Monday, July 3, 2017
Be your own agent
What I'm about to write about would be considered heresy by some real estate agents, but I'm not one to just go with the flow. When buying a house, you can save 2-3% by forgoing what is known as a buyer's agent, and dealing with the listing agent directly. You'll probably have a smoother purchase process too.
In the US and Canada, depending on the market you live in, commissions paid to a buyer's agent are often 2-3% of the sale price. Unscrupulous people in real estate will claim the buyer does not pay those commissions, but ultimately they do. When working directly with a buyer, most listing (seller's) agents will discount some or all of the buyer's agent commission, which reduces the price you pay for the house.
Decades ago it was necessary to have a buyer's agent because they had access to the real estate listings. Now most buyers find the properties they are interested in on their own, and only use an agent for viewing the property and as an intermediary in the purchase negotiation. The listing agent is actually the best person to show the property, since they know the property from preparing the listing. Having one less cog in the wheel also makes the process run smoother, and can even make the difference between getting the property you want and missing out. When you have a buyer's agent, your interest in making an offer may not get communicated to the listing agent for several hours, and if another offer was accepted or countered during that time, you could loose the opportunity to purchase the house.
Some jurisdictions still allow dual agency, where one agent acts for the seller and the buyer, and collects the full commission. So when you contact the listing agent, tell them you want to work without anyone acting as your agent. In Nova Scotia, the legal term is that you are working as a "customer" and would sign a "buyer customer status acknowledgement". People in the industry may try to scare you by pointing out that you don't have someone legally required to put your interests first, but you are still legally protected. Due to both professional standards for licensed agents and laws regarding fraudulent sales, the listing agent has to tell you all the details of the property, both good and bad.
Before asking to see a property, one of the first things you should ask the listing agent is the commission "to the street", so you know how much would be going to a buyer's agent if you had one. Then ask if they cut their commission to the seller by that amount if you don't have an agent. I questioned five agents in my area, and three were willing to work directly with a buyer while cutting the full 2.5% commission off the purchase price. One agent was willing to work directly with a buyer but would not confirm if they would forgo the 2.5%. The fifth said they were not comfortable working directly with a buyer, and so would require them to have their own agent.
So while being your own agent may not be an option all the time, when you can save 2-3%, I think it is worth trying. Good luck on your next real estate purchase!