Reader Question: I have found a home, and I want to make an offer. There are stories about why and why not it is a good idea to use the listing agent. What are the pros and cons of going directly to the listing agent to make an offer?
Monty’s Answer: Some homebuyers never realize there are pros and cons. Some will seek out the listing agent because they believe they can save money by negotiating the buying side of the commission down. Some agents promote this choice in very subtle ways.
The broker divides commission internally to the listing and selling agents
Savings can happen because the listing agent may double their payday with both “sides” of the sale. Some customers believe part of that “extra” fee may be used to bridge the gap between what a seller will accept and what a buyer will offer. The buyer (or the agent) may propose that if they raise their offer, the agent will reduce the buyer-side commission to help close the gap. The desired effect is the buyer can buy a home for less than they may have paid using a different agent. Also, If there are multiple offers, the listing agent has an enormous incentive to ensure their buyer is the winner.
The listing agent
Some listing agents see agency law as complicating such an arrangement. Individual states can be more intent on enforcing agency rules than others. States generally believe well-defined agency relationships and the associated oversight will result in fewer consumer complaints and a more professional real estate workforce.
Other agents think differently. Some agents work dual-agency successfully. How is the market performing in your price range? If the market is overheated, and they cannot keep homes in inventory, the agent logic may be to find another buyer that does not have this requirement. If the market is slow or the house has extended market time, some agents see a concession as an opportunity to help their seller. Or to be able to turn their attention to more productive assignments. They do not want to lose a sale.
You may be able to negotiate a more favorable price.
The time spent in negotiations may decrease.
You may garner information that a buyer-agent would not.
The agent may give up information that they should not.
There is a reduced chance of miscommunication.
You may have an advantage in a multiple offer environment.
The seller may be suspicious and question their agent’s motives.
The agent may use the double-agent scheme against you.
None or few of the hoped-for benefits materialize.
The agent could refuse you, which could negatively impact your offer.
You asked for my opinion, and I shared how it works. Read what I think here. The current system includes the multiple listing services, real estate companies and agents, the National Association of Realtors, and state regulators. They are working a system that is in large part, dysfunctional. We have yet to see a coherent alternative.