Written by Glenn Necklen
In today's fast paced Real Estate market, many consumers think they can "go it alone" when buying a home. This misconception is only supported by the myriad of free websites that provide basic listing information about homes for sale. However, most people aren't aware that these sites not only provide limited information about properties, but the information they do provide is often incorrect or outdated.
Licensed agents are the only ones who have access to the up-to-date Multiple Listing Service (MLS). This database of broker listed properties is the best and only source to accurately find properties for sale. Licensed agents are trained very well in utilizing their local MLS system to search, filter, and forward listing information to buyers. In addition, due to the centralized nature of the database, the information provided is current- usually within 15 minutes of the data submission from the listing brokers.
The core aspect of the "go-it-alone" myth is that buyers believe they can either negotiate better on their own, or can get a better price without an agent. To understand why this is a myth, you need to understand the truth about listing commissions. When sellers list with a broker, they agree to a listing commission or brokerage fee. Part of this fee is then usually listed in the MLS system as a co-operative commission for any broker/agent that brings forth a buyer that successfully purchases the home. The myth is exposed due to the fact that the listing brokers/agents are not required, or even obligated, to reduce their fee just because a buyer has no agency representation. Therefore, there is usually no room for a reduced price or a better deal for the buyer.
In some cases called "variable rate" commission situations, seller broker/agents do agree to a reduced commission rate if a buyer they personally represent successfully purchases the home versus a broker/agent cooperative represented buyer, or there is simply no buyer agency. However, this situation does not guarantee a better price for the buyer as a seller's broker/agent is not required to disclose their buyer-agent commission payout, unless the buyer has agency representation.
REMEMBER: COMMISSION SHOULD BE BETWEEN BROKERS AND CLIENTS- NOT BUYERS AND SELLERS!
Buyers have nothing to do with negotiating commission between sellers and listing brokers. Also, most agents relish at the prospect of an unattached buyer - as they are then usually able to retain the entire listing commission for themselves. This situation in no way benefits the buyer, and in some cases puts the buyer's interests at risk.
The bottom-line then becomes the old adage of "follow the money". In a commission driven business, it's not difficult to see how not having someone in your corner to fight the battle of buying a home can potentially hurt you as a consumer. Even if agents are faithful to their sworn duties as required by commerce law and the REALTOR code of ethics, like most professions, they will vigorously defend their income. This solidifies the reasoning for having a licensed agent defend your buyer interests- as that agent stands to lose as well.
Licensed agents have their place in Real Estate transactions, both on the buyer and seller side. Unless the commission dynamics are to change, this reality is likely to be in place for many years to come.
Glenn Necklen is Broker / Owner / REALTOR at Necklen & Oakland- Professional Real Estate services in Maple Grove, MN.