It seems that many potential home buyers feel that by working with the listing agent directly they will get a better deal than if they get their own representation. The idea is that since the listing agent will get "both sides" of the commission they will reduce their fees. While in some occasions commission reductions do occur, it rarely means the buyer has gotten a better deal.
The first thing to realize is that the listing agent has a contract with the seller, and has contractually agreed to look after their best interests. When a buyer makes an offer through the listing agent the seller does not have to accept concurrent representation (formerly known as dual agency and now known as transaction brokerage in Alberta). In fact, in the process of completing the listing contract the homes owner is given three choices for representation – sole agency, customer status, or sole agency with the option of transaction brokerage on a case by case basis. So, if you write an offer with the seller's agent they may request that to their agent that you accept "customer status" in the transaction (customer Status is where the agent owes you no fiduciary duties). Or, they may request that you find another agent to represent you. If both parties agree to transaction brokerage the roll of the agent changes significantly (that's a topic for another day).
So keeping in mind that the listing agent has an existing relationship with the seller, it's also easy to see that the listing agent wants to sell that house, not necessarily the best house for you, at the best price. A buyer with their own representation will get more advice about comparable properties and the value of the home in question. When you walk into a home with Sheldon, he will quickly give his honest assessment – there is a home around the corner for a way better price, or this is crap, or this is a great deal. While the seller's agent can provide information on sales of comparable properties, any advice they give you has to be shared with the seller. Can you imagine a listing agent saying "I think this home is over priced" knowing they'd have to report that back to the seller?
The point is, you may save a couple thousand dollars in commissions by working with the listing agent, but that really doesn't matter if you pay 5, 10 or 20 thousand too much. How will you feel about your thousand bucks off when you discover some pertinent information was not disclosed to you because you are essentially unrepresented?
Not sure……BUT buying through comfree seems to leave both buyer and seller feeling happy as no one has paid extra or lost some of the final price through commissions.
What about the 7 out of 10 who fail to sell? Are they happy too?
Must be seeing different stats Duke. I’ve read that 85% of houses on Commfree sell. Even if it is lower than that, the opportunity to save $10k in commission is enough to give it a shot.
Lol. Wait a sec. If the seller saves the commission, then the buyer still paid the same amount. If the buyer saved it then the seller didn’t save anything and it cost them time and effort if they did sell. Reality is that many, many people need the assistance of someone who not only markets their property for them, or just shows them property. Fact is when people couldnt give away a property on comfree awhile back people were turning to professional help. We certainly had an increase of activity from frustrated sellers who had enough of no activity. I guess the proof is in the pudding. If comfree is so great why won’t they also let you list with a REALTOR? What are they scared of.
Not even on the best day of fabricating their own stats could they claim that kind of sales ratio. Fact is their stats aren’t verified by anyone. btw do you work for them?
Just wondering what service Realtors provide to buyers? What are the criteria to measure that Realtor is working for buyer?
- Login to MLS and compare prices in last couple of Re sold and on sale for same kind of house?
- Presenting the offer to seller’s Realtor
I heard that most of the time Realtors’ work together as buddy to make it deal.
Lol…getting a little tense here? I have sold with both Realtors and comfree and both worked fine. There certainly is added convenience in using a realtor. The time I used comfree I had a lot of time on my hands and could accommodate viewings etc. As far as the costs went, going with comfree allowed me to bring my price down to attract a buyer. Both of us saved some money in the process. That being said, I like the fact that a realtor puts another party between you and the buyer. I am sure there are horror stories about private sales where the buyer continues to hound the seller anytime any little issue or question arises. Bottom line, both options have advantages and disadvantages. You have to consider your situation and how willing you are to commit yourself and your emotions to a negotiation process that may or may not end up saving you a few thousand dollars. Personally, I will probably list with an agent when I sell again in the future. However, if I was sitting with a $400K mortgage and the market value of my house was only $405K, I would probably be tempted to try on my own first. It would be very frustrating to sell your home and owe money to the bank after paying commissions. I have a couple friends who got into the market with 5% down in 2008 and they are both in a position like this. They live in a new development in Spruce Grove. One recently lost his job and the other’s business has been slowing….time will tell if “for sale” signs will be out on their lawns this year.
Not sure where you heard the buddy comment from. In most cases we try to cooperate with other brokers. We are mainly trying to fascilitate our clients desires to buy or sell afterall. However things aren’t always as simple as they seem and our fiduciary duties to our clients sometimes causes conflicts between agents. The real estate industry has rules in place like many professions do, to deal with those types of disputes.
The two things you mention, are certainly things many good agents will do. Having said that I have done over 2000 transactions and there is a certain advantage that my experience can bring to my clients especially if I was dealing with someone who is representing themselves. I can give my clients many different options on not only how to structure their offer to best obtain their goals but I can also advise of potential problems and pitfalls that their offer and the property they are buying may have. And yes I do review the values of the properties that my clients are buying, the titles and histories of those properties. I aslo weed out properties they shouldn’t see for various reasons as well as what disclosures they may want to request. For example you quite often come chat with us on the blog asking us advice on what are good areas to buy in and so on. All I can say is that if there was no value to what I offer as you’re suggesting I wouldn’t exist, nor would the real estate industry anywhere. The fact is that things aren’t always as simple as they seem and many people don’t have the time to invest in gaining my experience and knowledge working for them. My goal is to save my clients money and protect them. Many of my buyers have also become sellers and buyers again with me so maybe you just haven’t had a great real estate experience yet.
Thanks Sheldon Johnston and Sara MacLennan.
I have couple of friends as Realtors. They tell me how they find work around to make mortgage approval, make a sale working behind the scene, work closely with banker to get foreclosure listing from inside, work closely with inspector and lawyer to make a deal. The real good property came as foreclosure they (group of Re, banker and buddies) buy that RE before it came to MLS. Do some 10-15k work and relaunch in market. They tell me inside story of Real Estate industry that makes lot of people to think that it’s easy to find a satellite programmer then a good Realtor.
Is there any list of statement of work/assignment that buyer’s Realtor do? What are the criteria to measure a Realtor? It’s pretty same like hiring a consultant.
I am looking forward for your predication for next 6 months or a year RE market in AB. Looking forward for any advice for buyers who are sitting on a lot of cash with zero debt.
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There is great article in MacLean’s about Canadian RE and debt problem.
http://www2.macleans.ca/2010/02/02/awash-in-a-sea-of-debt/
thanks,
Currently, I don’t see comefree working all that well because a lack of move up buyers browsing the site, but as the younger generation takes over the market these sites will definitly be more popular. Especially if they can automate parts of the paper process and syndicate. Though, I’ve noticed that owners tend to be terrible negotators. Sometimes kicking off the negotiation with, “well thats the price but it might be a little high so don’t be afraid to go lower”
You need better friends. I will address a couple ouf your points. In my mind there is nothing wrong with them buying property before it hits the market. If the bank and or court are not willing to wait till it hits the open market then that is something I think they should look at. After all real estate is there business.
As for people working closely together I would agree that’s done. Each party has a role to serve and at the end of the day they are all responsible to their principle. It’s no different than a stock broker who’s familiar with stocks and trends buying stocks and some times they buy in groups as well.
As for a list of task that a buyer agent does that depends on the agreement between the buyer and the agent. A buyer can be represented a number of ways. Contractually as a client or as customer with the agent owing no fiduciary duties to them. Some agents do nothing at all but just write the offer and some take care of every aspect and detail that they possibly can.
Its up to the buyer to determine the service they require and then my recommendation would be put that in writing.
Interesting article Ron, Thanks for posting the link
A question on related topic – do you think MLS website (realtor’s portion) should be open for all?? I mean, they can have like monthly subscription fees but in that way an average user can atleast see whats the current value of their house etc. I would like to know other perspectives on this..
Sheldon I don’t work for Comfree. I actually live in Australia but will be heading to Edmonton to live in the next year as I have family there. I have been scanning your blog for info on property. I have been pleased with the info I have obtained from your site.
The thing I don’t understand about realtors is that one is working for the buyer and one for the seller. Doesn’t it just come down to who has the best realtor which will determine whether the buyer or seller got the better end of the bargain? I like to do research and am willing to pay market value. Comfree allows me to do that (from what I can tell as I haven’t used it yet).
PS the 85% claim is on their website. Does Canada have false advertising laws? Surely they can’t state that figure if it is a long way off.
I think you miss the point. If the buyer and seller save the commission it might be the difference between being able to afford a house and not OR being able to sell a house and not. An extra $10K commission onto the market value of a house might vbe the diff between being able to afford it.
In terms of negotiating maybe it does depend on the strength of the negotiator. Most people make assumptions that the value they negotiate is based on what they see and fail to grasp what they are missing. Some buyers assume that every seller is reducing the commission off the price, some expect they are going to save that money. In the end there is more than just price? Do the sellers know what disclosures they need to make or do buyers know what they should get?
RE stats. There are many people who disagree with me on a number of issues on this but many of these people have also questioned their stats. There is no reporting mechanism in place for their stats. There is No way to verify or cross verify their information. I know many sellers have told me they have never reported their sale price to them. Are they basing off the list price?
If it is as good as they say then wWhy do they restrict sellers from putting their properties on the MLS listing service as well. What are they afraid of?
I don’t know. Why would they care where else a person lists their property? I thought Comfree get an upfront payment. After that they couldn’t care less where else you flog the property. How would they even know where else the property is listed? Are you sure that statement is right Sheldon?
Heres “the” example of things converging towards online transactions actually
http://maps.google.com/help/maps/realestate/
The fact is MLS stats are also fabricated, I mean sales to listings excludes expired listings that never sold (i.e. expired) and I’d assume comfree does the same thing…excludes houses that were taken off the system.
The other wildcard is time frame, because if you said since comfree started 85% of the listings that weren’t terminated were sold you’d almost definitely be correct. Bottom line though is both the Realtors and ComFree manipulate the numbers.