Recently, a colleague purchased a landed home. His buyer agent arranged 50 viewings. When they found the right home, the agent negotiated the right price.
My colleague saved hundreds of thousands of dollars, and his agent cost him nothing. When SRX Property upgraded to a larger office, we used an agent even though we had access to commercial listings and transaction data that were not readily available in the public domain.
Not only did our agent negotiate the lease down once, he went back a second time and won another concession on price.
Our agent cost us zero.
My colleague and I have been involved in over 20 residential or commercial transactions as either buyers or renters. In every case, we sought the help of an agent to advocate and negotiate on our behalf.
As a firm believer in the value of the buyer agent, I am surprised when I meet the occasional buyer or renter who is vehemently opposed to engaging a buyer agent.
Based on my discussions, I have concluded that there are three pervasive misconceptions of buyer agents.
First, some consumers don’t recognize the value of buyer agents.
These consumers tend to be well-educated, but very skeptical about the integrity of agents. They argue that there’s enough information in the market to buy on their own and, thus, there’s no need for an advocate.
While there is no doubt that the real estate market is more transparent than ever, I view market information as a way to hold a buyer agent accountable, not as a substitute for an agent.
By employing information from SRX Property, I am an educated buyer, not an expert agent. I use my research in discussions with my buyer agent to identify the most appropriate listings, review the competition and market conditions, and establish the best negotiation strategy.
I still need five things from my agent that I can’t, or don’t want to, do on my own.
A value my buyer agents because they sift through the mountain of duplicate listings to find the diamond in the rough, arrange for home viewings, advise on the value of shortlisted homes, negotiate, and handle the paperwork.
In addition, I subscribe to the belief that the principals in the deal (i.e., the buyer, seller renter, or landlord) should never negotiate directly.
I know of no business person who would buy a company without an investment banker leading the negotiations.
I know of no prime minister who does not employ a team of expert negotiators to represent him or her. For example, there are seven countries involved in the negotiations with Iran on its nuclear program. Not one of those countries has the prime minister or president negotiating the agreement.
In real estate, there’s significant money at stake. A buyer agent is in a better position to work with the seller agent to find a win-win that gives face to both the buyer and seller.
A second misconception or myth about buyer agents in the private property market is that they cost money.
In my experience, the seller pays the commission, and the two agents split it. As a buyer or renter, I pay the agents nothing. This is common market practice for private property transactions.
In the past, there was a practice of some agents saying “no co-broking” in order to keep the buyer agent out. This practice should no longer be common. In accordance with Council for Estate Agencies (CEA):
The estate agent or salesperson is required to promote and protect the interests of his client; and should properly explain to and advise the client about co-broking. The “no co-broking” option shall not be used to deny co-broking opportunities because the salesperson is (a) working with another salesperson to jointly market the property or (b) has pre-identified salesperson/s whom he is only prepared to work or co-broke with.
A third misconception is the buyer agents are price takers, meaning that there is no incentive for them to negotiate the price down.
While this is a moral hazard in real estate, it doesn’t mean that your buyer agent will not protect your interests and work to get the price down. It just means you should trust but verify.
All of my agents have negotiated prices down even though it meant less in commission as a percentage of the sale price.
As an informed buyer or renter, I educate myself so that I can set negotiation targets with my buyer agent. I then ask my buyer agent to execute on those targets, knowing that he or she is in a better position, than me, to realize those targets.
Buyer agents are one of the best deals in town. Let them do the leg work on finding the right home at the right price at no cost to you in terms of commission.