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Representing Real Estate Buyers Exclusively: The Ultimate Fiduciary

Get Your Own Agent

When you find your dream house on the internet, in a magazine, or if you drive by and see a sign posted in the yard, calling the Listing Agent is not your best move.

Why not? Because at that moment, that Agent works for the Seller, and not for you, and that Agent’s job is to do everything possible to sell that particular house at the highest possible price. Needless to say, that’s what the Seller is paying the Agent to do.

The Seller is promising the Listing Agent a commission to sell the property, and almost always the agreement is that the Seller’s Agent will pay some percentage, often half or more, of that commission to the Agent who represents the Buyer. That offer to the Buyer’s Agent is made through the MLS (Multiple Listing Service) between Brokers. That’s largely what the MLS is for.

What this means for you is that you can have your own Buyer’s Agent, unbiased, completely loyal, uncompromised, and working only for your interests, all paid for by the Seller.

One pervasive yet widely misunderstood notion is that a Buyer can save money by going directly to the listing agent and asking the Agent to “reduce” the commission. This is a great idea– for the Agent. It turns out that when the listing agent “double-ends” the deal, both the Seller and the Buyer lose the unilateral fidelity from the Agent that each would have if represented separately, and the Agent walks away with more money, not less.

The moment that the Listing Agent gets the Buyer as a customer, the Agent effectively doubles the Agent’s own commission, because now there’s no Buyer’s Agent to be paid. If the Agent reduces the overall commission charged to the Seller, the Seller thinks that they are going to get that money, and it’s easy to understand why: The Seller is paying the Agent, and the Agent, by electing to change from being the Seller’s Single Agent to being a “Dual Agent” for both parties, is actually reducing the level of service provided to the Seller from what it was when they negotiated the commission. You can read more about this in the article on Dual Agency here.

In an equitable scenario where the initial negotiations worked out in such a way that the Buyer and Seller split the money “saved” by this “reduction” in commission, and if the Agent knocked an entire percentage point off of the commission, the Buyer would “save” 1/2 of 1% of the purchase price.  Now, one of the great things about our current system of real estate sales is that, because the Seller pays the commission, the commission is part of the purchase price and is thereby financed accordingly. So, if you, the Buyer, are making a 20% down-payment and getting an 80% loan, the breakdown of your “savings” would be that you were able to save .01% of the purchase price in cash at closing (20% of 1/2 of 1%), plus a very small amount of monthly payment, ($18.99 per month on a $750k, 30 year loan at 6%).

That is a potential benefit that you might get from using a Dual Agent. Now let’s look at what you will be losing.

You will lose the guarantee that your agent is completely unbiased when helping you evaluate properties and the standings of those properties within current market conditions. Is this property really worth what the Seller is asking? Can the Seller’s Agent give you an unbiased answer to that all-important question?

You will lose the guarantee that your agent is focused only on your best interests during the inspection period when potential defects of the property are investigated. Will the Seller’s Agent assist and encourage you to dig as deeply as possible into the potential problems with the property?

You will be restricting your Agent’s ability to tell you everything he knows in negotiations, not just once, when negotiating the purchase price, but again after the inspections and investigations are complete and any concessions are to be made by the seller.

If you look at the things the Buyer gives up with dual agency and imagine the potential financial losses that could result from them, do you really think there is a financial advantage to be gained by going directly to the listing agent?

Well, there clearly is one financial advantage, it’s just not yours. If we assume that normally the Listing agent would pay 1/2 of the 5% commission in our hypothetical scenario to the Buyer’s Agent, the Agent’s “reduction” in commission actually works out to be an increase of 60% for the Agent (whose net commission went from 2.5% to 4%), which in the case of a $750,000 purchase translates to an additional $11,250. That’s how much more the Listing agent walks away with as a result of the Dual Agency, while both parties accept less-than-full fidelity from the Agent. It’s simply not a good idea. And it’s not necessary.

Whether you are Buying or Selling, do yourself a favor, and get your own Agent.