Save Thousands by Purchasing a Home Without a Buyer’s Agent
Many home buyers have been convinced that they need to use a buyer’s agent to purchase a home. If you are somewhat comfortable in the home buying process, purchasing without a buyer’s agent is a viable option that can save you thousands of dollars. Let’s address some of the myths when it comes to buyer’s agents:
Myth #1: Buyer’s agents are free for buyers
The most common myth is that the buyer’s agent is free for buyers. The buyer’s agent usually gets paid a 2.5% commission from the selling price. Since the buyer is the only person bringing money to the real estate transaction, that 2.5% is coming from the buyer’s money. With the average home price over $350,000 in the GTA today, are you willing to pay more than $8,750 for the services of a buyer’s agent?
Myth #2: Buyer’s agents have the buyer’s best interests in mind
In theory the buyer’s agent should be representing the buyer’s interests. However the incentive structure currently in place encourages buyer’s agents to act against the client’s best interest particularly in the negotiation stage of a home purchase.
Generally the buyer would like to get their desired house at the lowest possible price. However, since the buyer’s agent commission is tied directly to the sale price of the house, the higher the sale price, the higher their commission. Why would the buyer’s agent negotiate as hard as possible for their client since the more they negotiate the smaller their pay cheque will be.
An even bigger problem for the buyer is the agent’s motivation to close the deal as quickly as possible. When a buyer is interested in a particular house the buyer’s agent’s main objective will be to close the deal otherwise the agent will need to schedule more visits, drive the client to many more houses and go through the negotiation process once again. The buyer’s agent does not get paid unless the buyer's offer gets accepted. There is incredible pressure to persuade the buyer to overbid. If the buyer overbids, there is a greater chance that the offer will be accepted. Many agents’ will pressure and use sales tactics against the buyer to increase the price rather than convincing the seller to drop their price.
Do you really need that pressure when making the most expensive purchase of your life?
Myth #3: Buyer’s agents are better negotiators than you are
Looking at the TREB monthly market update indicates that the average house sells for 98% of list price in the GTA (2007 YTD)
TREB Monthly Market Update
This means that the average buyer’s agent is unable negotiate more than the 2.5% fee they are charging the buyer.
Myth #4: Buyer’s agents will have access to more houses
Many buyer’s agents selectively choose homes to show clients. They may not show their client homes that are For Sale By Owner or homes listed on MLS that pay less than a 2.5% commission.
Next time you sell a house suggest to the listing agent that you would like to offer less than the standard 2.5% commission to the buyer’s agent. They will likely respond that buyer’s agents will ignore your listing. How could this be? If buyer’s agents were truly acting in the buyer’s best interest, they would show them any house that meets their needs regardless of commission.
This limits the universe of houses that are shown to you, the buyer. Going without an agent gives you access to all houses on the market and you will never be pressured into buying a house.
10 Steps to Buy a House Without a Buyers Agent
1. Never sign ANYTHING with a real estate agent until you are ready to make an offer.
2. Determine your financial capability to purchase a home, get pre-approved for a mortgage. Identify location and type of home that is aligned to your financial capability.
3. Find a good home inspector and lawyer. Use references from friends or relatives to do this. Become very familiar with the standard TREB real estate forms.
TREB Real Estate Forms With Explantions
4. Sign up for free daily MLS email listings that show new houses and price changes when they are available on MLS. You can find agents on the web who do this, also agents you meet at open houses may be willing to include you on these distribution lists. It is important to get on more than one of these lists since some agents only provide selective houses in their email listings. You can also bookmark any houses your are interested in from realtor.ca. A firefox plugin called Update Scanner can be used to identify when a change to a listing or listing search occurs. Firefox Update Scanner Plugin
5. Start tracking the market you are interested in via realtor.ca and going to open houses. Use a spreadsheet to track specific houses you are interested in. Capture price drops in your spreadsheet and when the house sells, call or email the real estate agent to ask about the selling price. Essentially you are building your own comparable market analysis since this information is closely held by real estate agents.
6. Call or email listing agents to schedule viewings. Most have no problem doing this. However if you come across a listing agent that does not want to give you a viewing, just tell them you will notify the owner of the house. Feel free to let the owner know (leave a note at their house) that their listing agent refused to show the house to a prospective buyer who is preapproved for a mortgage. I’m sure the owner wouldn’t be pleased considering their listing agent is not acting in their best interest.
7. When you find a house you are interested in determine what the market value is given your comparable market analysis. After looking at the market for a few months you will probably have a better feel for the market than many agents do. Ask the seller to complete a seller property information statement (Form 220).
Seller Property Information Statement
8. Make an offer. The agent may want you to sign a buyer’s representation or buyer’s customer service agreement. Only sign this agreement with the listing agent, not another agent that is brought to the table. You did all the work to find the house, why should another broker get a commission from this deal. Also ensure that the representation is for the specified property only otherwise you may be stuck dealing with the agent if the deal falls through. Your offer should be 2% to 2.5% lower than what you would normally have initially offered. Thus your MAXIMUM offer should be 2% to 2.5% below what you believe the true market value to be. Make the offer conditional on obtaining financing, passing home inspection and lawyer review.
9. Now this throws the ball into the agent’s court. If they can convince the seller to take the low offer, they keep the full double-ended commission. If they can't convince the seller to take the low offer, they may give the seller a rebate to bring your offer up to market value. Let the seller and seller agent work on rebates not you. Worst case, the agent is not rational and will not give back any of the commission to the seller and the seller won't accept anything below market value. You just need to walk away from the deal, another house will come up.
10. Obtain financing, perform a home inspection and get your lawyer to review all the paperwork. If all goes well, waive the conditions and continue with closing on your new home.
如果按这个思路走， 那么连卖房经济都不要，不是更省钱？
if cutting out all the agent fee is your primary concern, then looks for "for sale by owner" only. don't forget,even if there's no agent, the "owner"'s primary interest is to sell the house to you at the highest price possible. you are not g'teed the lowest price if you cut out all the agents: buyers & sellers.
be open, do talk about the fees w/ your agent; at the same time,
consider and respect the value of their services added to the process. don't focus entirely on how much they are making.
many experienced agent saves you more money (and time, your time is your money) than their commission.
at the end, it's really about who you get as your buyer's agent. individual experience may vary
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