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