Using an agent to buy a house? That is soooo 20th century…

This post is not legal advice. For legal advice, consult an attorney directly (i.e. not via a blog).

This is Part I of a multi-part post.
Part I: Visiting the Property
Several months ago, I authored a post about buying a house without utilizing the services of an agent. It generated quite the conversation (concluding with this tasteful comment from our friends at Bloodhound Blog: “Entirely self serving, badly argued with serious errors of omission, it generated some pleasant acrimony in the comment section…”) and eventually led to the promise of a “blogging death match” between me and Ardell — okay, Ardell, it’s ON!

It used to be, way back in the 20th century, that a potential buyer had no way of searching the “market” for the perfect home. There was no single “market” (as in marketplace) for consumers because properties were invariably listed on the MLS, and MLS data was private and accessible only through an agent. Thus, to search the marketplace, the buyer needed to hire an agent who could then search the data for the perfect home.

The advent of the internet changed all that, of course. Today, while agents (or more accurately, brokers) still control the data, it is available publicly through innumerable search engines . Thus, a buyer can now find the perfect home without ever speaking with an agent — until it is time to actually visit the property before making an offer (buying a home sight unseen based on pictures on the internet is only for the very brave and the very foolish). As a result, most buyers at that point simply contact an agent (we’ve all got family, friends, friends-of-family, and family-of-friends who are agents and who would love to assist) who can then provide them with access to the property.

But that service (and perhaps others! Good agents are a veritable repository of helpful information concerning property) comes at a significant cost. The typical buyer’s agent expects to be paid 3% of the selling price as a fee for his or her services (with some portion of that going to the buyer’s broker). This substantial sum (do the math yourself — it is a lot of money for even an “affordable” starter home) travels a circuitous route from the buyer to the agent. When listing the property on the MLS (still the de facto marketplace) the seller signs a contract with the listing agent (more accurately, the listing broker). That contract entitles the agent to a certain percentage of the sales price (typically 6% but there are many exceptions). That commission is then shared via MLS rules with a buyer’s agent, with 3% usually going to the buyer’s agent. Accordingly, at closing, 3% of the purchase price is paid by the buyer to the seller, who then pays it to his listing agent/broker, who then pays it to the buyer’s agent/broker.

So if you want to see the property but don’t want to hire an agent because you don’t want to pay such a significant sum, how do you get in to see the property? Easy: Contact the listing agent. Way back when property values were skyrocketing, some listing agents felt that they should not have to assist a buyer in seeing the property. Those days — at least for now — are over. As TJ commented on my last post:

I think the time when sellers and sellers agents have the luxuary to pick and choose buyers on petty criteria’s like if they have a buyer’s agent or not is soon going to be history.

Contact the listing agent, let her know you want to see the property, and schedule a mutually convenient time. In this market, the listing agent should be more than happy to show the property to a prospective buyer.

[Part II coming soon: “how to get that 3% back into the buyer’s pocket” which will further discuss the services that might otherwise be provided by the agent.]

81 thoughts on “Using an agent to buy a house? That is soooo 20th century…

  1. Part II should be interesting. Please deal with the ethical issues regarding variable listings (which affects the ability to give money back).

  2. This should be fascinating to see how the listing agent gets to deal with the dual agency issue. Not to mention the fact that the seller already has agreed to pay their agent the entire commission, so the 3% is already gone…yeah, should be interesting.

  3. Heck ya Craig! I think I’ll start listing my houses with a 5% commission to me, and I’ll just have me or another agent sit there 7 days a week with open house hours posted so the buyers can just wander in then! The selling agent can take their 1% fee for doing nothing but writing the contract, and representing the buyer. Seems like a fine idea to me, oughta work just great.

    But seriously folks, shouldn’t the agent who represents the buyer actually see in person the selection of houses the buyer is seeing, so they can properly advise their client as to the merits/pros/cons of making an offer on the house that buyer wants to own???

    I would not like to put my name on a contract that says I represent a buyer when I haven’t seen the house in question, yet I’ve had offers brought in to my sellers where the agent has never seen the house.

    Is that qualified representation? Bet not.

  4. Canada is looking at eliminating dual agency so, I guess by your method, the buyers will be left as “no agency”? And in that case what we’re talking about is no requirement to hand over 3%… so my bet is you’re going to say the listing agent should renegotiate the listing contract and reduce the asking price accordingly, eh? But here’s where you really should be putting out a warning: To the buyer doing so you better be on your game because nobody (not the seller, not the agent) owes you anything and in no way is going to look out for you. Of course, there’s always a Dummies Book to help… and those HGTV shows (Ha!)

  5. Will, just to be clear, in Washington dual agency only exists if the buyer has signed a buyer’s agency agreement with the agent. IMHO, the only time that should happen is if the buyer has a relationship that existed with the agent prior to seeing the house (and not just in contemplation of seeing that house). So where a buyer comes in, not represented by an agent, the listing agent would only represent the seller (but would still be entitled to 6% in the hypothetical).

  6. Kary said, “…in Washington dual agency only exists if the buyer has signed a buyer’s agency agreement with the agent…”

    Sorry Kary, that is SO not true.Clearly if the Purchase ans Sale indicates Dual Agency as the check block, that is Dual Agency whether or not there is a “signed buyer’s agency agreement”. In fact in MOST cases of Dual Agency there would NOT be a signed buyer agency agreement.

  7. Will,

    When the State of Florida outlawed Dual Agency they replaced it with Transaction Brokerage. They did not replace it with something that left the buyer unpresented and the seller represented. Are you saying that Canada will be opting for Seller Only representation as the replacement for Dual Agency? Florida is the only State I know of that outlawed vs. diminished Dual Agency and they clearly did not go that route.

    More than half of the States (33 last I counted) opted for diminished Dual Agency via Designated Agency. That reduced the instances of Dual Agency to only those where the listing agent (not brokerage) was the agent for both parties.

    I’m surprised CA hasn’t addressed this yet in any way.

  8. Ardell, that is just wrong. That an agent incorrectly fills out a box on a P&S agreement does not create dual agency. Read the RCW and the buyer’s guide:

    RCW 18.86.020:

    (1) A licensee who performs real estate brokerage services for a buyer is a buyer’s agent unless the:

    (a) Licensee has entered into a written agency agreement with the seller, in which case the licensee is a seller’s agent;

    (b) Licensee has entered into a subagency agreement with the seller’s agent, in which case the licensee is a seller’s agent;

    (c) Licensee has entered into a written agency agreement with both parties, in which case the licensee is a dual agent;

    (d) Licensee is the seller or one of the sellers; or

    (e) Parties agree otherwise in writing after the licensee has complied with RCW 18.86.030(1)(f).

  9. Just to be clear, it’s subpart (c) above that says you need written agency agreements with both parties for dual agency.

    Also, if you didn’t already have a written agency agreement, you’d probably be breaching your duty to the seller to get one just to be able to represent the buyer. And since the commission isn’t affected, there’d be no reason to do so.

  10. We’ll leave that one to Craig. But I’d say that (e) “parties agree otherwise in writing” incorporates parties agreeing otherwise in writing at time of offer and acceptance via the Dual Agency box on the Purchase and Sale Agreement.

    What you are saying is that if all parties agree to Dual Agency in writing on the Purchase and Sale Agreement, after full disclosure and informed consent, that is not Dual Agency. I disagree.

  11. Why would a seller agree to dual agency if it didn’t otherwise exist? You’d be removing your ability to negotiate for them–which is probably one of the most valuable things you do.

    Also, if all you’re relying on is the check box, I think you’d be in a world of hurt not having any document which spells out your agency with the buyer.

    But what I really don’t understand is why the agent would check that box. It makes no sense at all, even assuming you could create dual agency that way. Dual agency is fraught with problems, and should be avoided if possible. Why would you want to create it if it wasn’t necessary?

  12. Ardell and Kary — I was just checking the statute to see if this has been addressed by the courts. Based on my (far from exhaustive) research, it appears to be an open question as to what would satisfy this requirement. However, I’d wager that Ardell is correct — if the agent provided the “Law of Agency” pamphlet then I think the PSA would be sufficient since it is signed by all principals.

  13. I view the form as being merely a disclosure, and if filled out wrong it’s merely an incorrect disclosure.

    The risk of being wrong if you check the box dual is significant. If you checked the “dual” box, but the court finds you represented only the seller, you would owe the seller $10,000 if they find out that the buyer indicated they would pay $10,000 more. Only if you were actually a dual agent would that be information that should be kept confidential.

  14. Leanne:
    I agree that if the buyer’s agent is getting a 3% commission (or even a 1% commission for that matter, given house values) then the agent absolutely should see the property before writing the offer (and should provide all other services expected of a full service agent). With such a commission then simply writing the offer, property unseen, would be substandard representation.

    That said, I think consumers should have the ability to assume some of the responsibility for performing their own due diligence. If they choose to accept that responsibility, they should be able to save most of that 3% commission. Frankly, I think your 5/1% suggestion is a good one, particularly in this market. A home that was “open” during business hours would almost certainly attract more traffic, and 1% (assuming house is in King Co.) is still fair compensation for the buyer’s agent given any reasonable dollar per hour figure for time invested.

  15. Craig, but what about Redfin, where the agent probably never sees the property, but rebate 2% thus getting only 1% (typically)? I don’t see why you would include that as being unreasonable.

    For 1% the buyer should realize they aren’t getting the same representation in that area. I don’t think it’s unreasonable that they wouldn’t go to the property.

    But again, I think this would be an area where it should be fully disclosed in the agency agreement just what is being provided, if it is limited.

  16. Kary said: “Why would a seller agree to dual agency if it didn’t otherwise exist?”

    Because they want their house sold, maybe?

    That you think they wouldn’t or shouldn’t, doesn’t change the fact that they do. A B/A agreement would be actually quite ludicrous to get into at the point where Dual Agency is the obvious scenario.

    If a buyer comes to you as the listing agent to buy the house, normally the seller does not want you to tell them to go away under ANY circumstances. If the buyer does not agree to NO representation and the seller wants them to make an offer and agrees to Dual Agency, as does the buyer, well there you go. Dual Agency.

    In fact in most cases of Seller Only agency (as I have written about in the past) most times the buyer thinks that IS Dual Agency. People not understanding NO AGENCY is more of a problem than Dual Agency.

  17. Kary — I appreciate your point. I agree that the consumer should have the choice as to the scope and extent of any representation, and if they want to utilize the Redfin model then they should be able to do so. I would argue that, at 1%, Redfin remains grossly overpaid.

  18. Kary said, “I view the form as being merely a disclosure, and if filled out wrong it’s merely an incorrect disclosure.”

    The Purchase and Sale Agreement is “merely a disclosure”??? It’s a binding contract…except as to agency issues, and then it’s a disclosure? I don’t think so.

  19. Ardell wrote: “n fact in most cases of Seller Only agency (as I have written about in the past) most times the buyer thinks that IS Dual Agency. People not understanding NO AGENCY is more of a problem than Dual Agency.”

    I’d agree clients not understanding is the problem. But I guess I’ve never seen a situation where the buyer didn’t understand that I represent the seller, and insisted that I represent them too (which is actually closer to representing neither of them).

  20. Craig, are you ready to list your house? We can get started tomorrow, I just need a few signatures. Would 10:00 be good or is 11:00 better? :-). I will post the 7 day a week schedule for your open house hours right here once we’ve gotten started!

    But really, buyers agency requires competence, as well as disclosure from the buyers agent, and if the agent doesn’t even see the property they are negotiating on behalf of a buyer for, they should disclose that this may not be to the buyers advantage. If they don’t, then I see trouble. Even if the agent sees the particular house, but didn’t see the other 20 the buyer didn’t like, that agent isn’t going to be giving the best advice and insight. Just looking at comps online isn’t enough.

    It’s a risk that buyers put themselves into, and many of them don’t see the risk thru the dollars or pennies they think they are saving. Buyers now are being taught to put the showing burden on the listing agents so they can save some pennies/dollars … but perhaps we’ll be hearing that this method doesn’t work as well in a correcting market as it does in an upward market.

    Some buyers are very savvy, and don’t care about the competence of their buyers agent. I don’t know very many of these people.

    I wonder what percent of the foreclosures have owners who bought via FSBO, direct from a builders (sellers) agent, or with less than full service agents? It would be an interesting study.

    And, Ardell, if I list Craig’s house, and am sitting there Wednesday morning at 10:00 am, and in walks a buyer who is not currently represented by an agent, you think that Craig is going to be ok with me suddenly agreeing to act as a dual agent? Item ‘e’ shouldn’t be used in this example.

    I represent my seller when I list the property – and if my sister client wants to buy that property, well, then with permission of the parties, I could be a dual agent; but it may be better to just get another agent to come in and advise the seller or the buyer.

    But, how do we choose? Do we draw straws to see if Craig gets me, or if my sister gets me? Do we care? Well, yes, I think we do. So, with that scenario, I’d sure hope that Craig and my sister agree that they are both smart people and can make their own minds up regarding price and terms, and that I should be a dual agent. Or if not, that they are very comfortable being represented by Mr. or Ms. Not Me, but I’d sure want a clear answer from both Craig and my sister of the direction they want me to take. It’s not always a bad thing to be a dual agent, but you can’t be frivolous about changing from a sellers agent to a dual agent.

    And, for Mr. Random Buyer who comes in and wants to buy Craig’s listing, heck no. I only represent the seller. If buyer wants representation, that can easily be arranged via another agent.

  21. “And, Ardell, if I list Craig’s house, and am sitting there Wednesday morning at 10:00 am, and in walks a buyer who is not currently represented by an agent, you think that Craig is going to be ok with me suddenly agreeing to act as a dual agent? Item ‘e’ shouldn’t be used in this example.”

    First of all, Craig would not likely be so dumb as to agree to pay the 3% buyer agent fee to his listing agent, if the buyer walks in without an agent.

    Second, I’d wager that if the buyer were going to walk away and not make an offer, unless Craig agreed to Dual Agency at the listing agent price only, Craig would sell his house! He don’t need no steenkin’ representation be that Single Agency or Dual Agency.

  22. Leanne — pennies? Nobody is talking about pennies. We’re talking about significant sums — thousands of dollars. Why mischaracterize it?
    On another note, I think you and I are in complete agreement regarding dual agency. Whatever the agency relationship, the client(s) must provide knowledgable consent. In your scenario, I’d tell your sister to get an attorney to write her offer and I’ll cut the sale price by 1% (after all, you did great work with that ridiculously burdensome open house I requested so you should get the full five ;))

  23. Pretty simple argument laid out here with the commission. Like many things in life, there is a lot more behind the scenes.

    First if you just use the listing agent, they have a fidicuary duty to represent the seller. Do you think they are then going to give this unrepresented buyer the whole story of the value of the home…heck NO…their job is to get the highest price for the seller. Sure you can try and look as some comps, but do you know the entire story behind the sale of these “comps”.
    1) Job loss
    2) Divorce
    3) Family Tragedy
    4) Dream home on other side of town
    5) Moving out of town….I could get to at least 20 without stressing the lobes of my brain too much.

    Point is…the buyer’s agent will most likely save you a lot of stress and money knowing the true value of the home, going through escrow, asking for repairs if needed and all the time this takes etc.

    I am a big fan of letting experts do their work. Sure you can “save” $7500 painting your home…it is not that hard…but your opportunity costs of the time it takes to paint your home vs doing the job that pays your bills, spending your time with family etc. will most likely wash this out!! This argument sounds like the shopper going to a mall and buying a $200 dollar item that is not needed for $160 and feeling that they SAVED money???

  24. SBREV:
    I think buyers are capable of researching the market on their own and coming up with a fair offer. If they have any doubt, in this market they can just low ball. If they’re even remotely close, they should get a counteroffer. “Going through escrow,” inspection issues, lender issues — these can all be dealt with by a relatively sophisticated buyer. They may take time and stress — but $10-$20k’s worth? Almost certainly not, particularly if the buyer has retained some other knowledgable professional to assist with the process (say, one that works by the hour or for a very reasonable flat fee).

    I too am a big fan of letting experts do the work — but on the other hand I think one must consider the work at issue before spending thousands of dollars on that expert. We’re not talking about brain surgery here, and the cost of a buyer’s agent — given the work they will perform — is prohibitive (in any sane system anyway, which the current system is not as it has evolved over time).


  25. Ardell wrote: “First of all, Craig would not likely be so dumb as to agree to pay the 3% buyer agent fee to his listing agent, if the buyer walks in without an agent.”

    That’s pretty much the agreement in 90%+ of the cases. I’m not sure what you’re getting at with that statement.

  26. Going back to the previous discussion with Craig suggesting buyers go without agents – Did you end up buying a vacation home? I’m curious how your experience was “working” in an area you weren’t familiar with.

  27. Ardell wrote: “I think you are missing something, Kary.”

    I think you’re missing something–an agency agreement. Yes the consent to dual agency is there, but that doesn’t mean you have dual agency absent an agreement signed by the agent. Clearly not having such an agreement is sloppy practice–at best. At worst it’s just plain wrong.

    Perhaps you could go down to King County Superior Court and get a judge to agree with you, but there’d be only one reason you had to do that. Because you didn’t take the time to actually have a buyer’s agency agreement signed.

    If you have a buyer’s agency agreement, chances are 100% the judge will agree that you represent both. Absent that, you’re just going to be in front of the court trying to explain why you don’t have a written agreement. And I suspect more often than not, you’ll lose.

  28. # 23, so..y about the name, my . keypad isn’t wo.king all of a sudden. The dolla.s/pennies analogy was since some buye.s may only ask fo. a small amount, like $500. Call it what you will, I want to buy an . ! .ight now!

  29. Geordie — my wife and I looked at several vacation properties (in the Leavenworth and Greenwater areas) courtesy of the respective listing agents. We’re still looking for the dream cabin. However, you can bet your bottom dollar that, in this market, I will continue to ask the listing agent for access and I will write my own offer. To date, the listing agents have been very happy (at least on the surface) to assist.

  30. Ok, being without my . is awful. I do want to finish my discussion tho about listing’s house. So, let’s say the buyee with no agent comes in, and wants to buy the place. I am sellees agent, and this no-agent-buyee wants to make an offe. with his 3% agent commission going to pay his closing costs. and I likely say “yea! with a full list offe. yes the selle. will pay the buyees closing costs. yea!” And, maybe we negotiate a bit, but I still am sellees agent, not buyees agent, not dual agent.

    Just because a buyee wants to keep/save a 3% fee that usually would go to a buyees agent, doesn’t mean I feel the need to abandon my duties to my sellee. I see no compelling .eason to become a dual agent. If the buyee wants the house, we’ll find a way to have mutual acceptance, and it will be my and my sellee’s choice as to how to use that 3%.

    And this is a new keyboa.d. I apologize to the sellees and buyees of this blog…!

  31. In my experience the well-educated “super buyer” is actually a lot harder to work for than the average buyer – especially when it is someone you have known for a long time (referral, past client). You sometimes end up chasing your tail trying to provide all of the information they demand prior to making their super informed decision. And this person who sucks up your time for weeks is the the person who wants you to discount your professional value and cut your commission. For me, most recently it ended with their decision to stay put and not buy – lots of hours put in, no income earned at all.

    I look forward to the day when fee-for-service is the norm. We’ll get what we deserved based on how much time we put in and how much expertise we offer. Until then agents just have to survive in the current business climate with the outdated rules.

  32. And, by the by, what I meant by this sentence “Some buyers are very savvy, and don’t care about the competence of their buyers agent. I don’t know very many of these people.” is that I believe buyees expect competence of thei. agent. Mine do.

  33. leanne, not only is there no compelling reason to become a dual agent, there are compelling reasons not to become a dual agent. You represent the seller and mutual acceptance is not the end of the game. Why would you abandon your client for the inspection phase of the process?

    I really think there is little chance that a buyer would demand that you become their agent. Most unrepresented buyers would either prefer no representation or to be fully represented.

  34. Leanne,

    You are cracking me up without the r. Good luck with that.

    Seller Only agency works as well as Dual Agency. They both work well as long as there are no problems and they both fall short when there is a problem. As soon as the buyer wants their Earnest Money back, they no longer understand that part about agreeing to represent themselves.

    I have not personally had this problem, but I have seen it happen to other agents more than once.

  35. Kary,

    A buyer comes to your listing. You are the listing agent. Your seller wants to you to keep your eye on BOTH sides of the transaction and keep on top of the buyer and his lending, etc… This has nothig to do with Buyer Agency Agreements. If the seller wants you to stay in control of the whole show, and not just stand on his side of the fence, then Dual Agency comes into the picture, if both the buyer and seller want that. It has nothing to do with a B/A agreement nor would one be appropriate in this situation.

    We are talking about buyers calling listing agents and B/A agreements have no place in that discussion, but Dual Agency may occur.

    Let’s say seller is a Big Boy like Craig and the buyer wants to buy the house but doesn’t know much about the financing part, and wants at least some if not all of the commission, and some help. All parties may agree to Dual Agency in that type of situation. B/A agreement would not make any sense. Dual Agency may and can occur via the P&S Agreement with the informed and written consent of all parties in that P&S Agreement.

    I know it is currently “in fashion” to leave the buyer totally hanging out in the wind, but every buyer is not necessarily wanting that, and it should not be forced upon them.

  36. Well first, as a listing agent you do have some rights to keep on top of the lending process–as provided in the financing addendum.

    Second, if the seller wants you to stay on top of the buyer, the last thing you’d want to be is a dual agent. The seller is wanting you to monitor and if necessary take action against the buyer.

    Finally, I don’t understand this sentence: “We are talking about buyers calling listing agents and B/A agreements have no place in that discussion, but Dual Agency may occur.” You’re basically saying you want agency, but nothing to define the agency other than the state statutes. Again, not really a good practice. If you’re going to represent someone as their agent, you should have a contract defining the terms of the agency. In any case, I certainly don’t see a downside to having a written agreement.

  37. Ardell,

    Interesting topic. I hope in part 2 you’ll discuss “implied agency” where a buyer acts on the information provided (ie contracts, disclosure information etc) by the listing agent yet doen’t want the listing agent to act as his/her agent (no dual agency). The seller is represented by the listing agent and the buyer represents himself/herself yet relies on the listing agent for information and material facts about the property. In California, courts have upheld lawsuits against real estate agents offering advice yet not involved in the transaction (I call it the next-door agent or a friend of a friend was an agent and told me this) and having no formal agency agreement signed.

  38. Dave, first this wasn’t Ardell’s piece, it was Craig’s piece.

    Second, what you’re referring to is just the liability of the agent for representations made. It’s a result of representing the seller, not a result of implicitly representing the buyer. You could even have the buyer have their own separate agent, and where there was liability for the listing agent, it would still exist.

    Listing agents may or may not be responsible for misrepresentations made to a buyer. Probably the clearest example of that would be if the agent made a representation about zoning without consulting with the seller or any other source. Washington law provides a partial shield to the seller for such liability.

  39. Ardell – No, we are looking at transaction brokerage as well. The Buyer may be unrepresented or represented by a different office but not dual agencied (as in not even by two agents within a single office).
    Frankly, I don’t get it but I guess it’s something you need to experience to figure out (especially if you are a part of a big office).

  40. Ardell, I got my r by going to another computer. It’s like driving someone else’s car – it feels weird at first.

    I still think that my seller, Big Boy Craig, is going to expect me to remain his sole agent, and not become a dual agent if I show his house to Mr. Random Buyer who I don’t know and don’t represent.

    Just because Mr. Random Buyer needs a referral to a lender or lenders, and wants the buyers agent commission paid towards closing costs or a price reduction doesn’t change my obligation to represent my seller.

    And, once the inspection occurs, I have no obligation to represent the buyer on that, it’s my obligation to represent my seller, clearly.

    So, unless the buyer is darned savvy, they should get their own buyers agent. And, the buyer should really, really try to remain likeable – if the line is crossed between likeable and reasonable to ‘I’m smarter than you’ or other such obnoxious behavior, their offer tends to be seen as too much trouble to deal with, or worse, an offer from a bottom feeder … Without a buyers agent to calm things down, sometimes things just can’t get put back into motion. People get very emotional, and sometimes unreasonable, during price/terms negotiations, and often it is the agent for one side or the other that can calm the seas and bring the parties back together.

    A buyer without their own agent, won’t have the level of trust with a sellers agent as they would with an agent of their own, and if said buyer becomes angry or upset with the seller, can the listing agent really pursuade them to come back to the table? Maybe yes, maybe no, but far easier with their own agent helping.

    We all know as agents that it’s often the nuiances that make the deal, and a buyer who understands prices well, may still make a few missteps on his own behalf; you can bet that an experienced sellers agent is going to be making sure the seller doesn’t give up anything too fast and will not be pointing out a buyers missteps, or all choices.

    There seems to be the feeling that the sellers agent should be worried that this non-represented buyer will walk away if the sellers agent doesn’t:
    a) become a dual agent, and
    b) give up the commission that would pay the buyers agent.

    I simply make the point to the buyer that “I must represent my seller client, and you can still purchase the property thru me, but you will have no representation, or I can give you the names of a couple of agents to talk to so you can choose one of them to represent you, or of course you can go select your own agent.” And if they want me to write their offer, I write whatever they want, although in a practical matter if they suggest something impossible, such as a 3-day closing for a financed transaction, I can explain what really needs to happen, and offer to give them time to call their lender, or go with my suggestion of a closing date that could actually work. That kind of work is not representing a buyer, it’s detailing the offer so it can function if the terms and conditions are acceptable to seller.

    And the commission? Well, really that is going to be the sellers decision as it relates to the entire offer. If the buyer seems difficult to work with, do you think most sellers will give them the farm? No, they’ll probably not be as generous as they might if they think the deal is fair, and firm. And, if the buyer chooses no representation, then indeed, I am going to have to do more actual work. Meet the inspector and the buyer during the inspection, yet carefully not offer advice or representation; I’ll coordinate the calls from the appraiser for access (yes, some appraisers call seller direct, but they usually call the agents first, and even afterwards if they’ve got questions); I’ll do the normal listing agents job and check w/lender for updates during the loan processing timeframe; I’ll meet buyer at the house if they want to get in to measure, or to bring in their hardwood floor guy to start a bid, or all of those things that come up, that normally the buyers own agent would do. It’s not a big deal, but it is more time, and I expect to be compensated. I don’t have to collect 3% to do that work – but it’s going to be up to the seller and me to determine what we’ll agree to do in every offer situation, and we may not agree with a buyer as to the amount being 3%, or 2%, or $500, or nothing. You just don’t know till you see the actual offer, so make no promises. And, it’s not your decision to make: it is the sellers decision. You guide and suggest, you advise, but the seller chooses.

    The main issue is the bottom line, and whether the buyer appears reasonable to deal with. A difficult buyer may well cost themselves more money than they might if they had a skilled agent negotiating for them — some people can be their own worst enemies!

    Never underestimate the power of “nice” when negotiating with sellers or buyers or for yourself. Lots of buyers may not really understand this, but there is no hell on earth worse than working with someone who isn’t nice.

    Pushy wins no awards when negotiating with homeowners who rarely sell, even when dealing with banks, pushy doesn’t win.

  41. Will,

    I don’t think TB worked out so well for Florida. They did that 12 or or so years ago and I don’t think anyone has copied them. Big red flag. Not that you’ll have much say in the matter but Designated Agency is way better than Transaction Brokerage to resolve the bulk of Dual Agency issues.

  42. The case you make is really against listing agents, not buyer agemts. If listings can be found easily online then it’s the seller who doesn’t need representation. The seller, if they are confident in their ability to negotiate, yet they don’t want to hassle with showing the house, writing contracts or managing it to closing, needs only the name of a buyer agent who they can refer all buyer calls to, then offer to pay he buyer’s fee to the buyer agent – 1%, 1.5%, 2%, whatever, to show the house and handle all transaction matters with no representation — if they are unsure about the contract, they can get an attorney to look it over. That way the seller saves 4 to 5%, the buyer gets the house for less and has representation. The seller who can negotiate understands the buyer agent will be negotiating for the best price and representing the buyer, but that would usually be the case anyway — the seller accepts the risk to save money, or to price lower.

    If the seller has the informal referral agreement with a buyer BROKER who doesn’t have to split the commision, even 1% would work — the buyer broker would have a stream of buyers coming to him/her from seller referrals.

    I haven’t thought it through thoroughly, but for liability purposes, it’d be best for the buyer to have representation.

  43. I would say that the current market conditions are completely reverse of what Leanne is describing.

    As a home buyer I would walk away from a seller that was not cooperative. There are so many homes on the market that are begging for buyers why would I put up with an agent who doesn’t want to show me a property, or show the seller my offer or any other number of things being discussed on real estate blogs lately.

    I can say that I am definitely not a real estate agent and have never been involved in a realty transaction. We will however be buying our first home soon and I have spent the last year educating myself and reading blogs such as this one.

    I am currently on the fence between 3 options when we buy our home.

    The first is to use Redfin, I have sure spent enough time at their site and have never paid them a dime.

    The second option would be to find a buyers agent that would agree for me to pay them by the hour. I am a consultant and would be fine if they keep track of every hour they spend on me and bill me accordingly (at the agreed upon price of course). I will happily pay them outside of the loan I am making on the property and outside of the negotiation with the sellers agent. It would be in their best interest (more money) for me to never buy a house and for me to continue to require their services. This financial benefit to stringing me along would assure me that they are not trying to force me into a home just to snag a percentage of the entire purchase. When I am sure about a home and we buy it then their services would no longer be needed. If I spend 10 hours with them asking questions and becoming educated, or walking around the house 20 times to absolutely be sure then they are of course fine with that because they are being compensated.

    The third would be to negotiate with a seller directly and forgo all agents. I can easily see who owns a property and contact them directly. If they are in contract with a listing agent then I would be fine to wait until that contract expires.

    In any case we plan to use an attorney to cover our legal basis. I plan to spend a great amount of time understanding every form and contract that I sign.
    Reading this thread it almost sounds like there are agents focused on buyers and agents focused on sellers. I think that in this market it would probably be more prudent to focus on the buyers needs and less on the sellers.

    My heart goes out to everyone in a bind with their home but I am not about to become a charity with my first home purchase.

  44. Pete, I get a different perception of this thread, I hear the participants focusing about the ‘difference’ in representing sellers and buyers and whether it is appropriate to represent both.
    Out of curiosity, why would you consider option #2? It seems that you are well on your way to being a savvy buyer. What could a buyers agent bring to the table for you and what, in your mind, would be fair compensation?

  45. Regardless of market conditions, there are always people who want to “go it alone,” and since life is all too short, my feeling is, let them.

    And if they want to feel like they do as good a job as a professional and save all that money, fine.

    Real estate agents provide value, and that value is greater for people who, in turn, value that value. Some of the value is in intangibles, such as evaluating livability or consulting on the cost and recoupment of improvements. Some of the value is quite tangible, but difficult to evaluate – there is no “control” transaction to reference.

    Again, life is short. If you want to buy or sell without an agent, go right ahead.

  46. Pete wrote: “The third would be to negotiate with a seller directly and forgo all agents. I can easily see who owns a property and contact them directly. If they are in contract with a listing agent then I would be fine to wait until that contract expires.”

    You’d have to wait for six months after the expiration if the agent found out what you did. In any case, the sellers would be at risk for paying the entire commission.

    BTW, when you actually get out there and start looking you’ll discover most of the houses on the market are junk, and that’s why they’re not selling. When you find a nice house, the sellers can be more demanding. The exception to this is if you’re willing to buy a fixer or a cosmetic fixer. There the buyer is really in control in this market.

    Even in this market, approximately 1/3rd of the houses get a pending offer within 30 days. I’m assuming those are mainly the nicer houses. Nicer houses can still even get multiple offers.

  47. Definitely, some buyers and sellers will always choose to go it alone. However, I caution those who have never bought a home, to figure out a way to be comfortable having a competent buyers agent represent you, not just regarding the details of the contract, but also the details of “is this property good enough to buy”. If you’ve never owned before, how do you know the nuiances of real estate? Just looking isn’t enough IMHO.

    An attorney is a fine second choice, but the attorney is not going to go out ‘into the field’ and advise you on the merits or negatives on the specific property in question.

    I have talked many clients out of buying certain homes, and feel that a competent buyers agent is the voice of reason in helping a buyer choose which property to buy.

    Trying to buy your first home with only 10 hours of your agents’ time likely isn’t nearly enough. If you’re budgeting/considering paying by the hour, I’d recommend planning on 50 hours of your agents’ time, take a look at this scenario, and count up the time:

    * first meeting, either phone, email, or in-person to discuss your wants and needs (wish list vs. must have list), price range, geographic area, pre-approval information, etc. Sometimes this first meeting is actually 3 or 4 contact points. 1 – 2 hours
    * first showing: 3 – 8 properties 2 – 4 hours
    * second showing: 3 – 8 properties 2 – 4 hours
    * third showing: 3 – 8 properties 2 – 4 hours
    * fourth showing: 3 – 8 properties 2 – 4 hours
    * fifth showing: 3 – 8 properties 2 – 4 hours
    * sixth showing: 3 – 8 properties 2 – 4 hours
    * yes, there very well could be more appointments to see properties, this isn’t a race to find something the fastest, the goal is to find the best, and if can take months, not days.
    * you’ve found the right place, go back again: 1 – 2 hours
    * writing the offer: 1.5 – 2 hours
    * agent presenting and negotiating the offer: 2 – 3 hours (can be over several days)
    * discuss sellers counter-offer: .5 – 1 hour
    * you can’t come to agreement with this seller at this time: .5 – 1 hour
    * 7th showing: 3 – 8 properties, 2 – 4 hours
    * 8th showing: 3 – 8 properties, 2 – 4 hours
    * 9th showing: 3 – 8 properties, 2 – 4 hours
    * hmmm, maybe let’s go back and see if that seller will
    reconsider our last counter-offer: 1 hour
    * wrap up offer for mutual acceptance: .5 hour
    * home inspection: 3 hours (unless a small condo)
    * discuss home inspection, decide if asking seller to correct anything: .5 hour – 1 hour
    * negotiations with seller re: inspection: .5 hour – 2 hours
    * reinspect corrected items from inspection prior to closing: .5 – 1 hour
    * go back to home, measure rooms again, you’re excited now that the negotiations are done, and want to see your new home one more time: 1 hour

    This is just a start. Don’t forget all the emails you and your agent exchange, and phone calls, as well as the agent planning time to set up the showing tour. If we billed incrementally for our time, such as attorneys do, you would be quite surprised at how high the ‘few minutes’ of our behind the scenes time adds up.

    The advice of a good agent in choosing which place to buy is critically important. When I show properties, we let the average or below-average ones sell to ‘someone else’. You don’t want to be that someone else.

  48. Bob – I would consider option #2 because I do value what a professional real estate agent brings to the table however I find myself feeling a bit of distrust even though the buyer agent is supposed to be on my side.

    When I look at the financial reward, my buyers agent gets paid whenever I buy .. anything. I am sure most RE agents take the buyers interest above their own financial gain but with my option #2 I am convincing myself they will do that by giving them a financial incentive for me NOT to buy.

    I have no idea what a good hourly price would be but I would be open to whatever a good RE agent determines they usually command on an hourly basis when taking the average of the percentage method of payment for hours worked. I am fine with doing my own grunt work and research to nail down my options to a few homes, so would be comfortable paying this rate for their valuable time.

    Kary – it could be that the new(er) townhomes in Magnolia and Queen Anne that we are interested in are just ‘junk’ but I have been watching them sit for months before falling off of the MLS sites and then being re-listed for a reduced price. We have lived in San Francisco and Boston and have watched those markets detioriate as well. I am no expert but I feel that Seattle will follow the trend of other markets in the next couple of years.

  49. Pete — I’d reconsider your decision to use an agent AND an attorney. That is redundant, unless you’re using a “full service” agent. I have not utilized Redfin’s services, but my understanding is that they essentially write the offer and do little else. For that service, you pay 1%. At least one attorney in town — 😉 — provides that service for a very reasonable flat fee of $795, which is far less than the 1% you’re paying Redfin.

    An attorney can just as easily write the offer — and quite frankly very well may do a better job, particularly if there is any “wrinkle” to the transaction. For example, we have a client who bought a home as a tear-down. There were existing tenants. Client made it clear to Redfin that he wanted possession on closing to begin the demo. Unfortunately, tenants still in possession, and seller failed to give adequate notice of termination. The PSA written by Redfin did not protect this buyer’s interests at all on this issue, and as a result he is now in a sticky situation with the tenant, who is suing everyone for wrongful eviction.

    [There are a lot of topics here, and today is a work day, not a blogging day, so I’ll just chime in where I can (is it too early in the comment thread to be plugging my business?).]

  50. Leanne — you talk a lot about convincing buyers or sellers to “come back to the table” in order save a transaction and get it to closing (#42). As a professional who is paid outside of closing, I have a different perspective: if my client does not want to buy the property, then I do everything I can to rescind the transaction. I have no self interest in actually getting the transaction to closing. Another difference between agents and attorneys.

  51. Well, I see Leanne’s point.

    If the Seller changes their mind and doesn’t want to sell at all, that’s one thing. And if the buyer truly doesn’t want to buy the house, that’s another thing.

    In my experience, what happens is that one party or another gets bent out of shape and forgets why they got involved in the first place. In a commercial transaction, I say, fine – deal with people you like -there’s another 4% cap rate out there. But if we’re talking about a place to live, and you’ve already decided it’s the right place, but the Seller’s a jerk … maybe the Buyer needs a reality check: WHY LET JERKS GET IN THE WAY OF YOUR DESIRES!

  52. Pete, just to clarify, I am an agent, but I’m still interested in what exactly we can bring to the table for customers like yourself.
    What advice or expertise can we offer that you find valuable and worth compensation?

  53. “An attorney can just as easily write the offer”

    Or just bypass the attorney, too — read the contract and do a little studying online. Unless you live in a state where an attorney has to perform the closing, bypass them, too. If you’re going to do-it-yourself, go all the way. And if you have to use an attorney find one who is destitute and will do it for $15.25.

  54. Mike — a willing buyer and a willing seller don’t really need a binding contract, as they will both perform voluntarily. However, if you want to create a binding contract, you should hire an attorney (or, in this context, an agent, although that will cost a lot more). As for doing escrow yourself — well, if there’s a lender other than the seller, I don’t think that will work. Finally, as for finding a destitute attorney who will do the work for $15.25 — you get what you pay for.

    Or was this tongue-in-cheek?

  55. Mack — good point. You need at least a facially valid contract for the lender. If there was a flaw hidden in the contract that rendered it unenforceable, I suspect the lender would not notice and the contract would still suffice to get the loan. But that is just conjecture.

  56. Re: #42 Leanne and # 52 Craig, and #53 Mack,

    Craig, Mack summed it up pretty well. Many times the buyer & seller really do want the transaction to work, but blow up over some minor issue, very often it is the skill of the agents to get them back together to talk some more to see if agreement can be reached.

    What you offer for $795 couldn’t possibly be enough to do this, and perhaps you have a structured way of your continued involvement for being availble at additional fees when things get bogged down for emotional reasons.

  57. Leanne — In this context, I’m not worried about my clients’ emotions. If they decide they don’t want to proceed with the transaction, then I’ll do everything I can to unwind the transaction and get them out of it without any liability (i.e. for a buyer, the full return of the earnest money, and if the seller, rescission of the contract so there is no risk of a suit for specific performance). My clients are adults. It’s not my business to decide what is a “minor issue” and whether they really do want to close the deal, notwithstanding their current feelings. If they want out, I get them out. In all but a very few circumstances, I do NOT try to convince them to proceed with closing when they do not want to do so, whatever the reason.

  58. Ardell & Mack, how many times over the years have you gotten the Sunday night phone call from a past client who says ‘We weren’t really looking, but we saw an Open Huse today and we want to buy it, can you meet us right away?’, so of course you arrange a time to see the place. 8:30 on a Sunday night, and we’re in the kitchen or living room, talking turkey!

    More often than not, when we get there, we don’t agree that the place is “the” one, sometimes it’s location, price, condition, freeway noise, whatever. At that point, we have to cool the client down from their rush to jump in. Of course the client can still buy the place, but at minimum we give them our reasons as to why we think not.

    It’s nice when it’s a good house and we can affirm that they should buy it, but equally so, it’s nice when they want to hear what we’ve got to say, and understand that perhaps moving forward isn’t the right choice for this property.

    Just think if these same clients called a flat fee agent, or Craig? They’d simply be writing up an offer to purchase, with no advice about the merits or drawbacks of the property itself.

    That’s where I think buyers have the most risk, by buying the wrong place.

  59. Craig, when you’re $1500 apart and your client (seller or buyer) just tells you he ‘won’t deal with that unreasonable a–hole anymore’, do you just say, ‘ok fine, that’s $795’?

    Or, do you suggest they sleep on it, and talk again in the morning?

  60. I think I just figured it out – Craig, we’re on two different pages :-).
    For $795 you don’t negotiate the deal with the other party – you just write the paperwork, and let the client do their own negotiating, correct?

    I agree with your statement regarding being in the transaction already – and that’s one area an attorney might be better than an agent – getting the buyer or the seller out of the contract. We can’t give legal advice, you can!

  61. Leanne — we will negotiate on behalf of the client if that’s what the client wants. If the client wants to negotiate, and keep us behind the scenes, that’s fine too. If we’re $1500 apart and my client wants to walk, I don’t try to talk them out of it — that’s their decision. The flat fee does not necessarily expire with that offer (I’ll be updating my web page (“Fees”) with the current particulars, so check that page in a day or so for more info).

    Some buyers desperately want and need the hand-holding and intimate counsel of an agent. Other buyers have no need for such services. It’s frustrating that, as the system has evolved, the former is well served but the latter can easily WAY overpay for the agent services actually used (e.g. writing the offer, minimal consulation).

  62. Can’t wait for part 2…and yes, the lender depends on the purchase and sale agreement. I have a transaction where a mother is selling a home to her daughter, we (and escrow) will require a purchase and sale agreement/contract.

    I am wondering, Craig, if your buyers would have an issue locally with listing agents showing them homes? And if an buyer working with an attorney/agent is up against a similiar offer where the buyer is being represented by a Realtor(R); if your offer would get a fair shake?

  63. Rhonda — in yesteryear’s market, yes, I believe our offers were discounted — if not dismissed entirely — because they were written by an attorney. Today, however, I think every offer is taken seriously. If there are multiple offers, we may still not get a fair shake, but overall I think the climate is conducive to attorney-written offers. It would make for a great Consumer Protection Act claim, but the odds of ever getting the incriminating facts (who would admit to this?) are extremely low.

    I’m not sure what you mean by an “issue locally” — but typically that is what happens, the listing agent shows the home to the prospective, unrepresented buyer.

    Finally, I’d be happy to help that mother or daughter with a contract. Have them give us a call — or at the very least do NOT let them pay an agent a significant sum for this service (>$1k) — which, btw, very well may constitute the unlawful practice of law.

  64. Craig, obviously if you feel you need to improve your odds for your client, you can become licensed and join the NWMLS! It doesn’t have to be one or the other you know.

  65. Actually (to use my 9 year old niece’s favorite word), it IS one or the other, unless I become a broker. The attorney Rules of Professional Conduct prohibit an attorney from operating a business with a non-attorney. Because my agent’s license would be linked to my broker, and because I would be sharing the commission with him/her, the RPCs prohibit me from becoming an agent.

    Besides, its fun to be the rabble-rousing outsider fighting for change.

  66. Actually! My neice does that too – does yours toss her head when she does it? 🙂

    So a law firm cannot hire a broker and agents in-house as employees? Or independent contractors? Is the RPC ruling regarding a partner more than employees/independent contractors?

    I’m not suggesting you change, I’m just curious. I’ve often wondered why law firms don’t have real estate wings.

    You rabble rouse all you want, and when you need full service agents, you know a few good ones. Can we pay an attorney a referral fee? I believe I’ve heard we can, but again, not sure.

  67. Craig wrote: “Finally, I’d be happy to help that mother or daughter with a contract. Have them give us a call — or at the very least do NOT let them pay an agent a significant sum for this service (>$1k) — which, btw, very well may constitute the unlawful practice of law.”

    I’ve wondered whether firms like Redfin will get in hot water if they try to move into a state where attorneys are more active in real estate transactions. But for the fact that Redfin will show properties for an hourly fee, they seem to be setup more like a law firm than a real estate firm. For example, as I recall, one of the facts our Supreme Court mentioned in the case allowing agents to complete forms was the need to do them quickly, compared to attorney office hours. In this area Redfin might be more like a law firm. But also, where they may not typically see the property, again more like a law firm.

    I think Craig was trying to apply this to a slightly different situation (an individual agent writing a contract for a fee). I agree that’s possibly problematic. But I’m saying something more. The more that an agent/firm limits what they do in the way of services, the more likely it is that what they’re doing could be seen as the unauthorized practice of law.

  68. Leanne wrote: “Doesn’t the State of WA allow an attorney to become a broker without the 2 year salesperson rule (pass the test, take the clock hours of course)? I thought they did?”

    Yes attorneys in certain instances can become brokers or certified instructors prior to two years of being an agent. The process is not entirely clear to me.

  69. Kary — I think your analysis is right on the money. Any less-than-full-service agent could run afoul of the rule established by Cultum v. Heritage House, given the language of that case.

    Leanne — no, a referral fee is probably not allowed under the RPCs. Could a law firm hire a broker as an employee, and then allow the broker to sign the licenses of agents, who are also employees? An interesting question. I don’t think that is prohibited by the RPCs, but it may run afoul of the MLS rules.

  70. Craig, I don’t think it’s the wave of the future or anything, but I don’t know why it would run afoul of MLS rules, do you have any thoughts as to why?

    To me, capable is capable, and if I’m working with another agent on a transaction, I want capable. I see no reason why working with an agent who was employed, either as an employee or independent contractor thru a law firm would be a problem for me as an agent.

    I can’t say that a law firm real estate agent would be any more attractive to a potential client or less. Valid competition allows for all agents to discuss their individual services and fees with clients, and clients can choose the model they want to work with.

  71. Well, that was just a shot in the dark about the MLS rules — you weren’t supposed to call me on it! I don’t have the RPCs in front of me, but as a general rule they prohibit lawyers from being in business with non-lawyers. Also, there are problems with the legal fee being paid by someone other than the client (a problem when representing the buyer) and also with the sharing of legal fees. I think those rules would generally not allow an attorney to hire a broker. If a firm was to employ agents, the only way it would work — if at all, as the RPCs can be very restrictive — would be if the attorney was also a broker who then signed the agent’s license.

  72. This discussion of combining a real estate business with the practice of law is far too complicated. The a much easier solution would be for Craig to marry a hot real estate agent! This assumes there currently is no Mrs. Craig, or if there is, that she wouldn’t agree to step aside to allow this business arrangement. 🙂

  73. HAH! There already is a Mrs. Craig — and she’s a totally hot DOCTOR! Ya’ know, momma always said to marry a doctor… So, no interest in any other “business” arrangement. But I like the way you think, Kary…

  74. Hi, I am in the San Francisco bay area and looking to buy. I want to search and see properties myself, and then let an agent or real estate lawyer (if I foresee a complicate transaction) handle the paperwork. I am not so concern about the commission but I just want to search and check out the property myself. One listing agent showed me the property and I also went to an open house. Then I searched something I liked and I called the listing agent to schedule a visit. That agent told me either her or her associate would be at the appointment. Her associate came and I told her I was looking on my own. She showed me the property “like a sales talk”, I want to turn on all the stuff to make sure they were working and she said an inspection would take care but I started turning on the switches and then she helped me. At the end I told her if my want to offer, I would have someone to draft and present it to her. Then she said she thought she would automatically became my agent and draft the offer. So I told her you were send by the listing agent representing the seller. (If she weren’t so seller-oriented, I might have considered that because I haven’t decided which agent to become my agent). If I use her, that would be dual agency and yes, I read the book which tells buyers to run from dual agency because of conflicting interests. You see some people got into real estate just for the money!
    Anyway, when I call a listing agent next time, I will ask if the listing agent is willing to show me without becoming my agent. To me, if the listing agent isn’t, it’s like a sales person who wants to get commission without wanting do to any product demo.

  75. Beginner,

    State laws are different in California than Washingington regarding who represents whom. Though in your situation, you may not have had a different experience, it is important to point out the difference for our local readers.

    In California, anyone who hangs a license with the same broker of record, and agent in the listing agent’s office, represent the seller. So the only to have your own agent is to not call the listing company at all. Double check, but I haven’t seen any change n their agency laws in the last 5 years.

    Washington has Designated Agency where the only person who represents the seller is the listing agent and every other agent with any company represents the buyer. There is only Dual Agency if the agent is the listing agent, not the listing company, in WA vs. CA.

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