Does Dealing Directly With The Listing Agent Save You Money?

Some home buyers think that if they go to an open house or call the listing agent directly on a home they will save money.  The thought is if they deal directly with the listing agent they will receive an edge in negotiations and/or the listing agent will give up part of their commission to make the deal work. So will going directly to the listing agent save you money?

In reality, yes you may have the illusion of saving money upfront on the purchase price but remember you get what you pay for.  Most often what happens is you don’t save money and you are completely unrepresented by an agent.

Here is a recent quote from the Boston Globe on an article about whether using the seller’s agent will save you money….. “It sounds promising, but this thought process could end up costing the buyers much more than it could save them.”

Another quote from Bankrate.com about using the listing agent…”“I’ve heard too many war stories about buyers who think they’ll get a better deal by going directly to the listing agent of the property.  Most often, they do not get a better deal, and they end up not being represented properly in the negotiations.”

What Is A Listing Agent?

A listing agent is under contract to sell the house for the seller.  They have a legal obligation to do the best job they can do to sell the seller’s home.  A listing agent has five fiduciary responsibilities to their seller.

Obedience, Loyalty, Disclosure, Confidentiality , Accountability and Reasonable Care.  The responsibilities due to a seller highlights that what a listing agent does must always be in the best interest of their seller.

This mean if you are a buyer, the sellers needs will always come before yours…. period.

Who Does The Listing Agent Represent?

First and foremost when you go directly to the listing agent you are giving up your right to be represented by a buyers agent.  Remember the listing agent is almost always in a legal relationship with the seller.

What does this mean?  They have a fiduciary responsibility to the seller.  They owe the seller confidentiality, loyalty, obedience and much more.  The sellers needs will always come before yours and at many times to your detriment.

Also, consider you may not be the only buyer thinking the same thing.  There could be one or more other buyers taking the same approach.  But, you think you may have an inside track. Yet, the listing agent owes no one any loyalty but the seller.

Conflict of Interest for the Listing Agent

Because of the agents legal relationship with the seller there is a conflict of interest created that makes it very difficult for the listing agent not to divulge a home buyers best price, negotiating points, level of interest and more to their seller.  The listing agent is obligated to report anything they know about you, the buyer to the seller.  You have no right to confidentiality.

Furthermore, the listing agent cannot help or advise you in anyway.  You are completely on your own.  There job is to sell the house for the seller for the best terms and conditions.  Period.

This is a ridiculous question and of course your are going to say no….. but if you were sued by your neighbor would you ask the neighbors attorney to cut you a deal if he represented you as well?  Of course not!  That is actually what you are doing but furthermore a listing agent cannot represent you unless you are in a dual agency situation which is a nightmare in itself!  And, even then a dual agency situation makes the agent more of a facilitator than someone actually representing you.

So Can I Save Money Going Directly To The Listing Agent

The quick answer is maybe. Statistically the results are mixed and more often than not, no.

So the listing agent maybe gives up a few thousand dollars to make the deal work.  But every step of the home buying process is a negotiating point up until the time you close.  Times, dates, extensions, home inspections, repairs, final walk thru’s etc… are all negotiating points during the home buying process.

Many Listing Agents Will Not Consider Reducing Their Commission

Let me start by saying, recently I double ended two deals as a listing or seller’s agent.  In no way did I represent the buyer.  In both cases the buyer tried to negotiate using the fact that they were not using a buyer’s agent to get a better deal.  My seller’s refused to ask me to reduce my commission because they felt I worked hard for my money.

A listing contract was already in place with my seller and in no way am I obligated to reduce my commission.

Secondly, I made a decision along time ago in my career.  I will not give up any of my commission because a buyer or seller thinks they can reach into my pocket.  I also know many of my counterparts that are top notch listing agents will feel the same way.

In both cases my sellers countered and stated their position and the buyers still bought with absolutely no savings. Any buyer with a buyer’s agent could have come along and bought either house for the same money.  Both sellers received exactly what they wanted from the transaction with out me giving up one red cent.

I had a big pay day, double the commission.  But don’t fool yourself, I earned it.  Just because a buyer is unrepresented doesn’t mean more work is not created for the listing agent.

Furthermore, each buyer stumbled along with the home buying process unrepresented by a buyer’s agent.  Making mistakes along the way.

Inside Information From the Listing Agent

If you go directly to the listing agent to buy a house there is no information you will get that can’t be had from working with a buyer’s agent.  There are just some things a listing agent cannot share with you due to their fiduciary responsibility to the seller.  Like what the seller’s bottom line is…. a listing agent acting with in the law would never share that with you unless they were instructed to by the seller.

There are disclosure laws about the property as well in Massachusetts.  An agent is obligated to disclose any latent adverse condition about the property that will effect it’s value.  This is irregardless of how you are working with them.   That means disclosure information is readily available for everyone.  In many cases most agents require their seller to fill out a Seller’s Statement of Property Condition covering what the sellers knows about the property.

Verify, Verify, Verify

Take what a listing agent and a seller says with a grain of salt.

When I work with a buyer as a buyer’s agent the first thing I tell them is if there is piece of information given to us by a seller or an agent that is important in your buying decision we need to verify it and confirm it.  The experience of a buyer’s agent can really kick in here.

For example, one area in particular is lot lines.  It is funny how an agent or a seller will confirm with definitiveness exactly where a homes lot lines may lie.  But, the only way to be sure of a homes lot lines is with a certified plot plan.  I cannot tell you how many time sellers were wrong about where their lot lines were or did not even check the deed for easements.

You Don’t Know What You Don’t Know

I have said it multiple times before and I will say it again.  For most home buyers who may have never bought before or maybe only once or twice in a lifetime, you don’t even know the questions to ask.  Or, you wont catch the red flags that would make you want to investigate further.

As an example, most home buyers will not notice a Sentricon system, if they do they think it is part of a sprinkler system.  It is a system placed in the ground to monitor termites.  Most people only install a Sentricon if there has been a problem with termites.  If I see the Sentricon system it certainly begs a bunch of questions to present to the home seller or condo association.

There is Far More At Stake Than Saving a Few Thousand In Commission

A real estate transaction is a complex legal transaction with many facets to it.  Saving a few thousand dollars in a real estate commission because you went directly to the listing agent is only a very small piece.

As I pointed out earlier every step of the process is a point to be negotiated.  One being home inspections.  A buyer’s agent can recommend home inspectors where a seller’s agent should not.  A home buyer will have many decisions and choices to make that a buyer’s agent can help with.

Put all that aside, as a buyer’s agent there are so many duties and responsibilities that I have or can perform,  too great a list to list here so check out Massachusetts Buyer’s Agent-  What Can I do for you?

Here is an excerpt from a recent testimonial.  The testimonial highlights what a buyer’s agent does.  Not only did we negotiate hard we had a bunch of expensive repairs done that the listing agent insisted would not be done.  This is done thru experience.

He also (in a sellers market mind you) got a sold “as is” seller to fix things that I was sure they wouldn’t. He got the condo association to take care of things I was sure they wouldn’t and he took on tasks I never would have thought of….

Remember what I said earlier… “you don’t know what you don’t know”.  But an experienced buyer’s agent does.  The buyer saved significantly more money by using an experienced buyers agent than they would have saved by the listing agent reducing their commission in half!

Going Directly to the Listing Agent May Create An Illusion of Saving Money

So will you save money if you buy a house directly to the listing agent?  It certainly can create an illusion that you are saving money, but more than likely probably not.

Even the most seasoned investors know the benefit of using a buyer’s agent.  Many of them use a buyer’s agent just to save themselves time with the tasks an agent will perform.  If you do get a listing agent to reduce their commission you will earn every penny and then some of any saved commission.

You need to assess your skill level in buying real estate.  Are you a homeowner that is on your 6th house and have been around the block a few times or are you a first time home buyer. Being in the business I can also tell you how important it is to have your own advocate that is not emotionally charged during the home buying process.  A good agent will know when to pull you back and when to push your forward and will help to keep your thinking and judgment unclouded from emotion.

It all boils down to representation and experience.  Go directly to the listing agent and you will be unrepresented.  You basically on your own.  Do you have the skill set, knowledge and confidence to buy and negotiate and manage the process by yourself? Are you willing to risk deposit monies in escrow because you missed a critical date?

Do you even have the time?  I am often doing much of the leg work while my buyers are busy at work…. tracking timelines, scheduling, working with the mortgage broker, preparing contracts and extensions if need be, etc…

A full time agent spends most of their day negotiating, managing and problem solving all with in the world of real estate.  A buyer’s agent can bring their expertise to your transaction to save you time, aggravation and yes, often even money.  Don’t get pulled into the illusion you can save money by going directly to the listing agent to buy a home.  It certainly can be an alluring illusion!

Other Real Estate Resources:

• Kyle Hiscock Dangers of Using the Sellers Agent When Buying a Home
• Teresa Cowart  Why Using A Buyer’s Agent is a Smart Move
• Wendy Weir  Using Your Own Agent When Buying new Construction

Don’t go unrepresented as a home buyer, Call me at 978-360-0422 to discuss your upcoming home purchase and how I can help!

This article, Will Going Directly to the Listing Agent Save You Money? is written by Kevin Vitali of EXIT Group One Real Estate.  I have 13 years of experience preparing and listing homes for sale.  One of my services is helping you put a plan in place to prepare your home for sale.   if you are thinking of selling your home give me a call at 978-360-0422 or email me at kevin@kevinvitali.com

Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford