With the massive shift in technology the home buying experience is becoming as easy as a click of the mouse for some tech savvy consumers. Many are opting out of using a realtor to represent their interests as a buyer and taking a go at it themselves. Why Not? I see a house I like, I go view it, if I like it I put in an offer and pocket the 2.5% the seller is saving and HELLLLLOOO hardwood floors.
If only it could be that easy. The truth is, many buyers actually end up spending more by representing themselves because they are not focusing on what really can affect the pocket book. So are you really saving any money by buying without a realtor? Let’s break down some common misconceptions the do-it-yourself buyer has.
1. I’m acting as my own agent so I am saving 2.5%. This is based on the notion that without the buyer agent the seller doesn’t have to pay 5% to sell a home but they are ASSUMING that the listing agent has a commission rebate when bringing in the buyer. While some listing agents will reduce the buyer commission, it is rare they will eliminate it completely.
It is also much more common these days for the listing agent to reduce their fee (say to 1.5%) to secure a listing but will keep the buyer commission at 2.5% as a way to act as an incentive for them and to have the seller save money from the start.
2. I know this area inside and out, nobody is going to tell me anything I don’t already know. Looking at houses on MLS only tells part of the story. It isn’t as real as being in a house and knowing the features. It isn’t telling you that Mr. Smith next door likes to leave Sparky outside at 6 a.m and it surely isn’t telling you what homes are selling for. The intricacies of real estate are much more than what you see in the media and it really does take a full time professional to know exactly what you need to know.
3. I can negotiate a way better deal by myself. This isn’t a $20 dollar poker game with your friends and If It was a poker game, it would be the equivalent of the realtor knowing what you have in your hand and bluffing you. Make no mistake, professional realtors love the thrill of the deal and they are very good at making their case. What information do you have in your arsenal? Do you know the sales, current listings, days on market, sale to list price ratio, the listing agents average sale price…the answer to all the above is likely a no and because of that you will likely crumble at the negotiating table.
4. The listing agent totally loves me and is looking out for me. From the first viewing to the home inspection you really need a completely objective opinion on a property. While some agents do act with complete integrity, there is a strong argument among many that it is impossible to fully represent the interests of two parties. In truth, the listing agent’s loyalty typically lies with the seller and although “helping” you out, they are still the listing agent first and foremost.
5. I know what this house is worth. This has been touched upon several times already because this is the most crucial mistake buyers make. Do you know what the truly comparable homes in the area have sold for? Have you done adjustments for the pluses and minuses of this offering? How long has this home been on the market? How old is the furnace/air conditioner/windows/appliances?
While you are focusing on saving a percentage, the home you are buying could have been sitting on the market for 90 days and you are paying above market value for the product. It has happened several times to my clients who have sold and purchased properties in rural areas with the listing agent and surprisingly multiple offers were on the table… 100 days into the listing!!!
When taking all of these things into consideration it is very easy to make the case you aren’t doing yourself any favours by acting as your own agent. Having buyer representation not only puts you in a better position to make the right investment choice… it’s also pretty fun having a personal chaperone (it can be gruelling trying to book viewings without an agent).
Most realtors offer some form of buyer rebate on commissions (just like listing agents). My personal clients receive 20% cash back on every purchase that they can use towards closing costs OR put directly towards the purchase price. Whether through a closing gift, free home inspections or cold hard cash, you can rest assured that you will be getting rewarded for making the choice to realtor up! Happy home shopping.