Buying a Home in Salt Lake City, UT

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Attention Buyers: Buyer Representation is NOT Free

Free or Not Free

 

This post started as a response to comments in another blogger's comment thread on the topic of how messed up the real estate industry is in the areas of representation and how compensation can tempt agents to do things that are not in their client's best interest.

The discussion started over whether or not buyers or sellers were getting true representation and loyalty from their agents, or if the agents were only looking out for themselves and/or the companies they work for. There was discussion over whether it was ever right to double end transactions (get paid twice as much by "representing" both the buyer and the seller in the same transaction).

Again, both traditional agents and single agents (agents who will only represent either the buyer OR the seller in the same transaction, but not both) argued over where the compensation for services comes from.

There are many agents in the industry who perpetuate the false idea that working with a real estate agent is "free" for buyers. You can find a good number of agents who fall on all sides of this argument.

Some argue that because most listing brokerages offer some compensation to buyer agents who bring a buyer to the table for a specific property, the money is coming from the listing brokerage. They say:

"The money comes from the listing brokerage"

Sellers take exception to this, of course, as they believe they are the source of the compensation. Most sellers are usually bound by the listing agreement to pay an amount that covers their agent's company's fee, as well as the portion of that fee that the listing brokerage offers to buyer agents. They say:

"The money comes from the seller"

And then, educated buyers and their agents understand that since NONE of the money would be paid out to a buyer's agent without the buyer bringing the funds for the total purchase price, it is ultimately the BUYER who is paying the costs of the transaction, and therefore, those costs are real costs to the buyer and are NOT FREE. (Yes, one could argue that the buyer even pays the listing brokerage's commission too.) They say:

"The money comes from the buyer"

Regardless of where the money ultimately comes from, the most important thing you need to know is that when you hire a professional, YOU are paying for those services in one way or another. So I say:

"The money comes from YOU."

 

If you are planning to buy a home, answer the following questions:

  • Do you have excellent credit?
  • Do you plan to purchase a $300,000-$800,000 home within 90 days?
  • Do you have a good down payment, or are you paying cash for your next home?

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Comment balloon 8 commentsBenjamin Clark • October 01 2012 02:11PM

Comments

Benjamin - I don't charge anything to my buyer for representation, as you stated, my fee comes from the commission the seller pays, and we don't make our buyers make up any commission short-fall.   

Posted by Brad Baylor (ERA Coup Agency) about 6 years ago

Brad - What if the best home for your client is a for sale by owner who refuses to compensate your brokerage?

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) about 6 years ago

In addition, I don't doubt that is what you tell buyers, but what exactly does the legal language in your buyer-brokerage agreement say?

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) about 6 years ago

Practicing one way, and having a client or consumer sign a legal document that says something different is another problem in the industry. (I broke this blog into two, since the topics were so different, although related. Here is the original second half.)

At least in your explanation, (as long as compensation is reasonable), it sounds like you are erring in a way that is beneficial to the consumer.

Still, I believe the legal document should reflect the actual agreement. And per the law, in a real estate transaction, the legal document IS the actual agreement, and supersedes any verbal representations, not the other way around.

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) about 6 years ago

Also, is there not a conflict of interest if 5 properties come up, one offering you nothing, one offering you 1%, one 2%, one 3% and one 4%?

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) about 6 years ago

Benjamin:  It would be great if you could provide a LINK to the blog post that spurred this post of yours.  Most of those who read posts really would like to see both sides of a subject... not only yours.

By the way... I also read the four comments you have written above as your reply to Brad Baylor's comment #1.  Is it normal for a "Certified Negotiation Expert" such as yourself to use smoke screens as a negotiation tool?

In three of your comments to Brad... you answered his question by asking a question of your own.  Ahhh... the old "answer a question with a question" technique.

I would just love to "match wits" with you during a "negotiation."  It would be so fun.

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) about 6 years ago

Karen Anne, I asked the questions because I am genuinely interested in the answers. I do not know what the documents say that Brad has clients sign. This is the whole purpose of my other post, which was originally a part of this post when Brad commented on it. (I had to post the original in order to create the second half and Brad commented just in between while I was doing that.)

I also do not know whether or not Brad would work for free for a buyer who wanted to buy a home with no compensation being offered to him. Maybe he would? I have to assume he uses some sort of agreement, since he mentions not collecting from buyers in the event of a shortfall. If there is no agreement, and he works for free, how could there be a shortfall?

Finally, I'm struggling to see the question that Brad asked me in his comment above. Perhaps you can help me out with that.

Posted by Benjamin Clark, Buyer's Agent - Certified Negotiation Expert (Homebuyer Representation, Inc.) about 6 years ago

"... it is ultimately the BUYER who is paying the costs of the transaction, and therefore, those costs are real costs to the buyer..." AT LAST this is recognized! 

Who brings ALL the money to the table? THE BUYER! Only the buyer has the money to pay the seller, then the seller pays a listing agent who shares with a buyer's agent... No buyer with his money, no sale, no commission to anybody... 100% correct, Benjamin! Ultimately, the buyer pays everybody in real estate transactions!

All the talks about the seller paying are just that - talks... The seller has no money till the buyer gives him any... The buyer pays everybody (even if he is not really represented and actually everybody is working AGAINST him trying to get the best price and terms for the seller...)

Posted by Olga Kellen, Author of Amazon E-Series "Selling to Foreigners" (English-and-Russian.com, English-Russian Translation & Russian Internet Marketing) about 6 years ago

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