But think about whom Realtor’s actually work for in most transactions. Their commissions are generally paid by the Seller. That means they have a contract with the Seller to sell their house. If they successfully arrange for a qualified buyer who agrees, executes and closes on the deal, they receive their commission.
Sure they have to place the property on the MLS online, advertise the house, hold open houses if necessary and present offers as they come in, but if they consummate a sale, they get paid. Ideally, some Realtor’s would only work with Sellers if they could.
This can also be a conflict of interest for Buyers. If you are looking to purchase a house, do you have to pay the commission to a Realtor that you decide to work with? Generally No. If the Realtor that you are working with helps you find a house and you agree to a deal, they get paid their commission… from the Seller. Who did they really work for?
In most cases, they also work for the Seller. Even though they are helping you… the Buyer, by giving you advice and showing you houses in the area. They are still paid by the Seller of the home you end up purchasing.
Do you see the conflict of interest here? If both the Seller’s Realtor and your Realtor are being paid by the Seller, what kind of offers are they making on your behalf.
I have actually witnessed a situation where a Buyer told their Realtor to place an offer for $199,000, but I am willing to go up to $215,000 if needed. The house was listed with an offering price of $225,000
Guess what “your” Realtor is obligated to do when they present your offer to the Seller and Seller’s Realtor?
It went like this.
I have an offer from a young couple that wants to offer $199,000 for your house. I believe this is a nice offer, they have been pre-approved and their purchase has no contingencies. I have also been told that they are willing to go as high as $215,000 for the property….
What do you think the Seller and Seller’s Realtor are going to do? Accept your $199,000 offer?
Of course not, they will counter your offer higher than the $215,000 and then have you counter offer back with $215,000.
Did “your” Realtor help you with this deal? Did they fight for your best price? Did they get paid a higher commission on $215,000 than on $199,000? Who did they really work for?
When you are dealing with a Realtor, you need to know who they work for before you allow them to negotiate on your behalf.
For many Realtor’s, Sellers take up too much time and effort. Driving around, looking at houses, never finding the right house… it makes them wonder if you will ever buy a house. Or maybe you will find a FSBO, For Sale By Owner and cut them out of the transaction entirely.
At least with Seller’s, if someone brings them a Buyer… they get paid their commission. I hope you can see why many Realtors, don’t particularly like working with Buyers.
Remember there are many great Realtors out there. But as a Buyer… you should always be concerned with and know who is paying their commission? If you are looking to buy a house or know anyone that is considering it, please make sure to share this information with them.
For a simple solution to this problem, check out my new book entitled – How Much House Can I REALLY Afford? – on Amazon.com.
This article is just one of the many “Common Pitfalls to Avoid” that are covered in the book. Any one of them could cost thousands of dollars, cause headaches, plenty of stress and arguments in the process.