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Princeton Real Estate - How To Buy A Home Without A Real Estate Agent

In the turbulent Princeton real estate market there are new things happening - some (like real estate prices) could be confusing, and some - are a bit puzzling. I am talking Princeton real estate unrepresented buyers -is it a good idea? about a phenomenon of an unrepresented buyer. This type of buyer does their research on the Internet and contacts, for the properties they want to see, respective listing agents. They do not want to be represented by the listing agent (as a dual agent) or by any buyer’s agent. They want the part of the commission that would have otherwise been paid to the buyer’s agent, to be “credited” to the seller. The net effect of which, in the buyer's mind, is that they can offer less, and thus they would save a lot of money.

Assuming that the listing broker agrees to such an arrangement, what are the implications for these buyers? Is this a strategy for saving big or big losing?

This strategy could possibly work, provided these buyers have legal representation (and their legal rights are protected). The question is when could it work? The short answer: when a lot more human intelligence becomes publicly available. Here is a bit of a longer list of requirements.

The opinion on the price of the home is available from a public source. There is no such source now. Zillow, Trulia, Realtor.com, do not provide information on what makes one home more or less valuable then the other, or why a particular house on the same street sold for much more, or much less.

1. The opinion on the amount of the offer that will produce the positive outcome for the buyer is available from a public source.

2. The understanding of the inspection results for each property and the implications for the buyer are available from the public source.

3. The negotiation tactics for each property are available from a public source.

4. The ability to deal with the unexpected issues that can arise at any point in the transaction, including closing is available from a public source.

I am concerned that you as a buyer without representation, are not an equal match to the seller, with representation. Without needed intelligence available on the Internet, or from other public source, the buyers would have to do the best they know how. I am concerned it may not be "good enough", and that the potential “savings” could easily translate into big losses - financial, emotional, or both.

There are people who choose to represent themselves in court, some who are even facing imprisonment. I am not sure how many win. I know many lose. In this country it’s illegal to practice law without a license. It’s perfectly legal, though, to put oneself in jeopardy, doing it on their behalf.

The same holds true for real estate; thankfully for the buyers - their liberty is not at stake.

One of the goals of the Princeton Real Estate Blog is to make a lot of the information, previously not available to home buyers and sellers, accessible at their own time and convenience. Here are some articles that could be of interest.

15 Reasons you should not buy a home now ...5 reasons you should

What Did That House Sell For? January 2008

Who Else Wants Clarity About Real Estate Prices

Is Princeton Real Estate Local or Global?

Secrets To Buying A House In This Market

Secrets To Home Selling In A Bad Market

Photo by Jeremy Rich/Fancycanoe ____________________________________________________________________________________________________________________________

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Please contact Faina Sechzer at 609-553-4175 with questions about real estate, homes for sale and/or listing your house to sell, and relocation assistance in Princeton, Montgomery Township, West Windsor, Hopewell, and Lawrenceville New Jersey. Referrals are accepted.
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Posted by Faina Sechzer - Princeton, Montgomery, Hopewell, NJ Real Estate Expert on 03/12/2008 06:41 PM

Comments (109)

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109 Comments on Princeton Real Estate - How To Buy A Home Without A Real Estate Agent

MAR

2008

I just listed house today where sellers will have to bring money to the closing. Guess what they didn't have an agent and they bought from developer 2 years ago.

I have a client now I am now working with, who was trying to do that.....but what these people don't understand is they need somone to mange their side of the transaction....for them..who is going to do that....and write the contract...etc...these are the same people who, if asked to do their job for "free" would go crazy..

Very true, Faina, gotta love twitter for sending me here. Buyers definately need representation in new home construction.

AWESOME post, Faina! I think you've given some great points that many people outside of real estate might not consider when they think about going it alone.

This scares me for the Buyer! Thank you for pointing some things out for them. In the long run, the money is nothing compared to the benefit of representation for the entire transaction!

Good writing, Faina!

I heard that same reasoning the other day from a guy that did not want a buyers agent. Oh well go ahead and go it alone.

In our market, there is big downside with regard to risk on the buyers part. They are not going to save anything and in some instances lose money beacause of a lack of representation.

What everyone needs to understand is that what you as the agent working for a broker - and the Seller have arranged contractually IS between YOU and the SELLER. It truly is NONE OF THE BUYER'S BUSINESS, and has NOTHING WHATSOEVER to do with the price of the home.

How DARE the Buyer dictate to you that you shave half of your commission and still end up doing the lion's share of the work, whether you represent this person or not.

The only thing they're trying to do is save the commission. They would risk everything, possibly legal action to tell others i did it without the service of one of those "greedy" realtors. But in the end if it goes south they will try to contact one of us to get them out of this mess.

A buyer representing themselves on new home purchases or with a smart listing agent is like a Lamb going to . . . . . .

In reality there is no way a buyer is every truly unrepresented. If as listing agents we want the deal to get to closing we have to manage the buyers side of the transaction as well. In my world if someone wants to be "unrepresented" then they should be prepared to put up an escrow deposit that makes them understand that if they don't get to closing then it has consequences on their pockets!

I've been seeing this a lot too. I've had two potential buyers in the past few months ask me, "What will you do for me if I buy from you?" The 5 paragraph answer about all the ways that I save them time, money and headache by representing them does not register. They only want to hear, "Oh, I'll rebate x% of my commission". But they won't hear it from me; all they will get unfortunately is professional representation and a home warranty.

I don't understand why someone who is getting a valuable service for "free" would be hesitant to take advantage of it. Statistics prove that those who go alone in buying end up paying more in the long run and encounter more problems in the selling process.

I understand FSBOs who hope to get more; I feel bad for bhbbs (buy homse by buyer). They are losing in so many ways.

Regards,

Claudia Field
Baird & Warner
Barrington, IL

2 tv shows and some surfing on the net and Johnny the buyer thinks he's Donald trump! SOOO sick of this.

Without an agent in the picture, everyone thinks they are the one that is going to pocket the "savings"... and so that money needs to get counted several times... and never does.

Well written, thanks Faina!

I make it very clear to buyers who want to do this, and i have come across it about 5 time is the past year. "Representation and Compensation are two completely non-related things". Procuring cause is what entitles commissions, AND Commissions are only paid to MLS brokers. Now, since the buyer found my listing through my marketing efforts, I have procuring cause, hence no commissions for them. Now hey need to decide if they still want the house. It doesnt matter to me, I already have a home, and if they want this home, cahnces are someone else (who has an agent) will too. So, I say: represent yourself if you like, or find an agent, and negotiate your best offer on the home.

What I have found is that buyers that search on there own and want to haggle buyers commissions, typically lose out on the best homes. They find this out too!

You also can include all the unrepresented buyers who got great financing 'advice' from the listing agent, seller or the builder. I know more than one who is now either losing their home or lamenting the adjustable rate they signed on for when they bought from the builders 'preferred' financing supplier and got a 'discount' for doing so. Naturally as a Real Estate Agent I do not persuade my clients to use on lender over another, but (especially with first timers) I give them good educations up front so they know what they are really getting into.

Sonja -it doesn't surprise me. It's not an equal march between the new home builders and unrepresented buyers, of only they understood it.

Konnie -the view of these buyers is that the contract and negotiation could be done by an attorney. The only value they see in the buyers agent is driving them to see houses.

Missy - i am beginning to love Twitter -thanks to you in great measure.

I really like that explanation by Shawn Hartmann

I have explained the bit about the multiple contracts involved. In fact, I have a little drawing I do to show how the 3 contracts at play intersect. I will have to practice that Procuring Cause argument a bit so I can use it when I next have this conversation.

Thanks sarah!

I actually run across a lot of lawyers in the area I work. Typically fresh out of law school. They seem to understand the part about who the contracts are between, but they invariably want to rep them selves. I once had a lawyer buyer and lawyer seller in the same transaction, that was funny! I kept the commissions :).

Sarah - there are buyers some who would like to purchase homes without representation. What seems to be "new" in the case I described, is that they ask the buyers agent part of the commission to be "credited" to the seller.

Kim - the money could also be an issue as well. If the buyer is not represented, what they think they may be saving, could turn out not to be savings at all. Unfortunately, when these words come from a real estate agent, chances are they could be perceived by the buyer as self-serving.

Isn't this good for the real estate market in general. If buyers are overpaying because a house may not be worth as much as they believe it is, wouldn't that increase the comps for similar houses and therefor help the market?

The other line I use when a buyer want to rep himself is: "OK that sounds great, I'm kind of curious, have you ever done this before?". They alway say no. I just Say OK. Then I say lets meet at my office to discuss this. They never want to meet up.

By the way, if you make it your policy to never show properties to unreped buyers, you will save yourself a lot of headaches. think about it. If you dont show them your listing, how will they know if they want to buy it. they think they want to buy it because they saw the photos online, but the haven't been inside. Next time you get a sign call, ask if they are represented. If they say no, ask why not, if they say they are trying to save the commission, Say thats great, recommend they find a discount broker to help them out, or let them know they will need to sign a one time showing agreement with you to see it. This Should be standard practice in our industry.

Those buyer's who consider themselves real estate savvy because of all the information on the internet shouldn't completely disregard being represented. I have a potential client I am in negotiations with. He has proposed paying me a flat rate fee to represent him to write up the offer, attend the inspection and see through to closing. He already knows the house he wants to put an offer on. Since it is a million plus, I agree, it is hard to justify him paying me the full 3% when I am not doing alot of leg work. I know some people think he is not paying me, but rather the seller is, but essentially in my eyes, he is paying in the long run since he will be the one paying the interest on the homes mortgage (where the commission is wrapped in.) Long story short, I can respect his decision to seek a lower negotiated price by taking out the buyer's agent commission but I mostly respect him still seeing the value of being represented. Hopefully he decides to work with me.

Shawn, you said that "Commissions are only paid to MLS brokers." is that true, does the law prohibit homeowners from paying commissions to anyone other than MLS brokers?

Russ - everyone has a choice to not have representation. The unfortunate part is that many buyers do not completely realize what they give up.

Steven -my point exactly. Thanks for your comment.

Jackie & Jerry - I understand how you feel. Not all listing agents would agree to such an arrangement. I would, because I don't want to give up any opportunity for my seller clients. That may not be a smart business strategy for everyone:)

Faina,

Congratulations on a terrific blog and feature!

This is the result of companies like Redfin who basically leach off of the full service brokerages to carry the water FOR THEM. A lot of this comes back to Len Harley's basic premise that we must educate buyers and sellers that FINDING THE HOME is the easy part. Until that aspect of real estate transactions are understood, this sort of nonsense will persist.

Ashley Berg **Seattle's Green Realtor** ....Please dont take this wrong, but, The seller is paying the commissions. The value of the home is determined by the market. :)

By the way, how does this "savvy" buyer know about the 3% comp. Is that advertised somewhere by your MLS to the public?

I think it is OK credit back to the buyer, it is a personal decision. Or if he is paying a flat fee, ask for it up front and non-refundable. That way if the negotiations fail, you didnt completely waste your time.

bayou- no laws prohibit sellers from paying anybody. But the MLS broker comp is for paying brokers, brokers can credit back or elect to do whatever they please with it.

Every dollar paid to a broker/agent is a dollar well spent.

We manage the transation from start to finish. For buyers, we negotiate better terms and conditions than a layperson could for themselves. We are familiar with the neighbohoods, values, pitfalls. We do a visual inspection of each property with a "trained eye". We review documents, disclosures, GFE's, title report, etc. We schedule/attend inspections, interpret issues, request repairs, schedule repairs, sometimes negotiate on repairs with contractors, we confirm repairs and certifications, pest work. We coordinate with the lender, title company, appraiser, contractors, etc. You know that ole saying-- goes something like "a person who represents himself in court has a fool for a client". Same principle applies.

Great post. Thanks for covering it!

Shawn- I am still on the fence on who I think is essentially paying the commission, the buyer or the seller. I have had many discussions with my colleagues and get arguments on both sides of the coin. As for how the buyer knew about the 3%, he initially contacted me about selling his home and we discussed the commission rates. Thanks for the heads up about him paying up front and having it be non-refundable. I certainly don't want to waste my time. I have done enough of that the past few months with the mortgage industry tightening their reigns and promises by lenders the client is approved.

Ashley,

But the seller agrees to pay a commission long before a buyer knows about the home being for sale.

So, lets say the home was listed for $1. would the buyer want to reduce 3 cents off your commission? The point is the value of the home is determined by the market. The buyer should make an offer based on value, not based on a commission that has been negotiated long before he knew he was interested in buying the home. The seller already agreed to pay a commission to agents before anything happened.By the way, why didnt he just go to the listing agent, could it be because the listing agent said "NO"?

It is up to you as an agent to determine whether you give some of that commission back.

I just say NO, its simple to do..

I have been the inspector for several buyers "going it alone." All, seemed to count on everyone involved to pick up the slack for the missing representation---including me. It made inspections longer and I found myself continually having to duck questions I would likely only know the answer to if I was a Realtor. I cringe when I ask them who their agent is and they say they don't have one or are using the seller's agent. Kind of like both divorcing parties using the same lawyer---not a good idea. I always encourage them to "get representation."

Awesome response Charles.

Real estate agents are going to jump all over this with comments but the public needs to understand if they go into a real estate transaction without representation it's similar to going to a Doctor (Surgeon) who contracts with a hospital to use their operating room for a fee and telling the Doctor I want the money he/she pays the hospital for said room to go to me (patient) and lets do the surgery in the parking lot.

Great analogy Carmeron! I'll remember that!

LOL Cameron!!!!! What a great analogy! I will have to remember that one.

Great Post!

Susan

Great article, lots of very good points made but do we think we can change human nature to save a few bucks?

There seems alot of this going around lately, the selling agent giving part of the commission to the buyer. It's a technique that sounds good to the buyer, but the buyer has way more important stuff than to worry about saving part of a commission. Most sellers are savvy enough to know that a completed transaction is a slim possibility. Any offer I had with buyers of this nature would have all kinds of safeguards to protect my seller.

MAR

2008

Found this post on Google and thought it provided good insight. As a consumer, I can see how buyers go into this situation thinking that its much easier to handle alone and there is a potential cost savings. I know I initially did while in the process of looking for my most recent home, but soon realized that my wife and I were behind the proverbial eight ball in taking on such a task, especially when we first started in our search and viewing homes FSBO. Some people in this world are just a tad odd..We eventually obtained the services of a realtor, and it made the process much easier in terms of all the logistics. In terms of negotiating, we unfortunately didn't get much feedback from our realtor (of course an isolated issue in regards to the realtor we used) and it made the process a bit more stressful, but in the end I'm sure it was a lot less hectic than it would have been if we represented ourselves.

I think the biggest issue (as the one comment mentioned) is that consumers watch TV shows and then hit websites like Zillow, Trulia, and Realtor.com to evaluate what the price of the house should be (especially based on recent sales and comparables) and then do the "well, they sold their house for this much and ours is nicer" process. The other issue is that consumers think they may have a better understanding of the process once they've gone through it before and often feel the realtor's time is just taking them from home to home and filling out a contract. I know I followed these very same steps and thought I was indeed knowledgeable on the subject matter and figured all I needed to continue was a run-of-the-mill real estate attorney to represent us legally and in our best interests. I'll never know how it would have all played out if we did it on our own, but I can tell you I slept a lot better the night after I signed all the paperwork at closing.

I do have to say that my understanding of the process from selling/buying in 2000 to 2007 was much increased due to the amount of resources available on the Internet. Many consumers are coming into the process with far more knowledge of most of the steps (whether real or imagined) and find themselves to be more informed consumers. I'm sure that could be both a good thing and/or a bad thing for realtors.

I wouldn't ever go into buying a house without representation, especially since it costs me nothing in terms of a commission. As for selling my current home in a few years without representation, I'm not sure (I'm sure that will ruffle some feathers). Then again, I said I was never moving again :) Sorry for the long comment!

not an equal match to the seller, with representation

That's the key point. Someone going through this process once in awhile or for the first time vs someone who does it professional and knows exactly what to expect and how to protect the seller's interest.

I also liked what Chicago Buyer said, "Some people in this world are just a tad odd.." Better to have the agents do the negotiating because often the buyer and the sellers clash.

good blog man peope want to take on the job but a good reltor can save you time and money

Wow, this is scary. I haven't heard of this yet. However is there much difference with an agent who represents both parties?

Chicago Buyer -thank you so much for bringing in your perspective. Hearing from my non-agent readers and making it a 2-way conversation with consumers is extremely important. Real estate blogs (where the conversation is often between agents) to consumers may appear self serving. So again, many thanks for sharing your views and experiences.

I agree that it's difficult to sort out what Internet can and can't do for real estate buyers and sellers. Consider this blog as an example. Its objective is to get as much information as possible to consumers and especially those in the greater Princeton NJ market. I publish prices of properties sold, tips, opinions, and my experiences as an agent. Does it give my readers an advantage? I certainly hope so. When they call me, our search could be much more focused and productive. Plus, it gives them a definite view if I am an agent for them. Does this blog, or any web site, substitute the human intelligence, required in a particular transaction? I don't believe so.

After my last move, I said the exact same same -"I am not moving again":) So we are on the same page. Subscribe to my blog(shameless plug), and you could be better prepared, if you change your mind.

Robert - my post assumes that the buyer has legal representation and therefore their legal rights would be protected. it's all the other issues that I am worried about and ultimately that their "savings" could really turn into a loss.

Lenn - you said "A buyer representing themselves on new home purchases or with a smart listing agent is like a Lamb going to . . . . . ." It's a very apt metaphor and certainly illustrates the points succinctly..

Cindy - when i say that the buyer is unrepresented I mean it -that no one is looking out for their best interests. Even if they hired someone to "do" the transaction steps, it does not insure that the transaction or some steps in it are in their best interest. And that's the danger, IMO.

Lisa -you say "that answer about all the ways that I save them time, money and headache by representing them does not register". this is very interesting. The only explanation, I can think of, is that in consumer's mind, it does not equate to their potential "savings".

Claudia -the idea that these type of buyers have is that they are in fact benefiting from the part of the buyer's agent commission. Their view is that if the seller had to only pay for the listing agent, the buyers offer would be perceived as higher by the amount of the "saved" commission. I am sorry if it's too confusing in explanation. As I said in the post, this could perhaps work,if everything else was there in place for such buyers, which there is not.

Greg - you are definitely making a point. Everything sure looks easy on TV +it only takes half an hour:)

Lane - if the agents were totally eliminated from any transaction, I wonder if the prices of homes would be less. Somehow, I don't think so. I didn't happen in the travel industry, and there were only talking about small $.

Audrey- thanks for reading and commenting.

Shawn -thanks for contributing your experience to this discussion and engaging other commenter's opinions as well. You have an interesting approach and obviously have had experience dealing with such transactions.

There is another issue that needs to be considered. If a listing agent had received a call from such a buyer, they would have to consider if not agreeing to this buyer's request , they are somehow jeopardizing their client -the seller.

every listing I take, the seller gest a variable rate. Its 6%- and 5% if the buyer comes to me without an agent.

Now, when the buyer comes to me to aks for commission I let them know that the seller has a pre-ngotiated commission that gives him a discount for "un-reped" buyers. I ask them to make an offer, aware that the seller may choose to lower the price based on this.

KEY POINT: The seller has a contract with me, the buyer does not know the terms of the contract or what the commission reduction is.

If they tell me that I'm paying out 3% according the mls, I'll tell them they are not an MLS broker. If they were, I'd gladly pay it out.

Jason -you are bringing up an excellent point. When i said in the post that the buyers liberty was not at stake, I realized on further reflection, may be not entirely correct. Your point is very important -very bad decisions, leading to foreclosures or worse could be a result of not having representation, not having adequate representation, or disregarding the advice of their their agent.

Cari -you pretty much summed it up in a great way. The problem is that the agents would wholeheartedly agree, while the consumers just don't see it this way. I can't blame them, either. We all perceive value differently. Your quote " "a person who represents himself in court has a fool for a client" illustrates the point well.

Too often buyers fail to realize the srvices a Professional Realtor offer to them are FREE. To not have representation in this day and age is like skydiving without a parachute!

Ruthmarie - I can't blame consumers, Redfin or anyone else for their views -they are a perception of the value they see in the services provided, and they are entitled to them. I am not 100% hopeful that the "education" will help either. Coming from the real estate industry this education is perceived by consumers as totally self serving. And there lies the $64,000 question. How do you someone (adult age) who doesn't want to be protected? May be the answer is - it's their prerogative to be injured, as long as no one else is injured in the process. But is this possible?

Bayou - you are raising an excellent point and I very much appreciate it. You ask: "Isn't this good for the real estate market in general. If buyers are overpaying because a house may not be worth as much as they believe it is, wouldn't that increase the comps for similar houses and therefor help the market?

Unfortunately "overpaying" for the house will not help the housing market. The next buyer who comes along, if they have competent representation, would be told that perhaps the house was "not worth" what the previous buyer had paid. The "worth" of the house is not necessarily the last selling price and that's why it is not available on the Internet.. Thank you for contributing to this discussion.

Faina- That is what the buyer wants you to believe!

Actually, As the sellers rep, you would be doing your best to get the buyer to make an offer. I ALWAYS keep the buyer focused on the house itself, and do not focus on the commission. Simply oput, the buyer has to determine whether they want the home (or just the commission). They get to negotiate with the seller, not me.

You have to be VERY careful with all this not to offend any party. But it can be easily done. Remember most buyers commit to a home before they write an offer, They have been search and putting energy and time into it. They likely do not want to lose the home over a commission that they have no entitlement to. And chances are, if they want the home someone else will want it to. I'll happily payout another broker :)!

Charles -thank you so much for adding a perspective from the Inspector's point of view. You have probably seen endless transactions fail during the inspection phase. I have seen buyers ask Inspectors about how they should proceed. You are very smart to see the potential danger in that and giving your customers the advise you do: " Kind of like both divorcing parties using the same lawyer---not a good idea. I always encourage them to "get representation."

KEY POINTS WHEN FACED WITH THIS SITUATION:

1. Always ask the buyer "where they got the idea about negotiating commissions"

2. Then say "Sorry, i dont do that"

3. Then say "Are you interested in owning this awesome home?"

If you do this with a face to face conversation, especially with a husband and wife, you'll watch them look at eachother and usually one will say to the other "I told you so"

Carmeron -your analogy made me really laugh (in a good way). Unfortunately, many of these analogies fall on the deaf Consumers' ears. They usually don't need convincing of the value of the operating room, but many see no value-added of an agent. If the consumers see buyer's agent as the one who drives them to the house and points out "this is the Living room, this is the kitchen", they do not perceive it as great value.

Remember guys, our sellers hired us because we have skill in negotiations. If we cant even negotiate our own commissions, with an un-repped buyer, it may be time to look in the mirror. And ask our selves, are we really worth these commissions? Please do nt take this the wrong way, I consider it tough love.

Connie, Susan - I am glad you liked Carmero's analogy. I enjoyed it too.

Richard - I stopped my "human behavior change" attempts with my teenage kids:) The change , in particular for real estate consumers, could come from enhanced understanding, or sometimes , unfortunately from a personal bad experience. Of course, there are those who are never convinced.

Nice job, Faina... Get us all thinking,

We as Agents and Brokers are enabling this behavior by not saying NO!

NO to overpriced listings...This buyer strategy works best when the property is overpriced, too many days on market, and we are desperate to sell it to save face with the seller!

NO to the very notion that we do not earn what we are paid. Our real estate network / marketing system, created by REALTORS, is the most efficient in the world. It is a well oiled machine that cost billions to establish and will cost billions more to keep going into the future. Mr. Internet did not create and pay for it. It was created and paid for by those who came before us and we MUST preserve and pay for it now for those who follow us. The parasites of our GREAT system are causing enough harm already.

NO to people who say they will do their share of the work when we know that our duty to our seller client requires us to get the job done even if Mr. smart-a$$ buyer does not have a clue. This should already have been explained to your sellers when entering into the listing. The TOTAL commission is for getting the job done. The choice to offer compensation to cooperating REALTORS through the MLS is a joint decision at the time of listing. It is the brokers decision whether to compensate anyone else.

Buyer agreements and showing agreements will help you determine very quickly if this is someone's intention when they call on a property.

Please Just say NO to destroying this GREAT system that no one seems to think much about.

BTW... I just read on the Internet how to power your entire home with Hydrogen...

Have a GREAT day! Thank You!

Chrystina - I found Chicago Buyer"s comments interesting and valuable.

Leo -I appreciate your comment.

I think there is definitely a change coming in the real estate industry, and now more than ever, traditional realtors are having to really define their value proposition.

I agree with you all. I like the Chicago Buyer comments as well. Everyone here is absolutely correct. Don't negogiate your commission, show the value of your services, your not a cab driver(gas is $3.50 per gallon)

When buyers insist they can do it on their own. Let them. One less headache for you. We don't have to do business with everyone.

I hope that lots of consumers see this. A good REALTOR really does add so much value to the transaction. We sell real estate every day and we know what the possible pit-falls can be, especially in our local markets (which can and do vary). I think part of the problem is that buyers really don't have any idea what happens "behind the scenes". They see us showing the property, making up the offer, maybe some phone calls to them between contract and closing and then they see us pick up this big commission check at closing. There is just so, so much that is done on a daily basis that the clients have no idea about. We do it that way because that's our job... making the transaction as worry free and stress free as possible. We don't involve them in the day to day problems (bumps in the road) that we solve or avoid completely. The other thing is that lots of consumers don't really understand that the big commission check is like a pie and everyone gets a piece (the franchise, the broker, the tax man, the office help, the magazine, the MLS, the NAR, state and local boards, the local gas station, etc.) We are in business for ourselves and there is overhead. Anyway... off on a tangent. Bottom line is that it is well worth what is paid in commission by either buyer or seller to have a professional REALTOR handling things for them. Research your agent, get references, hire a GOOD one and let them handle the rest. I'd be willing to bet that you will make money / save money doing it this way. We haven't been around all this time for nothing!

James Hlubek, Broker/Trainer - ERA Beach Ball Realty Pensacola, Florida

Very well stated. The interesting thing here is the KEY word "NO". Its easy to say.

Why is it that the consumer wants this anyway? You don't hear about a car sales and a consumer saying "I'll buy this if you cut your commission on the sale" do ya? They negotiate with the dealership, not the salesman.

The industry is what we make it! Its your choice.

Here is the thinking of some buyers.

The realtor who works with you to buy only wants to get you to spend more, close on a easier house, talk you down from your demands. The selling realtor only works for the seller (and the buying realtor kinda does too). (this is the perception of some)

When the buyer approaches the listing agent, their relationship only goes as far as this one property, if it falls thru the realtor goes from 6% to 0. There is no next house or second chance. Now the realtor works 100% to pleasing the buyer, the buyer is back in control. I think asking for a % of the commision off upfront is rude and probably counterproductive.

Jacki and Jerry Shafer, how DARE they ask for this? Your attitude is very repulsive to today's bottom feeders, even if you don't say it to their face, people can smell this emotion. You can have your beliefs and opinions, but when you ask how the person with the $$$ DARES to ask for something, you might have cost yourself a client. FYI.

Buyers can always run an ad in the newspaper or online or something to the effect "I'm a buyer looking for a home that is not repped by an agent, please call me and give me a discounted price so I can save the commissions". Probably will have callers, this may be the next way to buy RE.

I leave this post for a bit in the capable hands of the commenters. Please keep the important discussion. I will be back to answer each comment, after I do the things that sell houses for my clients:).

This has been a very fun and interesting post. Thanks for starting this FAINA!

Good Blog! Another agent in our Board had a perspective client that wanted to sell their house. They purchased it about 5 years earlier from a FSBO. When the agent was doing the listing, the seller was asked if they had a termite contract and the said no. The agent had a termite company do an inspection and there ended up being about $5,000 in damage. The seller ended up not putting it on the market because they could not pay to fix the house. As far as I know, they are still living in that house - not sure if they did anything about the termites. We are in a termite area and I always rewuest a termite inspection.

Three things -

First. I am a listing Broker, and I believe that agents/brokers who list property have created this monster. Publishing all MLS listings on every real estate site that exists makes the consumer like a first month agent - information overload, with a bad case if I know it all. We can now put maps, instant value estimators, school information, local government information, etc. on our own pages - so why do we need a Realt or.com or a Z illow or other? Stop feeding them their content and consumers will find our sites more easily so we can be their information source.

Second. My MLS requires some form/amount of compensation to a buyer's agent. If that were allowed to be zero, buyer's agents would need to truly get their commission from the buyer. What a change that would make in the business! And before all you exclusive buyer agents get all huffy, answer the question - who deducts the commission on their taxes? That is who pays the commission regardless of who brings the money.

Third. Send your URL to REindex.com, The Site Engine(sm) and I will link to your site for free so customers looking for real estate in your town can easily find your site. No lead generation, no back-link required.

Heath Coker www.CapeGroupcom Cape Cod Real Estate

www.REindex.com REindex.com, The Site Engine(sm)

Some interesting dialogue going on here. Very informative, especially the non realtor comments from the general public. I had a conversation a while ago with a friend who is a lawyer and we were talking about buying a house. She said that she plans to represent herself, as she can draw up the contract and negotiate and she felt it was in her best interest to do so because she would then ask the listing agent to lower their commission so she could get a better price on the home. Over the life of the mortgage loan, that extra few thousand dollars the listing agent may agree to give up so the buyer can get the house for a lower price barely changes the monthly mortgage payment.

I don't know if I would ever feel comfortable buying a home that is for sale by owner, do I really want to sit face to face and negotiate with a homeowner? If they know you truly love the home, the less they may be willing to negotiate. I had an issue like this last year with a buyer. Everytime we looked at the house the owner was there talking to us and would not leave us alone. We wrote a very good offer and he would not come down.... wanted about $5000 over list price. We walked away from that one. We don't negotiate directly with the decision maker when we buy a car and I think there's a reason for that. People get too emotional and attached to their homes. I think it's better to have a liason to keep the emotions out of it.

I have a "friend" that's in the process of buying a home without representation. They found it through an open house and it was listed in the mls as well as fsbo. They called the fsbo # thinking they could "save" money this way. What do they do?! They give the seller 98% of their asking price in an area where most homes are selling at 93% of the asking price. The kicker is that they feel they're good "negotiators" because the seller accepted their initial offer!!! What they failed to realize with their limited search is that there are similar sized homes in comparable neighborhoods selling for 10% less.

FAINA - This is an excellent article about the cons of self-representation. I am so glad that you used the analogy about being one's own lawyer when faced with jail time. This is an appropriate comparison, as the skill set necessary is pretty specialized. Great job, and congratulations on the featured post!

This is a very interesting post and this is the first time i have ever heard of that ingenious move, "crediting to the seller"(im being totally sarcastic!)

This is a great post however.....whats next?

Not A Realtor -thank you so much for offering your view, which is very interesting and much appreciated.

You say that "When the buyer approaches the listing agent, their relationship only goes as far as this one property, if it falls thru the realtor goes from 6% to 0. There is no next house or second chance. Now the realtor works 100% to pleasing the buyer, the buyer is back in control." If I uderstand your view correctly - this is a way to have the seller's real estate agent (not all are Realtors) act not in the interest of their client -the Seller, but in the interest of the Buyer.

In NJ this would be a violation of Seller Agent agency relationship. I quote from "The NJ Real Estate License Act -Statute and Rules" -11:5-6.9. "A seller's agent WORKS ONLY FOR THE SELLER and has legal obligations, called fiduciary duties, to the seller. These include reasonable care, undivided loyalty, confidentiality and full disclosure.." (capitalization is from the text).

I would not expect the consumers to know these rules, but would expect the real estate agents to explain them to the buyers and sellers.

If these relationships are not understood, it could cause a buyer to believe that an agent is acting in their interest, when in it's not the case. That's one of my concerns.

Thanks you again for participating in this conversation.

I recently had a tenant who wanted to do the exact same thing! When it was all said and done they ended up paying $30K more than any other house on that street for less square footage... you get what you pay for!

Good Morning Realtors,

I recently had a electrician come to my house to get an estimate on some work. He told me his hourly rate was X0.00 an hour plus driving time and materials. I politely thanked him for coming and told him at this time it was more than I can pay for this type of work. As he was leaving he told me he really needs the work and that he would come down on his price to get the work. I promptly hired him for the job. He was happy and I was happy.

As he was working he was telling that me that times sure have changed. More and more people have taken it upon themselves to do the work themselves. Let's face it times are bad and saving every dime helps put food on the table.

I would like to sell my house but I cannot offer more that a 4% commission to be split between the two agents. I am pricing my home at what the market would bring for my home according to CMA's. Now here's the klinker, the agents that I interviewed suggested that I raise the price of the home so they can have a 6% commission. I will be at the very top of the CMA's and the house probably won't sell.

I keep thinking of the electrian and the things he talked about. I know times are tough but I would take 4% over 0% anyday. Have realtors priced themselves out of the market? Can someone clue me in?

It definitely is a weird world we live in. We can't let an unlicensed person represent us if we want them to, but we can represent ourselves. I would never represent myself in court. I might take on a few do it yourself projects but when there is anything legal involved it's not for me!

More than likely working on your own will cost you in the long run. A good agent is worth the cost.

James -the post has certainly generated interest and contribution from the consumers. Whether agents agree with their view or not, it's very important to have a 2 way conversation.

Consumers have a lot of choices which agent to work with, or none at all. It is evident from this thread that real estate is practiced differently by different brokers and agents.

I LOL about "I just read on the Internet how to power your entire home with Hydrogen.". with my heating bill may be this is the right idea:)

Consumer Question- Thank you for your comment - hearing from consumers is important to bring the non-agent perspective to this thread.

I'll limit my comments to NJ, since this is the state where I am licensed. The commissions are negotiable between the Seller and the Broker. This means that you don't have to enter into a listing contract with a Broker, if it doesn't meet your approval on commission or other contract provisions. The same holds true for the Brokers -they are free to ask for compensation they see fit for their business. It is not much different then in any other business. Going with your example - there could be an electrician for whom the rate you proposed would not be a good business decision.

That said, just like there are many electricians, there are many real estate agents. You could carefully evaluate and compare their fees and what they will do for you for this fee. You could make your decisions based on this evaluation. I can't comment adequately, because I don't know the particulars, on the proposal you received from an agent to raise the listing price as a way to justify the higher commission. It does not sound to me as one having anything to do with the other, but again I may not have the full picture.

Gareth - I agree that if the consumer does not see value in services, they will not engage those who provide such services. Is that much different then in other industries? The challenge in real estate in particular, is when consumers see the value, but for some reason don't want to pay for it.

Gimmy -that's the beauty of being in your own business -you could choose not to work with customers who do not agree to the compensation you ask for.

Katherine -your argument is shared by many agents on this thread. Some consumers have a different opinion and may not be open to hear things contrary to their beliefs.

Larry -I can't say your story surprised it me. Thanks.

Kristina - interesting that your lawyer friend saw the value of a legal contract but did not see other value of real estate representation. Were you able to change her mind?

Matt -you have a perfect example for the point of the post -some things could appear as profit, when in fact it's a loss. when that it is the case it becomes difficult to admit, that a mistake was possibly made.

Jason -thanks for reading and commenting. It turned into an interesting conversation from different points of view.

Heath -I appreciate the offer and will definitely check the site as soon as I am done answering comments.

Dave -i had the word "credited" in quotes to illustrate the point. It would not have been actually structured this way.

When you ask "This is a great post however.....whats next?" -what would you like?:)

Emily -thanks for another story to illustrate the point of what could and does happen.

Faina - Great post!

I am in Russia right now, and here the buyers pay commission directly to their agents (no MLS). In our American way we as the REALTORS have an advantage of not asking the buyer to pay for our job directly (though there is no money without the buyer). I agree with Shawn Hartmann that "Representation and Compensation are two completely non-related things".

I wrote couple articles for our local newapaper (Before the Blogging Age) educating potential buyers about the value of the opportunity to hire their own representative advocating their interests in the transaction for free of direct charge. Unfortunately, some of them are "smarter" and try to negotiate on the other people's contract which is an agreemen about the commisson between the seller and her agent.

BTW what about RESPA and about paying taxes on the commission credit by savvy buyers?

Christy - I assumed in my post that the buyer would have legal representation. That would still leave a lot of issues not covered without real estate agent representation.

Brian -that is the opinion of most agents on this thread.

Svetlana - I used the word "credit" to the seller in quotes, because that's not exactly how such a transactions would have been structured. It would have had the effect of the credit, not a real credit, so there would have been no affect on RESPA or taxes for the listing agent. The seller would have been charged a lesser commission, then what is stated in the Listing contract. I don't know if this description makes it clearer.

Nice to hear from you all the way from Russia.

Another great post.

Some buyers do not "get it", but what is interesting is to talk to someone who was not represented and had a difficult time, now there are the true believers. They never again will be without an agent.

MAR

2008

I can completly relate....several months ago I had a buyer call on one of my listings. After meeting him at to let him in (you know he can't do THAT himself) and spending all this time answering all his questions he informs me he is going to submit an offer....GREAT....HIMSELF....GREAT. Just a wee bit irritated at this point (missing my daughters ball game) we start negotiations (he wasn't prepared at all). Long story short...no contract....buyer moves on....buyer calls me two weeks later (guess none of his "offers" on multiple houses were working out for him) and asked ME to represent HIM on his next offer. I turn sellers down often but this was the first buyer I actually chuckled at after I informed him "you can do it on your own, you don't need me".

Again, thanks for the post! It's so very true!

BTW..before any starts fussing...his next offer was not on my listing or any within my office. (I know my duties to my sellers).

Great comments Jeremy & Jessica Talley

Its all about expectations. Listing agents......

Always ask the buyer: Why do you want to rep yourself? Have you done this before? Then say no, you do not negotiate your commissions thats already ben negotiated with the seller. The buyer gets to negotiate hi best offer with the seller.

Check out Chad Goldwassers (www.goldwasserinstitute.com). The 7 point buyers lead conversion technique will help you to eliminate all these non-repped buyers upfront.

Faina you make great points. I always like to see the consumer have choices, especially if they understand what they're getting into. Btw, I'm in Hamilton, nice to meet you!

MAR

2008

I'm a FSBO seller currently, and the buyer's agent and mortgage company think they can bully a woman around. They miss deadlines, play games, I feel like a babysitter for them.

It's not easy. Sometimes I wish I had an agent because it's emotional when the games start. But I think of all the money I'm saving, and then I kick butt and straighten them out!!! You need to be tough at times, to get the deal done and stand up to professionals who think you don't know what you are doing so they can walk all over you. And you need to be able to read contracts. It's worth it if you can handle it. not all agents are as capable as an informed FSBO person.

MHO is the buyer needs competent, professional representation far more than the seller, if there was a choice to be had...

I recently had a listing who was trying to sell only three years after buying. They overpaid the market by at least $10,000 then, and just could not come to grips with why the math didn't work out when they tried to sell. P.T. Barnum knew...

Awesome Job Mrs. FSBO. Congrats to you. You may be experiencing what appears to be game playing by a buyers agent and lender, My guess is that they have no ill intention, may just be incompetent.

Problem with this industry is not buyer and sellers or Good agents. Its incompetent agents that muck things up.

I get expired listing (sellers) call me to list. I always ask the seller first.. "how did you pick your previous agent?" One answer I have never ever ever ever ever ever heard is "we studied hard and interivewed with 5 agents, and then picked who we thought best for the job". Most people work off referrals or friend/family. Its tough out there, but the good agents are still selling homes. NAd getting great feedback from their clients.

Buyer Beware!

MAR

2008

Some people always think they know how to get it done. They usually end up on the short end of every deal, and trying to blame someone else.

MAR

2008

Interesting post with some interesting comments. Any buyer who wants to represent themselves, well all I can say is...let the games begin!

The unrepresented buyer may as well have a bullseye in their back!! great reading

MAR

2008

Faina: This is just a fabulous post. Buyers don't realize the importance of being represented when buying a home. Like someone else said, they just don't get it.

APR

2008

Faina: You've obviously struck a nerve with all the comments you've garnered from such a post. I respectfully disagree with you. A home is worth what it's worth, and you are worth your commission. A typical commission is fair to all parties concerned. We earn every dime of our commission and we shouldn't be so quick to roll over and give it up, thinking we're doing our clients a service. As someone else pointed out, there truly IS no such thing as giving no representation. Unless you only communicate through an attorney they have chosen to represent them, you WILL be talking with them, and you WILL get yourself sucked into a lawsuit. Everybody - be careful out there!

APR

2008

Jacki & Jerry - thank you very much for weighing in on the topic. This is what makes the conversation interesting. I considered giving my client -the seller every possible opportunity to sell their home. If it came from a person, being represented by an attorney without an agent, I was willing to do it. I wouldn't say, "I rolled over". I did what was in my client's best interest. Like you suggested, it would not be a decision every agent would make.

I agree that if if an agent is not sufficiently versed in the issues of agency representation, they can get into problems dealing with "unrepresented" customer. Acting as a dual agent doesn't make one immune to problems. An agent still needs knowledge of dual representation, or they could have to as many problems, if not more, as with unrepresented customer.

I agree, these are issues that agents need to be very careful and knowledgeable about. It's always best to consult one's broker before engaging in such transactions.

JUN

2008

Hi Faina,

I agree you can make whatever business decisions you feel work best for you. I also feel my listing contract is with the seller and if the home sells during the listing period, I'm due the commission stated in the listing. But this is still very interesting. Thanks for bringing this up for our consideration though.

SEP

2008

I real estate agent is a high grade moron who carries keys, and open the front door for you. If they had four more I.Q. points they could make candles for us.

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Princeton Real Estate - How To Buy A Home Without A Real Estate Agent

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