to the listing agent – guess what – he or she gets the whole 6%. Don’t you think that agent is then going to do whatever it takes to keep the deal going strong because they are earning a double commission? Your interests be damned – they’ve got their own interests! And they represented the Seller first, so guess who’s side they are really on? Yep, not yours… They want to get the most money possible for their Seller.
Okay maybe I’m being a little dramatic here – not all real estate agents behave in this way. I have certainly had listings where I also had the buyer’s side, but I always try to be fair to all parties involved. I like to think of myself as one of the good eggs out there.
I recently ran into a situation like this: I was working with a Buyer and she went to see an unlisted house without me that had a “Coming Soon” sign in front (tsk, tsk). She ended up writing a full priced offer through the listing agent. Do you think that listing agent reviewed area comparable sales with her to see if that offer price was fair? Uh, no. Of course not. The agent knew my client been working with a Realtor too (tsk tsk) but because the Buyer didn’t press the issue, they didn’t involve me to write up the offer to the Seller.
Finally once my Buyer told me and I reviewed the (full priced!) offer they had written, I could see it was totally one-sided and in the Seller’s best interest, not the Buyer’s. But because she didn’t press the issue that I was her Buyer’s agent (she didn’t really think it mattered – it does matter!), I am no longer able to help because the offer had already been written and of course the Listing Agent wouldn’t allow me to take half her commission at that point and come in and represent the Buyer. I’m not sure at this point how it’s going to turn out, but I’m confident I could have written a much more solid contract for her that protected her interests better – and it would have been free to her as the buyer since the listing agent would have had to split the commission. But she was a first-time homebuyer and said she didn’t know any better.
Another thing to consider when you use the same agent to represent both the buyer and the seller. They become what is known as a Transaction Broker. And the biggest difference between a Transaction Broker and a Single Agent Broker, per the State of Florida, is limited confidentiality. What that means is if you are the buyer, and let’s say the house is $200,000. You want to offer $180,000 and tell the listing agent (who is also representing you ) to put in the offer to the Seller, but that you’d really come up to $195,000 if the Seller should object to the lower offer. The listing agent could very well go to the Seller and say “Here’s the buyer’s offer of $180,000, but I know he’ll come up to $195,000”. Um, hello? You aren’t supposed to TELL the Seller that. But as a transaction broker there is limited confidentiality…so watch out. Again, I don’t do this… It has and will land agents in hot water, but I’ve seen it happen to buyers before. Buyer beware, as they say…
How To Protect Yourself as a Buyer
Has your buyer’s agent ever asked you to sign something called a “Buyer’s Brokerage Agreement”? No? Well don’t be surprised if they do, or you might even ask yours for one. It will protect both you and the buyer’s agent should you want to look at For Sale By Owner properties, unlisted properties, and properties in the MLS by clearly defining your relationship for a specified period of time.
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