It was a typical Saturday afternoon and I am hosting an open house. There is a knock at the door and in walks a couple. I greeted them with a welcoming hello and handed them a brochure on the property. They spend quite some time looking around. We had the usual conversation about the market and I answered a few questions they had about the property. As there were making their way to the door the gentleman said “I have a question for you, I was told by a friend of mine that if I work directly with the listing realtor when I buy a property I can get a better deal than if I have my own realtor. How does that work?” It was a great question and one that I have heard before so I thought I would explore this with you so that you can make up your own mind as to what way you think is best.
First off, I will explain how this all works. We have a great document that is provided from our Real Estate Board call “Working with a Realtor”. It is a few pages long so I will paraphrase it to make this a bit easier to read. Click here to see the full document.
There are 3 types of professional relationships a buyer can have with a realtor. Designated Agent, Limited Dual Agency and Customer Relationship.
A Designated Agent is a realtor that works for you and only you. They provide undivided loyalty to you by negotiating in your best interests and protecting your negotiating position at all times, disclosing to you all known facts which may affect or influence your decisions. Such as:
- Building condition
- Market value
- Neighborhood information
Limited Dual Agency occurs when the Designated Agent (the Realtor) represents both the buyer and seller in the same transaction. The realtor cannot be concerned exclusively with your interests in the transaction, since they are acting on behalf of the other party and must deal with both the buyer and seller impartially. The realtor must do the following;
- Must not disclose what the buyer is willing to pay other than what is written in the offer, nor disclose what the seller is willing to accept other than what is contained in the listing;
- Must not disclose the motivation of one Client to the other Client, unless one of the Clients has authorized such disclosure themselves;
- Must disclose to the buyer any defects about the physical condition of the property that are known to the realtor.
The Customer Relationship is where the buyer is not represented at all by a realtor. They represent themselves. In this situation, the realtor is not permitted to recommend or suggest a price, negotiate on your behalf, inform you of their client’s bottom line price. However, the REALTOR® can provide you with other services, such as:
- Explaining real estate terms, practices and forms
- Assist in screening or viewing properties
- Prepare and present all offers and counter offers at your direction
Now back to the question. Can you save a few bucks by going directly to a realtor to buy? I would say that it’s possible but at what cost.
If you hire your own realtor you have the highest likelihood that you will not pay too much, have an expert negotiate in your best interests and have a clear line as to who is on your team.
If you opt for working with the listing realtor under a Dual Agency Relationship then you are being represented by a realtor that has to be impartial to both the buyer and seller and who I must point out will more than likely have a stronger relationship with the seller as they have only just met you.
For all of you gunslingers out there who feel that they know as much about real estate as a professional realtor the Customer Relationship will be the route to choose. All I can say is buyer beware and best of luck.
Before I finish this up I will give you an interesting statistic. The majority of the complaints and lawsuits that come in against realtors are a direct result of the realtor representing both a buyer and a seller in a Dual Agency Relationship. It would seem that both buyers and sellers don’t feel that they are being represented properly under these circumstances. The trend for realtors these days is to make every effort to not represent anyone under dual agency. They are choosing to either have the buyer find their own representation or to work with the buyer under a customer relationship.
At the end of the day you as the buyer can decide the scenario that works best for you. Do you want to be fully represented, partially represented or not represented at all? The cost of each decision is difficult to put an exact number on but it is very clear that some choices are risker than others and when we are working in hundreds of thousands of dollars or even millions you should really give it some thought as to whether your decision will add up to perceived savings or actual savings.