If you were a boxing pro, would you go into a fight without a coach? Would you feel comfortable listening to advice from the other guy's coach? Or would you rather have your own coach helping you avoid the punches?
Getting advice from the other guy's coach is what many buyers do when they get the seller's agent (called the Listing Agent) to write an offer for them on the same house.
Why the Listing Agent is not a good buyer's coach
See, the Listing Agent has an agreement with the seller of the house and is obligated to sell the house for the largest amount possible.
When a buyer contacts the Listing Agent directly, the Listing Agent has no choice but to comply with his signed agreement with the seller and convince the buyer (with ethics and honesty) to pay as much for the house as possible.
So, how can buyers get their own coach to help them pay the right price for the house?
A buyer's own coach is called a Buyer Agent
To be a good buyer's coach, a Buyer Agent would have a signed agreement with the buyer and the obligation to advise the buyer on the market price of the house (and not pay as much as possible for it).
Let's look at an example
A buyer finds a house listed for $300,000. If the buyer contacts the Listing Agent to make an offer on the house, the Listing Agent has the obligation to recommend to the buyer to pay $300,000 for the house.
On the other hand, if the buyer submits an offer through a Buyer Agent, the Buyer Agent has the obligation to:
- research prices on comparable homes, and
- recommend to the buyer a range of values
The range of values is based on what other similar homes have sold for and also considering the exact features and repairs required for this specific house.
In this example, the Buyer Agent could present to the buyer a range of value of between $270,000 and $285,000.
Can you see how a Buyer Agent could save this buyer almost 10% of the asking price?
But - some buyers get a cash-back from the Listing Agent
It's true that some Listing Agents offer cash back from their own commissions to buyers. However, in my many years in Real Estate, I have rearely seen this cash back be any more than 2% of the asking price of the home.
Let's compare the savings
Comparing the savings of submitting an offer via a Buyer Agent vs. a Listing Agent (in this example):
- up to 10% through a Buyer Agent
- up to 2% through a Listing Agent
Of course, this is only an example.
Your savings could be even more than 10% through a Buyer Agent
It's possible that the savings through a Buyer Agent be 20% (or only 5% - and even zero - if there is too much demand for the house).
And it's also possible that the Listing Agent keep all of his commission and not offer any cash back to the buyer.
In general, getting a 2% (or less) cash back isn't worth forfeiting the right to being coached through the rest of the transaction where there are more potential savings down the line.
This is just the tip of the money-saving iceberg
There are many more ways in which the Buyer Agent can help a buyer save thousands of dollars when buying a house.
Read 4 other examples of How a Buyer Agent can help you avoid an uppercut punch