Some consumers want to work with the seller’s Realtor because they believe that Realtor will reduce his/her commission if they don’t have to split the commission with a buyer’s Realtor. This thought process continues: a smaller commission reduces the seller’s cost to sell and effectively lowers the buyer’s purchase price.
There are a couple of holes in that theory.
First, the sellers and their Realtor signed a contract agreeing to the Realtor commission before the house was listed for sale. The standard-form listing contract used in the Greater Phoenix area doesn’t say the commission is dependent in any way on whether 1 or 2 Realtors are involved. That language can be added to the listing contract by the seller & their Realtor but it’s not standard and it’s not required.
As an aside, buyers who expect the seller’s Realtor to reduce their commission because the buyer doesn’t have a Realtor are effectively asking a complete stranger to take a pay cut after half the job is complete. And it’s not “only 1%”. If the commission is 5% of the sale price, a 1% commission reduction is a 20% pay cut. (1/5th = 20%)
Second, buyers who work with the seller’s Realtor are actually getting limited representation in their purchase. The seller’s Realtor still owes the seller the duty of getting the highest and best price for the home.
Our broker, Jay Thompson of the PhoenixRealEstateGuy.com, wrote a really eloquent blog post explaining why the “I’ll save money by working with the seller’s Realtor” logic is as holey as Swiss cheese. He breaks it down into dollars and cents. And sense.
I’ll just say this: if you end up in divorce court and your ex hires a high-powered lawyer, you’d get yourself a lawyer too wouldn’t you? Sure, not hiring your own lawyer might save you some money. But you’d be on your own in divorce court and you could end up like a bad country song: “I lost my house, my spouse, my truck, my shirt and even my old sad, tired dog in the divorce. . . .”
Heather Barr is a Realtor and a happy workaholic. She eats more than someone her size ought to be able, and is a runner as a consequence. Her TiVo's full of spy thrillers, police procedurals and Whedonesque sci-fi.
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I have to agree that this strategy is less then perfect, but most people don’t buy many homes in their lifetime and don’t see it the way agents do. They have found something they like and say “heck, I’ll buy it!”
If they can make the decision then it is the agent’s job to write up the contract and get their signature on it. If they haggle with you then say “no” to them and “initial here, here and sign there.”
Great point, John. I know for a fact this has happened in the condos where I live. From Fall 2009 to now, the selling price for 2-bedroom condos has been averaging $130,000. Recently, two more 2-bedroom units sold for $146,900 and $155,000. In both cases a single Realtor represented both buyers and sellers. Those buyers paid 12% to 16% more than the last few buyers. Talk about overpaying!
Occasionally, I’ll get a question about why a home sold for so much. (The price paid was high.) When I used to look into such things, it turned out that about half the time the buyer’s agent was also the seller’s agent. I can imagine a prospective buyer walking into an open house, loving the home and the seller’s agent telling them that he (the agent) would give the buyer 1% of his commission if he (the buyer) used him as his agent. The buyer thinks he is clever and making 1% on the sale price but in reality the buyer is paying far more than 1% more than the market price for the home because the agent won’t advise him that the home is way overpriced.
Heather, whenever you find a home that sold for an unusually high price, check for a dual agent. See if your experience matches mine.
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