Skip the Buyer's agent?

29 Replies

I just received an advice from a friend that says: "The market is too hot, ditch your buyer's agent. Just get a RE attorney to make sure your offer is safe and go to the open houses yourself informing the seller's agent that you're a private buyer not represented by an agent. All the info you need is out there (mls) and run the comps yourself. That will give you a competitive advantage as the seller's agent would probably favor you"

Not the most ethical advice I would say but thought I'll throw it out there and see what the pros think about it.

I have a really good realtor that provides me with a lot of security, info, and works tirelessly to educate me on the process, but I could not help about think about it for a second.

I'm a licensed Realtor/investor in Texas, and I think that if you know what you are doing, and understand contracts and know how to do your own comps, then more power to you. It will be quicker process since you don't have to involve another agent; however, most Realtor would like for you to be represented, sure they like the extra commission, but not the risk of having a customer instead of a client.

There is no ethic issue of skipping the buyer's agent, unless you have solicited his/her service in the deal.

This is possibly the WORST ADVICE EVER!!

Always use a Realtor for the following reasons:

1.) They are FREE to the buyer

2.)They do ALL of the leg work so you can crunch numbers and be the investor

3.)They are so much more knowlegable because they do this every day

Get a good realtor, get 10! BUT NEVER GO IT ALONE!

Unless your selling, then they are too expensive and you can figure that part out on your own! LOL

Cheers!

What exactly is the up-side this "friend" pointed out to ditching your agent?

You will have to pay an attorney out of pocket to cover your interests, whereas a buyer's agent gets paid out of the commission from the sale. The commission does not change whether you have an agent or not, so ditching your agent will not affect how an offer looks to the seller. I don't really see much/any downside to having a buyer's agent unless the market is so hot that the buyer is paying commissions...and even then I think you'd still be paying the 6% to the selling agent instead of 3 to yours and 3 to theirs.

Medium logoMichael Seeker MBA, Renting502 | http://www.Renting502.com | Podcast Guest on Show #94

As @Andrew Nguyen stated, if you are comfortable enough with the process then go for it. As an agent you open yourself up to much more risk by being a dual agent. I know here most brokerages I know will have you represented by another agent in the office versus creating a dual agency situation

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

Your friend is unwise. Open houses are usually held several days after the property is listed on MLS. Why should you have to wait for the open house to inspect the property immediately after being listed and make an offer to pre-empt the competitive offers that result after an open house? How would you do that without a buyers agent to quickly write up an offer for you with electronic contract software? Do you expect the seller agent to really write up an offer for you that is under asking for a property they listed? In a competitive environment, it is that much more essential to have a buyers agent provide property access and draw up contracts quickly so that you can get the jump on the competition because days on market is decreasing in hot markets. It's usually customary for the seller to pay both buyer and seller realtor fees, so you're paying nothing out of pocket for this additional team member that hardly appears to be getting in your way. I'd take this free addition to your team any day as a buyer...

hmmm??

Frankly, this just sounds weird. First, I don't know what your buying strategy is, but most investors aren't buying the types of properties that have "open houses". Second, how are you going to run your mls comps, exactly? Zillow? Trulia? they have some info, sure -- but nothing as up to date (or searchable/sortable/complete) as the actual mls. And third- what is even your financial advantage? The seller is paying the commission anyway (if you go the lawyer route, then you'll be the one paying).

So no, I don't see the advantage, especially since you acknowledge that your agent has been helpful. Now, if you feel your agent isn't being timely with presenting offers and responding to your requests, that's a different issue altogether...

Medium team zen logo vJean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com

Only way you ditch your buyers agent is if you are one. Sellers agent is a different story because you pay for it

I only see one advantage that might not even be there. I'm not sure how the dual agent works but if the seller's agent is fine with just 1/2 the commission by not having an agent as a buyer you could technically save the seller 3% and leaving him with more money. Hi might be more inclined to go with your offer, giving you an advantage in a hot market, r if what I described above is even possible.

People have covered various reasons not to forgo the buyers agent. However, I think your friend is also saying that the Seller's Agent may "sell" your lower offer to the buyer with the idea that he/she could get double commission even though their is a higher offer from somebody else. Obviously that violates their fiduciary duties, so what your friend is recommending is very much illegal. I'd just use your Realtor and let him earn a commission for all the work you've admitted he's done for you. Good luck!

It always gives me a chuckle seeing this residential stuff. Given that 90% of agents do not make it a year in the business and that many buyers are newbies or rusty sellers it's like the wild west.

If you have bought tons of property before and feel that it helps you with the sellers agent to push an offer then it's your choice. If you haven't purchased much than a great broker/agent can be worth their weight in gold.

Just remember to not step over dollars to make pennies.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

In my opinion it is not worth poisoning the relationship for a short-term savings on commissions. Thinking long-term and building your reputation will pay itself back in terms of deal offers and in lots of other ways. Good luck with your decision!

John

@Stefan Ham - yes... the financial advantage is either :

1- seller saves 2-3% from the non existent buyer's agent

or

2- Realtor gets that share and pushes the seller to make my offer more favorable (only works on motivated sellers that are not knowledgeable)

- I can get the MLS access from many realtor websites by subscribing to them (currently subscribed to three and they don't even know me) and I can go to the private showings before the open houses with these. It's not that the seller's agent would mind it.

- Comps are from zillow/redfin/trulia although yes they are time consuming @Jean Bolger are they really not that up to date?

"1- seller saves 2-3% from the non existent buyer's agent"

That's NOT going to happen. The listing agreements generally spell out the listing broker gets ALL the commission except if a broker is on the buyers side and then they agree the co-op will be XX.

A listing broker isn't going to want to deal with a buyer directly when they represent the seller when the buyer is trying junk like asking for a rebate if allowed in that state or saying the seller can take my lower price if you just reduce your overall commission. The listing agent if they are only getting 3% would rather have a buyers agent on that side and let THEM handle the buyer. You do not have to do dual agency and actually dual agency is not allowed in many states. A broker can still make both sides having one person as a client and the other as a customer performing only ministerial acts.

Stuff like that gets your name black marked and good luck on ever finding that many deals again from brokers and agents.

Medium allworldrealtyJoel Owens, All World Realty | [email protected] | 678‑779‑2798 | http://www.AWcommercial.com | Podcast Guest on Show #47

Great input guys and definitely great advice. Like I mentioned , my agent has been awesome and did earn my respect and loyalty. Of course after all the work he's done, I am bound ethically (even if not on paper) to get him his commission. The only day I would think of not using him is when I will get my own license (as mentioned here).

I was just looking to educate myself more on the topic and get your input for the future.

thanks again!

Originally posted by @Georges Arnaout :

- Comps are from zillow/redfin/trulia although yes they are time consuming @Jean Bolger are they really not that up to date?

Oh no!!!

Real estate professionals, including those pesky appraisers that determine the actual value of the property for any lender getting involved use the MLS for comps. If you're using any other source then you might as well post a bunch of numbers on a dartboard and hope the one you hit is within 10-20% of what it actually should be.

Medium logoMichael Seeker MBA, Renting502 | http://www.Renting502.com | Podcast Guest on Show #94

@Georges Arnaout

I think it depends on how savvy you are as an investor. If you know what you are doing then I think it can potentially limit your success by using one dedicated buyers agent. I'm a big believer in relationships and from my single family investing career I stuck with one really great buyers agent for years and years. However the market was different (08-11) and a lot of deals were available to be picked up. I think if you build solid relationships with a lot of agents and build a strong reputation that you can work with a lot of different people on a non-exclusive basis. Having access to the MLS can help with scouting and comping deals though (so figure that in somewhere). I know of an investor that just calls sellers agents all day long looking for deals and has great success. It also depends on how much time you have...if you want to be the one scouting all available MLS deals then I think that can replace some of the responsibility of the buyers agent. If you don't have time then a great buyers agent can be worth their weight in gold.

If you are a rehabber a good plan can be promising the sellers agent the retail listing after rehab on any deals they bring you to buy. If you get connected with the right agents this can be a good strategy.

On commercial and larger multi-families I don't really see active investors giving any broker exclusivity.

The buyers agents have the access you need to know of the listing especially real time but on the other hand most listing agents will do what they need to do to get both sides of the commission. If I wasn't an agent I would work with an investor wise agent that would give up his commission to the listing agent and I would pay my agent myself out of my pocket to ensure I get the deal. If I stand to make $75,000-$150,000 on a property on a flip or over a long term hold the more important part of the process is securing the deal not the $2500 I would pay my agent out of pocket for.

This isn't a common practice where I am from but if I didn't/couldn't have my real estate license I want the good agent on my side to make sure I see the deals and benefit from his access and then pay him separate out of my pocket to make sure the listing agent is motivated to secure the deal.

Medium untitledMark Ainley, GC Realty & Development LLC | [email protected] | 630‑587‑7400 | http://www.gcrealtyinvestments.com | Podcast Guest on Show #72

If you aren't experienced or confident enough to write up your own offers without an agent, I'd strongly recommend you use the agent that you admit has been giving you good service. If you really want to save the commission, get your own license. I was tired of waiting for an agent to be able to see new listings and tired of helping them get the paperwork right so I got my own license. Now I don't have to wait for anyone to see a new listing and I can write up an offer anytime and execute everything with electronic signatures so I don't have to print or scan anything. Waiting for open houses is not something I'd ever want to do.

So there are several issues to address:

1) You said your agent has done good work for you and has helped you a lot. This should answer the question.

2) Even if they sucked do you have an exclusive buyer agent agreement with them? If so you better get them to terminate it before doing something like that. You very well might need to pay them the commission anyway.

3) I will disagree with the whole "They are free" stuff. They aren't. The seller has to pay the commission which means they need to sell at a higher price to net the same amount. Now they agree to pay a commission to their listing Broker so they are entitled to the full commission if there is no buyer agent. However the situation presented is a legit way to gain some flexibility and most favored status with the listing agent. While they will never just give back half the commission since there wasn't another agent they might kick something back. They also might recommend your offer over another if they are the same price. They also might combine these 2 aspects. For example say you make an offer of $415K on a duplex with the listing agent and they also get another offer of $420K from someone with a buyers agent. Lets assume that all the other terms are basically the same as well. So on your offer the seller would net if it was a 6% commission:

$415K * 0.94% = $390.1K

and for the other

$420K * 0.94% = $394.8K

So you clearly lost by $4.7K. However on the $420K offer the agent is getting $25.2K/2 = $12.6K while on yours they would have gotten a straight $24.9K.

Mr. agent being human could go to the sellers and say that they recommended taking the slightly lower offer but they will kick back $4,900 to get them to net an even $395K which is more than the other offer. Mr. Agent now is in line to get a $20K commission vs. the $12.6K while getting their client a higher net. They also now will be communicating with the buyers lender directly, they will be talking with their attorney directly and will help them select the home inspector and all that stuff making it more likely for it to be a smooth transaction with the one less person to deal with. That is a WIN, WIN, WIN for the buyer, seller and agent.

Now admittedly the stars have to align pretty well for this to come up (Doesn't take to much bigger of a discrepancy for the kickback to not be worth it for the agent to do the extra work) but there IS some added flexibility with less people at the till.

However since it is unlikely it will work out like this keep the agent if you think they have done a good job and you need some guidance still.

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | Podcast Guest on Show #43

Thanks guys. I really appreciate all the valuable input.

On another note, is it considered unethical to have multiple buyer's agents? As you know I am just making sure (since I am a newbie) that I am not breaking any regulations or etiquettes here. And my question assumes that I did not sign an exclusivity doc with my current agent...

thanks

Originally posted by @Georges Arnaout :
Thanks guys. I really appreciate all the valuable input.

On another note, is it considered unethical to have multiple buyer's agents? As you know I am just making sure (since I am a newbie) that I am not breaking any regulations or etiquettes here. And my question assumes that I did not sign an exclusivity doc with my current agent...

thanks

If you don't have an exclusivity agreement there is no reason you can't work with as many agents as you want.

I would say if you are focusing on one purchase right now in a particular area that you current one knows well I would not solicit others if you are happy with this one.

However if you are looking for consistent dealflow and have a larger area you working in then work with lots of them. Thinking being they will send you prospects and you prescreen them and only go see ones that have potential so nobody is wasting the others time.

Medium rre logo web rgb w motoShaun Reilly MBA, Reilly Real Estate, LLC | [email protected] | 1‑800‑774‑0737 | http://www.MassHomeSale.com | Podcast Guest on Show #43

Just because you say you are private and not represented doesn't mean that you aren't represented. To my way of thinking you are just being represented by the seller's agent. And yes; it would be human nature to want to have both quarters of the commission instead of just one quarter - but you won't get what you are paying for either.

Think about this - if you had a friend who "provides me with a lot of security, info, and works tirelessly to educate me on the (RE) process" - how quick would you try to reduce their good while probably only slightly helping yourself?

I can tell you that for me there wouldn't be the slightest chance. Karma is a *****, sturdy reputations are tough to come by, and working with somebody you know and trust really can't be bought.

I don't object to the concept - in principle. What I object to is sidestepping somebody who has done nothing but help you. For me: I'm just not that guy.

stephen
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Originally posted by @Georges Arnaout :
I just received an advice from a friend that says: "The market is too hot, ditch your buyer's agent. Just get a RE attorney to make sure your offer is safe and go to the open houses yourself informing the seller's agent that you're a private buyer not represented by an agent. All the info you need is out there (mls) and run the comps yourself. That will give you a competitive advantage as the seller's agent would probably favor you"

Not the most ethical advice I would say but thought I'll throw it out there and see what the pros think about it.

I have a really good realtor that provides me with a lot of security, info, and works tirelessly to educate me on the process, but I could not help about think about it for a second.

This post has been removed.

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