Not using a buyer's agent in this market

[picchu]

I read this suggestion in another thread. Could someone elaborate on why one would be advised not to have a buyer's agent? Wouldn't a buyer's agent be able to give us comparable listings if we were interested in a house? Would a seller's agent be willing to do this for us as a buyer?

 

[alafleur]

Hi Picchu, Welcome to the forum.

The basic principle here is that on most real estate transactions there are two agents: 1 representing the buyer and 1 the seller. As a buyer, some folks believe that it is a good idea to not hire yourself and agent and to simply find the property you wish to buy on your own, then approach the seller's agent directly and submit an offer through them. In this case one agent would represent both the buyer and seller. Proponents of this theory feel that by cutting out one of the agents from the equation, there will be more flexibility on the selling price because 1 agent= 1 commission fee.

In my own (admittedly) biased opinion, this route is filled with potential pitfalls and risks and it is almost never advisable to purchase real estate without having your own buyer's agent working exclusively for you.

 

[Observer Walt]

Your question was, *could* you work without a buyer's agent. Yes you could. People do it regularly.

Is it a good idea? Emphatically, no. As a buyer, get your own agent. Why rely on some agent who you almost certainly don't know, expecting that person to represent your interests equally with those of the seller?

Does a seller's agent want to sell you the best property for you, regardless of who has it listed, or does he want to sell you his listing? I know what the answer would be, at least four times out of five.

 

[simuls]

Is it a good idea? Emphatically, no. As a buyer, get your own agent. Why rely on some agent who you almost certainly don't know, expecting that person to represent your interests equally with those of the seller?

The idea behind NOT having a buyer's agent represent you isn't to let the seller's agent represent you, that would be ludicrous. The idea is that no one, but you (the buyer) knows exactly what you want and only you can represent yourself effectively because there's no conflict of interest whereas there is in sharing a commission.

There is a cost associated with having a buyers agent, even if it seems like their service is free, as they split the commission with the seller's agent. Because of this relationship, the buyer's agent is in no way more loyal than the seller's - it's a mutually beneficial relationship for the agents - not the sellers and buyers. If you represent/educate yourself, and have a good real estate lawyer, you should be able to negotiate a lower selling price because the seller's agent doesn't have to split the commission.

eg. $300 000 sale, 5% commission = $15 000/2 or $7500 per agent and $285 000 for the seller

or

$295 000 sale (decrease of $5000 for buyer), negotiate a lower commission of say 3% = $8850 commission to single agent (increase of $1350) and $286 150 for the seller (increase of $1150). Win/win/win.

All properties are available for view on MLS unless they're private sale (in which case you still have the same availability as the agent), so unless you're looking for something tremendously specific, then do it yourself...unless your time is worth more than the cost difference - which it might be for some.

 

[whatever]

I went through a buyer's agent for my last purchase and found it so aggravating and so expensive that I doubt I'll repeat the experience. The agents are trying to serve so many people and so quickly that I found they really didn't care and didn't listen to anything we had to say, instead trying to get us to look way outside our price range (which makes sense, since their commission comes off the purchase price) at condos that didn't even suit our needs.

In the end we found three condos we liked, on our own off of MLS, and just used our agent to get us in to have a look. I let them handle the negotiation for our purchase, which was a huge mistake (again, why would they want to bring the purchase price down? It's money out of their pocket), but when it came time to sell I handled the negotiation myself (I stupidly asked my agent to handle my listing when I sold) and came out $10k ahead of what they said I could get.

The next time around I'm pretty confident that I'll go the private sale route, for both ends of the transaction. Lawyers are going to be involved regardless, and at the end of the day they're the ones that really protect you, not the agents. But then that's my experience, I'm sure many others will disagree

 

[simuls]

I've had several friends go the private sale route (both selling and buying) - even very recently - and they've always been very pleased with the outcome vs. using an agent.

I do think that this will become more the norm over the coming years as buyers and sellers are increasingly educated about the market. Although a flat fee agent might make sense too.

 

[picchu]

Thanks for your thoughts so far. We've already pinpointed the area that we want to buy and lucky for us, houses don't sell quickly there so we're always able to see them on MLS.

My thinking in not using a buyer's agent was to save money. The calculation you posted, simlus, is exactly what we were thinking.

So if we decided not to go the route of a buyer's agent, then we should just make sure we have a good real estate lawyer, right?

 

[simuls]

Right.

 

[cabbagetowner]

go dual agency

 

[cdr108]

go dual agency

^^^
use that as negotiation for lower price since the agent would be double ending the commission.
i say this bc you will want to know comparables sales, etc which you won't have easy access to without MLS.

 

[dpylyp]

Buyers Agancy and the Buyers Registration System

All properties are available for view on MLS unless they're private sale (in which case you still have the same availability as the agent), so unless you're looking for something tremendously specific, then do it yourself...unless your time is worth more than the cost difference - which it might be for some.

No they are not. Unless you access an agent portable for buyers to look at specific MLS number, or listings to get the address you will not comprehend the difference. Do properties still sell quickly? Yes Choice real estate at the right price does move fast. Why wait for potentially 3 or 4 days for Realtor.ca to upload your selections. With FSBO's there are no provable numbers.

The second point I have a challenge with was Negotiate yourself with the selling Agent .

The Listing Agent has cultivated a relationship with this seller for potentially years if not months prior to listing the home. You as the Buyer now expect him/her to immediately switch hats use everything they know about that [family] and battle to the death for the best price and conceed their commission in the process. Think about that. It is unrealistic.

Another catagory of Buyer pops in here; The percentage discount buyer.
" I got X,000 dollars Off the asking price" So I really got a good deal.

Maybe, Maybe you paid market value.

It could have been a grossly overpriced listing, where the opportunity by time on the market, made the Sellers consider your bid.

The conclusion to all this is the Buyers agency program and yes registration of Buyers. Sellers would then access the pool of purchasers by criteria and contact the listing agent, Hey I have a property that suits.... Vendor just made a huge price adjustment.... My people are moving with job transfer....... I now have the legal means to pass this information to you.

But those playing with concept of going alone.... dealing only with the Listing agents, never truly find the real motivation in a transaction.

Purchasing Agents, digitize documents and records for you, Provide a CMA summary of related purchases for you to ensure comfort and financial soundness of your decision.

Lets tackle the last point. If you were paying cash, yes cash, for a purchase, If you were a business, you would and do sign a purchaser agency agreement because you often take months and years of investigation and touring homes, creating assisting with financing and inspects...

When you are financing your purchase through a mortgage the funds for the selling commission flow through the property seller as disbursements on closing.

 

[cabbagetowner]

No they are not. Unless you access an agent portable for buyers to look at specific MLS number, or listings to get the address you will not comprehend the difference. Do properties still sell quickly? Yes Choice real estate at the right price does move fast. Why wait for potentially 3 or 4 days for Realtor.ca to upload your selections. With FSBO's there are no provable numbers.

The second point I have a challenge with was Negotiate yourself with the selling Agent .

The Listing Agent has cultivated a relationship with this seller for potentially years if not months prior to listing the home. You as the Buyer now expect him/her to immediately switch hats use everything they know about that [family] and battle to the death for the best price and conceed their commission in the process. Think about that. It is unrealistic.

Another catagory of Buyer pops in here; The percentage discount buyer.
" I got X,000 dollars Off the asking price" So I really got a good deal.

Maybe, Maybe you paid market value.

It could have been a grossly overpriced listing, where the opportunity by time on the market, made the Sellers consider your bid.

The conclusion to all this is the Buyers agency program and yes registration of Buyers. Sellers would then access the pool of purchasers by criteria and contact the listing agent, Hey I have a property that suits.... Vendor just made a huge price adjustment.... My people are moving with job transfer....... I now have the legal means to pass this information to you.

But those playing with concept of going alone.... dealing only with the Listing agents, never truly find the real motivation in a transaction.

Purchasing Agents, digitize documents and records for you, Provide a CMA summary of related purchases for you to ensure comfort and financial soundness of your decision.

Lets tackle the last point. If you were paying cash, yes cash, for a purchase, If you were a business, you would and do sign a purchaser agency agreement because you often take months and years of investigation and touring homes, creating assisting with financing and inspects...

When you are financing your purchase through a mortgage the funds for the selling commission flow through the property seller as disbursements on closing.

battle to the death? what a joke I would love to hear of any instances where a buyer's agent did not push them to pay more. Remember the ol' "you've got to put in your very best offer" bit. i've used an agent twice when i first started buying re. i have regretted those decisions to this day. 2.5% for what? for a 500k deal a buyers agent might get 12.5k when the lawyer who closes it, only charges a fraction of that. you need a lawyer, never an agent.

...unless of course if you don't have internet and can't access the realtor site. but if that's the case i'm assuming you can't read this.

 

[Yossi Kaplan MBA]

Why Buyer Agent? Why not?

A Realtor's perspective.

1 - use BA as uninvolved third party who could negotiate for you without being emotionally involved as you will be.

2 - get them to find you insider deals. you'll never hear about them by yourself, you will be paying retail instead.

3 - get them to arrange for clauses in your favour (entry to unit, delayed closing, reduce closing caps, free stuff, etc.)

4 - get them to schedule and book all the appointments and save you time

5 - get them to do the paperwork, including clauses, so you only have to sign. they will also coordinate legal and mortgage referrals.

6 - get them to tell you the history of the area / building you are looking into. chances are they have worked that building before (otherwise you are hiring the wrong person) and they might know a thing or two you want to doscover before purchasing.


Don't use a BA if:

1 - you think you could get the other side to do a multi-representation and still get you a beter deal without putting your own interests on the back burner.

2 - your family is the seller (i.e. you have an "in")

 

[beaconer]

Don't use a buyers agent if you know what you are doing

A buyers agent is not needed if :

-you know what you are doing,
-know the general price range of the area/property and generally follow the market
-you have a pretty specifically defined property you want.
-you generally have bought a property before
-you are fairly good at negotiating

Although it sounds like a steep criteria, it really is not. It basically means that if you have done your homework and are fairly educated, go without the buyers agent.

For a good perspective behind the motivation of most real estate agents, read Freakonomics:

Here is an excerpt of the relevant point:

"In Chapter 2, for example, real estate agents are essentially accused of failing to serve their clients' needs as a result of the incentive structure that prevails. Agents are paid a commission based on the selling price of a house. If an agent holds out for an extra $10,000 on the sale of a $300,000 house, that's a big deal for the seller, but a mere $150 for the agent. As a result, the Steves suggests this incentive structure drives real estate agents to go for churn instead of the highest possible price."

I did not user a buyers agent on my last purchase and saved myself a lot of money, and a lot of hassle dealing with competing offers. here is why.

In my experience, not having a buyers agent gives you a lot of leverage in two ways: commission and offer price.

The sellers agent/broker will usually act as both buyer and selling agent with a negotiable commission usually at 4% (300,000*0.04 = $12,000) instead of 5% (300,000*0.05 = $15,000).

In the situation where you having a buyers agent, the selling agent and buyers agent split $7,500 each in the example.

However, in the situation where the agent/broker acts as both the buyer and the seller, the agent/broker stands to make $12,000, or an added incentive for them of $4500.

Given the above example in Freakonomics, the agent then becomes much more amendable to your offer, since regardless of the offer prices, given now they stand to make higher commissions, they make more money, and are more apt to deal with you.

Either way, the seller has a much more profitable interest to deal with you than a competing offer coming from a buyer with a 'foriegn' buyers agent.

I have not only done this on my last purchase but in a lot of offers leading up to my purchase and in each one found myself with much stronger negotiation power.

You want to really test a buyers agent and see how they are driven by commission rather than your best interest?

Spend three weekends in a row having them show you properties and show some moderate interest, but mention none have yet to really peak your interest. On the 4th weekend, show a little more interest then moderate, and see how strong they push you to buy.

 

[beaconer]

Furthering the example...

Furthering the example of the $300,000 property:


If the seller is listing at $300,000 and actually wants $290,000 as their final offer(listing prices are always inflated), If I came in as a buyer $285,000 without an agent, the listing agent with a 4% commission recieves:

~$11,400

If there was a competing offer, that came in at $290,000 from a buyer with a buyers agent, the selling agent makes (2.5%*290,000):

~$7,250

Now I am not suggesting that both offers would come in at the same time (in this situation the listing agent would have an obligation to take the higher offer on behalf of the client), but I am suggesting that it would serve the selling agents best interest to deal with me without the buyers agent if I make an offer first or in isolation. It would also be in the sellers agent interest to convince their client to take my offer, thereby not serving the sellers best interest.