FAQ VII: Can I Get a Better Deal if I Go Direct to the Listing Broker?

By
Real Estate Broker/Owner with Elevations Real Estate, LLC www.BuyFortCollinsHomes.com

FAQ VII: Can I Get a Better Deal if I Go Direct to the Listing Broker?

House Money

 Short answer:  Maybe

 Long answer:  Maybe Not.  Here’s why:  A Seller hires a broker to market her home.  They pre-agree on what that marketing/brokerage fee will be.  Together, the seller and the broker determine a list price for the home based on current market values.  Let’s say that the house will go on the market at $200,000.  For the sake of doing easy math, let’s say the Seller negotiated a marketing/brokerage fee with the listing broker of 6%*.  In our market, it is customary for the co-op broker (i.e. the broker who brings the buyer) to receive 3% of the brokerage fee.  That leaves 3% for the listing broker.  The Seller gets a representative.  The buyer gets a representative.  Everyone is happy, right?

 But what happens when the buyer goes straight to the Listing broker?  Using the same formula as set forth above, it seems that (absent the co-op broker) the buyer could theoretically save 3% on the purchase of the home, right?  Well, no, not necessarily.  In all likelihood, if the listing broker is going to double-side the deal, the broker may or may not offer a concession on the marketing/brokerage fee.  In my experience, if a concession is made it is common for that concession to be not more than 1%.  After all, the broker will be representing both sides of the deal and will be tracking all dates and maintaining communication on both sides and shuffling documentation back and forth for the Seller and the buyer.  The broker isn’t going to just do both sides of the job for free, right?

 

Here’s my point.  If I’m a buyer and I am going to go straight to the Listing Broker solely for the reason of saving money (in this example) we are talking about a savings of less than $2,000 based on the above scenario.  On top of that, as the newcomer to the relationship triad of Broker-Seller-Buyer, as the Buyer, I am the House Bank Womannewcomer and likely the odd man out.  I’ve made it clear that my negotiation position is price-based and depending on my walk-away power, I’ll probably settle for a price higher than what a professional negotiator might achieve on my behalf because I won’t have access to a market analysis done on my behalf demonstrating where this property stands in relation to the market as a whole.  In my humble opinion, if I were a buyer, I’d look at how that $2,000 “savings” impacts my long-term bottom line.  On a loan amount of $193,000 versus $191,000, at an interest rate of 4%, the difference in a monthly principle and interest payment is just ten dollars a month.  For that difference, I think it is well worth it to search out a buyer’s representative with a solid reputation, strong negotiation skills, and expert knowledge of the market.  Coupled with impeccable professionalism, and a relationship borne of advocacy you may very well save far more than just $10/month.

 

*Disclaimer:  This fee is individually negotiable on a property-by-property basis between the Seller and the Listing Firm.  The figure stated above is for demonstration purposes only and in no way reflects a standardized commission rate.

 

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Rainmaker
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Dinny Evans
Dickson Realty - Truckee, CA
Radical Real Estate

Right on Chris, I like it!  We all know that it is possible to do a really good job representing both sides, buyer and seller and it does happen.  But when it happens because we have a great buyer and a great house (which might just be our listing) the motivation is completely different.  By the time I show my buyer a house with my sign on it, I am always sure that the buyer already has my confidence as well to negotiate fairly.  You did a fantastic job of talking about the buyer looking for a deal and explaining how this isn't the way to do it!

June 09, 2012 06:17 AM #1
Rainer
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Chris Hardy
Elevations Real Estate, LLC www.BuyFortCollinsHomes.com - Fort Collins, CO
Northern Colorado Real Estate

Dinny- Phewwwfff!  I think this is an important topic but didn't want to step on the toes of those who end up double-siding deals in the way you describe.  I really appreciate your supportive comments!!  Thanks!

June 09, 2012 06:53 AM #2
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Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Chris - Excellent explanation of the weaknesses of a misguided strategy. Maybe the fault lies with us, in that we make a point of telling buyers that our services are free - the seller is paying for them - and it's somewhat natural to downgrade the perceived importance of something that's free. So, yeah, let's trade off that representation thing for some cash advantage.

June 09, 2012 08:11 AM #3
Rainmaker
701,060
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggresive & 560 FICO - OK, Colorado Mtgs

I like you POV on this. Mostly because your right, it all depends you might get a better deal you might get a worse deal. To be safe use someone who represents YOU!

June 09, 2012 08:14 AM #4
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Chris Ann Cleland
Long & Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Northern VA

Sellers want to make the most they can for the home.  Going to the Listing Agent just means more money for the Seller and definitely for the agent, but not a better deal for the buyer.

June 09, 2012 02:07 PM #5
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Rainer
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Chris Hardy

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