Can You Get a Better Deal by Dealing Directly with the Listing Real Estate Agent?

Home buyers can be tempted to cut out the buyer’s agent in the belief it will save them money. Lindsie Tomlinson clarifies the issue

RE/MAX Crest Realty Westside
May 27, 2015

Listing agent luxury real estate home with view

In real estate transactions, listing agents represent sellers, while buyers’ agents represent buyers. Over the years, I’ve met a number of people who believe that if they deal directly with the listing agent, they can “get a better deal” when they purchase a property, and they’ll pay less for it than they would if they had their own real estate agent, because the listing agent won’t have to split the commission.

It’s a theory worth investigating.

Working With a Realtor (Designated Agency) is a document published by the British Columbia Real Estate Association that describes the relationship between buyers, sellers and real estate agents and contains a number of points that will help you understand exactly why it’s so important for buyers to consider working with their own agent.

In British Columbia, there are three ways you can work with a real estate agent: Designated Agency, Limited Dual Agency and Customer Relationship. Here’s a quick overview of how these work:

Designated Agency

In a Designated Agency relationship, the real estate agent works for the buyer. Your agent must provide undivided loyalty to you (the client) by protecting your negotiating position at all times, and disclosing to you all known facts that may affect or influence your decisions.

In a nutshell, your real estate agent works only for you and protects your best interests at all times.

The buyer’s agent is paid by the listing real estate agent sharing the commission on the property transaction.

Limited Dual Agency

In a Limited Dual Agency relationship, the real estate agent represents both the buyer and the seller in the same transaction. Both parties need to consent to this and the real estate agent must deal impartially with both parties. They must not disclose the motivation of one client to the other, what a buyer is willing to pay or what terms they may agree to (other than what is contained in the offer), or what a seller is willing to accept.

Basically, the real estate agent works for both the buyer and the seller in a limited capacity and keeps 100 per cent of the sale commission.

Customer Relationship

In a Customer Relationship scenario, the listing real estate agent is working for the seller, and the buyer proceeds without a real estate agent working on their behalf. The real estate agent cannot give the buyer advice or negotiate for them, but they can write an offer to their client on the buyer’s behalf.

The real estate agent cannot recommend or suggest a price, negotiate on your behalf, disclose any confidential information about their client, or inform you of their client’s bottom-line price point. They can, however, explain real estate terms to you, assist in viewing properties, prepare and present your offer and counter offer, inform you of lenders, and identify and estimate costs involved in a transaction. Again, as there is no other agent involved, they keep 100 per cent of the commission.

So Should You Use Your Own Real Estate Agent When Buying?

One thing I always point out to my clients is that the listing price is not necessarily the sales price – or the actual market value, for that matter. Sometimes the listing price is too high and is above market value.

Unless you have an experienced real estate agent who is working solely for you, and can research recent comparable sales (and negotiate the price down for you), it will be difficult or impossible for you to find this information and evaluate it to determine with confidence that you’re paying the right price.

Listing real estate agents will sometimes list properties below market value in an attempt to start a bidding war. In these cases, you may be competing against several other parties. If the listing real estate agent is writing your offer, they can’t recommend an amount that is reasonable for you to offer. How will you know you aren’t paying too much?

It’s also worth knowing that the majority of complaints and lawsuits against real estate agents are a direct result of a real estate agent representing both a buyer and a seller in a Limited Dual Agency relationship. One side (or both) didn’t feel they were being represented fairly. (I can understand that: If you were in a lawsuit, would you want the same lawyer representing both sides?)

When you hire your own real estate agent you get an expert dedicated to guiding you through the buying process and negotiating on your behalf. Yes, they’ll receive a commission for their services – but compared with the risk of going it alone and overpaying for your home, you might think it’s well worth it to have someone looking out for your best interests.

And remember that when you hire a real estate agent to represent you when buying a property, you don’t pay them yourself. The seller pays the commission to their listing real estate agent, who hands on a portion of that to the buyer’s real estate agent.

If you go directly to the listing real estate agent and expect them to reduce their commission because they aren’t sharing it with another real estate agent, they might do so – but at what cost? You will never know if you really got a deal or not.

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