Going through listing agent for normal sale

[Bienes Raices]

When you have a normal sale (not REO or SS), is it still a good idea to go directly to the listing agent and have them act as a transaction broker? Or is it better to use a buyer's agent since the contract and negotiations may be more complicated than in an REO transaction?

[Bill Gulley]

I suggest you get a buyer's agent as the transactional agent will not, can not, advise, they only facilitate the deal. Unless they are willing to take only the listing commision, there are nothing but down sides not having an agent. Not only would a buyer's agent advise, but they accept risks for the representations made, disclosures that should be made.

[Shane Woods]

Bill Gulley, I've been having this conversation with my wife, as we're looking to buy our first home. I'm glad my explanations to her are mostly accurate :)

From my understanding, the buyers agent's fiduciary duty is to you, the buyer. And by law they must have your (buyer's) best interests intended as they work the deal. The listing agent's fiduciary duty is to the seller, and must have the seller's best interest legally. Is this correct? Maybe I'm not using the right words for best interest, but I know I got fiduciary right :) It's a fun word.

[Jeff S.]

Personally I prefer to work with the listing agent. Having said that if you have an agent that really will put you first and will work for you then it is only right they get the commission.

When I did it the agents, especially the successful ones, would primarily show their own listings first, and sometimes exclusively if they had lots of listings as virtually all successful agents do, then their office listings next (higher agent/broker split), and would lastly show MLS listings.

I wouldn't take much comfort interpreting laws that protect you when you are conducting business. Agents need to feed their families first. There have been many dishonest agents in business so figure stuff out for yourself, protect yourself and don't count on laws to help you financially.

You are doing what you are doing for the reward. Don't be too surprised if others operate under the same set of principles.

[Bill Gulley]

Shane, yes you're right, but it depends as well, as to how your state looks at the issue in certian circumstances. A buyer's agent shouldn't be telling you what to offer, set a number, for several reasons, but some areas will say that the one who pays you is the master.

John Chapman is an attorney in Texas, not a RE type but he is a landlord and may be familiar with Texas laws of agency. I bet he could address this issue....

IMO, A buyer's agent will certainly owe you more attention and duty, but they may not be allowed to pass on information about the sellers motivations with respect to price, unless consent is given or it's made public. As an example, if the selling and listing agents were at an open house and the selling agent overheard the seller saying he would take X dollars, that agent may not necessarily be able to pass that information along to a buyer. Or, if it were overheard that the seller must sell by X date. So there can be limitations on what a buyer's agent can do, but in other respects the buyer's agent is representing the buyer. This can also be an issue of policy in an area set by a local Board of Realtors or even by brokers.

If it is a choice between having a buyer's agent and a transactional agent, go with the buyer's agent everytime, unless you know what you're doing and the listing agent cuts the commission, IMO.

[Shane Woods]

@Jeff, I didn't really think about that buyer agent mentality, I guess a little naive on my part. Thank you for bringing me back to reality!

Hopefully more do it "right" than not.

[Shane Woods]

Thanks @Bill. More good stuff to chew on. Your insight is appreciated.

[James H.]

Bill Gulley,

I am strongly considering not using an agent so I can have another 3 percent of negotiations.

I will be financing the the purchase. Between what the selling agent is required to disclose and what the mortgage company will require, what are some examples of things that can still happen that would have been prevented by having a buyer's agent?

[Bienes Raices]

I should mention that the house in question is a (potential) rental listed at 49K, not something I'm going to be living in myself.

[Bill Gulley]

Without representation, you'll have one less agent, company and insurance company to hold responsible if someting goes wrong. If you make your own assumptions about a property, it's all on you, if a buyer's agent makes representations, what was represented is on them, who knows what they may say.

I have heard of agents sued for not disclosing that there were kids next door! The buyer told the buyer's agent that they worked nights and was looking for a quiet neighborhood. The listing agent has no duty to tell about neighborhood issues. The family next door returned from vacation (or what ever the reason it was) and the pre-schoolers kept the buyer up. In that case the buyer's agent failed, and the agent ended up buying the property. Brokers are very adverse to law suits or even threats of such actions.

Now, you could tell your agent you want a property with a 12% cap rate, that's not reasonable to hold them to, but you could make requirements about a property or location, school district, fire protection class/service area or other issues that you could hold a buyer's agent responsible for.

No mortgage company is a substitute for due diligence or buyer's representation. They are not going to be responsible for maintenance or living there, neither is the appraiser.

The seller and listing agent only need to make those disclosures required by law, they may not be required to say that in a hard rain, the back half of the yard holds water for several days unless it's in a flood plain, that's not a flooding issue for the house.

Your buyer's agent is also held to a greater standard of care, beyond what a reasonable person might know, like the back yard flooding, especially if it is common knowledge locally or for that area.

If you really know what you're doing and you can get the 3%, go for it, 3% could be pretty cheap insurance too. Good luck

[James H.]

Thanks Bill Gulley,

I'm looking for up to 150k to purchase. 3 percent is 4500 bucks. A pretty penny for me to pay someone to tell me about neighbors they don't really know and about flooding issues that they probably won't know about either.

If the back yard floods during a heavy rain: How does the buyer's agent have an oppurtunity to know this when an individual might not? Other than just experience in a neighborhood? Are there things the seller or seller's agent is required to disclose to the buyer's agent that would not be required to disclose to an individual making an offer?

I'm not trying to nit pick or nay say what you've contributed. I am just trying to figure it out. My plan is to buy in a neighborhood in which I am quite familiar. I am a civil engineer and am competent in evaluating a site as well as the structure. I have a lot of knoweledge about building practices for different eras and hands on experience remodeling and rehabbing older houses.

So, my concerns are not about the site or the structur. I know all about lead, asbestos, cast iron plumbing, federal pacific electrcal panels yadayadayada, I can scope the neighbors for myself. My concerns all revolve around legal concerns and if I am paying the right price.

[Will Barnard]

This is a common debate, use a buyers agent or not. When purchasing a home for your personal use, I would suggest the use of a buyers agent who is required to have a fiduciary responsibility to you (even though that is not necessarily so).
For investors, if you can get the deal for less by not using one, I say, do that. It is all about the numbers and investors should have their own capability of looking out for themselves. All this stuff about having someone to sue if something goes wrong is hogg wash in my opinion. Only attorneys win most law suits and that is not a road you want to have to venture down anyways.

If in doubt, hire your attonrey to advice you on the contracts and addendums. Surly a few hours of attonrey fees is much less than 3% of the purchase price!

[James H.]

Originally posted by Will Barnard:

If in doubt, hire your attonrey to advice you on the contracts and addendums. Surly a few hours of attonrey fees is much less than 3% of the purchase price!

Will Barnard,

Very good point. I had not thought about doing this.

[Bill Gulley]

Bienes Raices, I haven't forgotten you with these attempted hijackings....LOL

It boils down to what could an agent advise, what might they be able to provide for you in terms of area, market, property valuations, ordinances and compliance, proposed zoning issues that might be around the corner, do you know if the property is in an alternate flight path for the airport? There really are endless posibilities of external factors and have nothing to do with the roof. A transactional agent would not need to mention any of these things.

Disclosures are made by the seller and given to the listing agent who then provides those issues with other agents and prospective buyers.

But, again, a Realtor is held to a higher standard than the buyer or seller, they have ethical duties to disclose and if they don't,can be held liable. If you do it yourself, you only have yourself to blame for not making any discovery.

If you approach a listing agent first and don't get the discount on the commission, then what?

Talking an agent down 3% is easily said, I never did it, if I accept the liability on a deal I'm going to be paid for it. Some brokers won't allow it, they may allow the agents to dicker some, but they may need consent on such a deal too, they are taking money out of the broker's house!

So, if it doesn't cost you any more for representation, why would you not do so and accept more liability when you can transfer such liabillities.

Besides, the agent is going to take you in their car, buy you lunch, lets you stop at the store for a minute, maybe even walk your dog, so why not use them?

[J Scott]

Originally posted by Brian Hoyt:

I am strongly considering not using an agent so I can have another 3 percent of negotiations.

You may not have that extra 3% to negotiate with...

It's quite possible the seller is going to pay a fixed amount (likely 5-6%), regardless of whether it gets split among two agents or whether the listing agent keeps both sides (even if the listing agent doesn't represent you).

You'll need to check the listing agreement (or ask the listing agent) to be sure...

[Steve Babiak]

I agree with Jason's last statement - the commission is set between the seller and the agent (and broker); whatever that amounts to, I doubt they will concede half of it.

[Bill Gulley]

RE Brokers,good ones, have a reputation to uphold which is worth much more than a law suit or threats of one. Brokers here, especially one of the largest in the state, will buy back a property in a heart beat, so it's not hog wash at all to keep agents honest.

I'd think that most investors in residential deals would have issues that would be so complicated that you would need an attorney unless you are not going through a broker, but that's not to say don't consult, by all means, if in doubt ask. And an attorney doing a contract review will be much less than a Realtor commission, if that's all they do, but really, they can't (or won't) advise in many areas. Attorneys here charge 10% to take care of a transaction and that may be with additional doc fees, usually get there in commercial deals.

Another solution is to get a license if ya need that 3% and want to act on your own.

[Will Barnard]

Bill Gulley - What I meant by that is the simple fact that countless imes, agents/brokers do NOT have your best interests at heart, only their own paychecks. I have personal knowldge of several examples. Regardless what their ethics state, they all will not act accordingly. This is not to say that some don't, they do.

Point being, IF you can get a better spread by going direct to the list agent, or get the deal over others by doing so, then i say doit. If it is for your personal residence, use the buyers agent. Simple as that.

[Jeff S.]

Not sure why a listing agent would discount their fee to 3%. They have more work to do dealing with both a buyer and a seller plus all the paperwork and closing. Before discounting to 3% wouldn't they tell you to get your own agent? The benefit of a listing agent selling their own listing is to earn both sides of the transaction.

[Kama Ward]

Shane Woods With either agent, do not use the professionals they recommend: inspectors, attorneys etc. These professionals rely on the agents for their living. OH yes, I learned this the hard way!

Get your own recommendations from another source- another investor preferably, or a friend with good judgement who has bought recently, or a quality contractor you happen to know.

All this changes with relationships-- if you develop a relationship with an awesome agent (rare but does happen with persistence). Take their recommendations for professionals if you don't already have your own.

Let's say you bought your first house, and you love it. And your agent was "great". Lots of people say that, right? Well, You got lucky- or you're oblivious- or there's a serious problem that may not even show up until you try to sell. Hey, cynical but true in my experience.

Buyer beware! Due Diligence Rules! It's all on you in the end!

[Kama Ward]

Also, I prefer fewer layers between the seller and myself- all other things being equal. I've found things go more quickly and smoothly that way. Unless the seller is crazy- then it still takes longer, but a layer or two keeps my drama level lower.