Friday, May 21, 2010

Is there a benefit in working with the seller’s Realtor when you buy a home?

Some consumers want to work with the seller’s Realtor because they believe that Realtor will reduce his/her commission if they don’t have to split the commission with a buyer’s Realtor. This thought process continues: a smaller commission reduces the seller’s cost to sell and effectively lowers the buyer’s purchase price.

There are a couple of holes in that theory.

First, the sellers and their Realtor signed a contract agreeing to the Realtor commission before the house was listed for sale. The standard-form listing contract used in the Greater Phoenix area doesn’t say the commission is dependent in any way on whether 1 or 2 Realtors are involved. That language can be added to the listing contract by the seller & their Realtor but it’s not standard and it’s not required.

As an aside, buyers who expect the seller’s Realtor to reduce their commission because the buyer doesn’t have a Realtor are effectively asking a complete stranger to take a pay cut after half the job is complete. And it’s not “only 1%”. If the commission is 5% of the sale price, a 1% commission reduction is a 20% pay cut.  (1/5th = 20%)

Second, buyers who work with the seller’s Realtor are actually getting limited representation in their purchase. The seller’s Realtor still owes the seller the duty of getting the highest and best price for the home.

Our broker, Jay Thompson of the, wrote a really eloquent blog post explaining why the “I’ll save money by working with the seller’s Realtor” logic is as holey as Swiss cheese.  He breaks it down into dollars and cents. And sense.

I’ll just say this: if you end up in divorce court and your ex hires a high-powered lawyer, you’d get yourself a lawyer too wouldn’t you? Sure, not hiring your own lawyer might save you some money. But you’d be on your own in divorce court and you could end up like a bad country song: “I lost my house, my spouse, my truck, my shirt and even my old sad, tired dog in the divorce. . . .”