Should You Use The Listing Agent To Buy A Home in Durham Region?
Saturday Aug 04th, 2018
I created a short blog (below) on why I think you should never purchase the home from the listing agent:
Hypothetical Situation: So you’ve been out and about, enjoying this great weather (finally!) while touring open houses. On one breezy spring day though, you walk up the landscaped stone into a home that you fall in love with. You have done your due diligence by going to your lender to see what you can comfortably afford (On a side note, I recommend everyone ensure they do this first, especially if you’re in the market and seriously looking). The only thing is you’re not currently working with a real estate professional. So you build some rapport with the open house agent and ask him/her (Let’s call her Mrs. Agent) if you can just put the offer through her. Please…don’t do this.
If the person at the Open House is the listing agent, that individual is bound to protect the best interests of the seller. Let me repeat that, the person must look out for the best interests of their seller. If this is the case, how would the agent ensure your best interest in terms of buying the house? Some agents would argue they could but I don't believe this is possible.
Let’s look at this from a different perspective.
Let’s say you’re being sued for something and the person bringing the case upon you has selected Mrs. Agent to be their lawyer. Would you approach the same lawyer and ask him to represent you too? No, of course not. This is exactly what people are doing when they ask to buy the house from a listing agent. If you ask Mrs. Doe about the neighborhood, she will say it’s great. Then she will say the price is fair too. Hold on though, you're a savvy real estate purchaser and you know that there's a chance you can get a discount because now the listing agent is double ending (getting commission from both sides) the deal. This is a fallacy too. First off, most agents will not discount their commission and those that do will end up either giving what they discount to the seller (because that’s who’s paying for it). Even if they decide to give you a portion of the savings, how do you know you couldn’t have gotten more off the price of the home itself?
Let me give you a real life example.
I met a wonderful couple at an open house who told me that if/when they buy they were going to buy from the listing agent to save them and the seller some money. I explained the situation above and how it’s not a recommended practice. They said they understood but would still try to purchase from the listing agent. 2 months went by and the clients called me and said that they tried to use the listing agent in two cases and were not successful and felt the experience was not favouring them. I knew it wouldn't because the agents don’t have your best interest in mind, legally they have to protect the seller (in most cases) and do what’s best for them. Long story short, the clients selected me to help them purchase their home. We won them their desired house in multiple offers for $40,000 less than asking, this is the benefit of using a real estate professional to help you buy the house.
Let’s look at the numbers.
Let’s say, hypothetically, you decided to buy a house (listed at $779K) with the listing agent. Let’s assume the listing agent decided not to take their portion of the buy-side commission and split it between the seller and buyer. This would have saved you approximately, $8,000. But what if that house can be negotiated down significantly more?
In this market, where homes are being reduced often (I negotiated a 2nd house down from 779 to 710 in one offer) by sellers in many instances, it's really important to work with a buyer agent that will do the proper due diligence for your purchase.
I always explain the above to any buyer coming into purchase one of my listings. In conclusion, please find a great agent to work with if/when you are buying a house. Remember, in 98% of the cases you don’t have to pay anything for their services either, they are working for you at no cost, because the seller is paying their commission.
The government is looking to change the rules around allowing the type of multiple representation mentioned above, because, arguably, two differing parties’ interests cannot be protected by the same sales representative. I think we can expect these changes later in 2018 or start of 2019.
Thanks for reading.