Report #4
Should a Buyer Deal Directly with the Seller’s Agent?
Will this really save some commission dollars for you?
An Agent contacts you with information about a home, which is for sale. You check out the home, but discover it is listed with a different Agent. You know there will be two commissions involved: one paid to the Agent who brought you the deal (called the Buyer’s Agent) and one paid to the Agent who is selling the property (called the Seller’s Agent). If you contact the Selling Agent directly and bypass the Agent who brought you the deal, can you save some commission dollars and thus reduce the cost of the property?
There are actually two questions here, so here are the two answers:
(1) You may bypass an Agent who brings you a deal, if you have not signed a Procurement Agreement by which you agree to appoint that Agent to find a property for you. If you do buy a property, which he has brought to you, you will owe him a commission even if you didn’t utilize his services in the purchase of that property.
(2) If you have not signed any agreements with him, you may legally bypass his services. You probably will save some money, but not as much as you might think and almost never 50% of the commission. Remember, there is now only one Agent and he will want to be compensated for doing the work of two Agents. For a 6% commission, you may receive a 1% to 2% discount, but not the full 3%. A 5% commission has even less wiggle room, so you’ll likely end up with about a 1% to 1½ % savings.
Go directly Seller’s Agent because he knows the most about a property
The Seller’s Agent should know both the full history and background of a property, the Seller’s motivation and usually their bottom line price. So the assumption is, that a smart Buyer should bypass any other Agents and take the inside track straight to the source of the most accurate information.
But like many assumptions folks make, things don’t really work that way in real life. You won’t get better or more information by going directly to the Seller’s Agent because both the Seller’s Agent and the Seller himself, are required by law to reveal everything they know or even suspect about the physical condition of a property that might have any effect on a Buyer’s decision to purchase the property.
In fact, there is a specific clause within the California Purchase Agreement which states that: “Seller shall….DISCLOSE KNOWN MATERIAL FACTS AND DEFECTS affecting the Property, including known insurance claims within the past five years...” The Seller’s Agent is also required to perform a visual inspection and report his findings back to the Buyer. If that were not sufficient, there is a 12 page document titled the “Statewide Buyer and Seller Advisory” which contains 53 paragraphs of mandatory disclosures from the Seller to the Buyer, so going directly to the Seller's Agent won't create any advantages for a Buyer in this area.
What is the downside of not using a Buyer’s Agent?
(1) The Conflict of Interest. How can an Agent protect the interests of his Seller who wants to sell for the highest price and you, the Buyer who wants to buy for the lowest price? That is the dictionary’s definition of “conflict of interest”. Yet by California law, this Agent must now represent both the Buyer and the Seller’s best interests during contract negotiations and that can often lead to a nasty conflict of interest. While “Dual Agency” is not illegal, it doesn’t occur very often because the California Association of Realtors discourages this practice. In fact, it’s such a heavily litigated area of law that it is illegal in eight states. You might want to Google “Dual Agency” for further guidance.
(2) Will You Get a Lower Price for this Home? The Seller’s Agent certainly has an idea of what the Seller’s lowest price may be, but he will never tell you. He is bound by law to get the highest possible price for his client, so don’t expect him to help you negotiate your price (and his commission), down.
(3) How do You Know that this Home is Fairly Priced? You are dealing with the Agent who actually set the price. Having a knowledgeable Agent to assist and guide negotiations will assure that you paid the fair market value for this house and not some inflated valuation arbitrarily set by the Seller’s Agent.
(4) Do You Know What You’re Doing? Are you capable of understanding and being involved with multiple counter offers? Do you have the experience and sophistication necessary to deal with the highly complicated 20+ legal sized pages of the Residential Purchase Agreement and a dozen other associated documents? Can you navigate the minefield of contingencies, notifications and disclosures and comprehend the nuances of the “legalese” in which everything is written?
(5) How do You Know this is the Right Home for You? Might it not be better to partner with your own Agent who will help you to understand what you both need and can afford? With over 120 specific attributes to be included (or eliminated), he can create a custom search for any property in any area or zip code or price range. Need a single story Colonial, in a 5 star school district, west-facing views, with a pool, RV parking and a 15 minutes commute to downtown? He can find it for you….if it exists. Your own Agent will work for you exclusively and his first duty is to fairly and honestly protect yourinterests.
Involving yourself in a Deal in which the Other Party has an Agent and You Don’t, Is Like Asking a Future Spouse to Draw up your Pre-nuptial Agreement.
They say that a lawyer who represents himself has a fool for a client, so how does representing yourself as a Buyer make you any different from such a lawyer? California law is very clear: the Seller’s Agent has “primary fiduciary responsibility” to the Seller and the Buyer’s Agent has “primary fiduciary responsibility” to the Buyer. In reality, each party really needs a knowledgeable professional standing beside them, guiding and protecting their interests. A plan to bypass professional representation may indeed save you some money up front, but it could also end up costing you a lot more in confusion, misunderstandings and time.
Coldwell Banker is the Largest and the
Most Trusted Real Estate Company in America
(1) Ethisphere is a consumer watchdog group that tracks the corporate behavior of major companies and examines and analyzes how they conduct business and interact with the public. They designated Coldwell Banker as the Most Ethical Real Estate Company in America, for the last 6 consecutive years. You may verify this at www.ethisphere.com.
(2) For the 21st year in a row, Coldwell Banker is again ranked the #1 Residential Real Estate Brokerage in the nation in both sales volume and number of homes sold, by REAL Trends 500. You may go to https://www.realtrends.com/top-10-real-trends-500-volume-2018 to download the full report.
(3) It is no accident that Coldwell Banker has consistently out performed all other Real Estate Companies for the past 21 straight years. Americans love to root for the “little guy” and if that’s what you like, more power to you. But if you’re really serious about selling your home or finding just the right one, it might be a good idea to consider a partnership with the one company which has both the very best reputation and the very best sales record.
I have been a California Broker for over 30 years. You may check any Realtor’s records by entering their license number at www2.dre.ca.gov/PublicASP/pplinfo.asp. My License Number is 00904384.
I would love to show you what amazing resources the largest Real Estate Company in the World has to put at your disposal! Please visit my website www.jimmoranbrokerage.com.