Does It Really Matter if I Buy My House With the Listing Agent?

Oct 19, 2022Buying Basics, Homebuying Process

It’s a practice that, since 1996, has been commonplace in real estate.

You’re a buyer looking for a house. Maybe you’ve connected with an agent that has dropped you on their mailing list to keep you up to date with new listings that come on the market. Maybe one has even shown you a couple of houses. Either way, you’ve also been looking on your own. You’ve been going to open houses and talked to many listing agents who are more than willing to answer your questions and seem very interested in getting to know you more.

According to a 2019 report from the Consumer Federation of America, “between about 10 and 20 percent of all home sales involve only one agent who works both with seller and buyer.”

So why then, when you find that perfect house and view it and when the listing agent is right there and could give you a better opportunity at being able to get an accepted offer, would you leave and call up another agent that may or may not know about that house? In this post, we will dispel the myths surrounding this important question.

Myths About Listing Agents

MYTH: The listing agent will give you a better opportunity and/or better chance of getting your offer accepted.

FACT: By law, the listing agent must present your offer equally and show no bias toward your offer over any other offers that come in. They must present offers factually and advise only on the content of the offer, not by who’s offering it or who is representing the buyer. If another better offer comes in, the agent still wins because the other offer is better and they have no ties to you.

Relatedly, people often mistakenly believe that you have a better chance of success with the listing agent because it’s double commission for the listing agent. While the listing agent does stand to make more money off the deal if they also represent the buyer in the sale, that is not a benefit for you, it’s a benefit for them. Even if they end up getting your offer accepted over others, their loyalty still lies with the seller. You are generally on your own once an offer is accepted. If something goes wrong with the deal, the listing agent can find another buyer. It is very likely you’re not the only one they’re writing an offer up for. It will be harder for the listing agent to find another seller if they lose the listing. Therefore they are more likely to side with the seller in any dispute or issue that may arise once an offer is accepted.

MYTH: Dual agents can offer the same level of service, if not better, than exclusive buyer agents can offer.

FACT: If you’re a buyer working with an agent or agency that also carries listings, you have most likely signed away some of your fiduciary rights. Any quality agent is going to want you to sign an agency agreement. If there’s a chance your agent (or agency) could also end up being the listing agent in any deal, you will have to sign a document stating your willingness to sacrifice certain fiduciary duties owed to you, so that the agent or agency can represent you on both sides and make double commission from you.

You are required to sign this because dual agency is actually illegal unless properly disclosed. In fact, dual agency is outright banned in eight states, including Alaska, Colorado, Florida, Kansas, Maryland, Texas, Wyoming, and Vermont.

Furthermore, commissions are based on sale price. A buyer agent advocating for you from an outside firm may have been able to get that house for you for a lesser price as they would have no qualms negotiating the price lower for you. They may have good connections to lenders and attorneys that could end up saving you even thousands more.

Listing agents are generally focused on making money, not saving money. They commit to their sellers to get as much for their house as possible. A double paycheck will increase significantly more with each thousand they make you go up on price as the commission goes up on both sides. An outside buyer agent will of course make a little more if the sale price is higher, but it’s not double AND they have likely built their business on saving their buyers money. To go against that will hurt future business for them.

MYTH: If it was really as bad as you say, no one would be doing it.

FACT: The real estate industry is a multi-billion dollar industry and most people don’t know the difference. Most agencies are not eager to explain the pros and cons of specific types of representation, especially the type of representation that is making them millions more than they would be otherwise.

The Shoe Salesman Analogy

We recently came across an article from a blogger [DarrylSpeaks.com] about why real estate agents should NOT stick to just buying or selling, but should do both. So what was the upshot? It was not about benefits for the consumer, it was about making more money for the agent: “We could make a list of pros and cons for each, but the answer is pretty clear when you think about it from a money-making perspective,” he said. “Let’s say you decide to sell shoes for a living. You can accomplish this in one of two ways — you can find a vacant property to lease, decorate it with the latest shoe store fashion, set up all the shoe racks, purchase a vast number of shoes wholesale, hire staff, and host a big grand opening and advertise your business and draw customers to your shore to buy your shoes. You keep up with inventory to restock your shelves as shoes are sold. The other way is to find someone who is looking to buy a pair of shoes, take them in your car and drive them from shoe store to shoe store to find that one person a pair of shoes they love, then once they find a pair, they pay you for your service!”

Except that the way it works in Real Estate really can’t be compared to shoes. Using their shoe analogy, let’s look at it from a realistic home buying angle.

SCENARIO 1: You walk into their store and they have a wide range of shoes. “How can I help you?” asks the shoe salesman. “I’m looking for a pair of shoes,” you respond. “Great! Let me show you what we have!” he says.

As he’s showing you the store’s inventory, you go on to describe your ideal pair of shoes. As you’re explaining your ideal pair, the shoe salesman is showing you shoes that aren’t quite what you’re looking for. You decide to go home and think about it more. You do some online searches and find your ideal pair. You go back to the store and tell him you’ve found the perfect pair. He tells you with disappointment, “Oh, we don’t carry that.” He proceeds to show you other shoes the store does carry, but you’ve already found your perfect pair. The salesman knows that if you go to a different store to buy your perfect pair, he will lose your business.

SCENARIO 2: Now consider that same scenario with an outside shoe salesman. In the aforementioned article, the blogger goes on to say a buyer agency is a disadvantage to the agent: “If you have no listings, you have no shoes to sell, and you spend all your time searching for ‘shoe’ buyers rather than letting them come to your ‘shoe store’, aka – your listings.”

That is true, but is that really such a bad thing? The shoe salesman that has no shoes to sell is not married to one shoe store. Rather, they have the world at their fingertips. This salesman can help you find your perfect shoe regardless of who is selling them, then help you to buy them.

The store has only one pair of shoes left and they are perfect for you? The shoe store might try to sell them off to one of their own clients, but your shoe salesman has dealt with this scenario before. They know how to play the game and win. It benefits both the shoe store and the shoe salesman to sell this pair of shoes. It benefits your shoe salesman more to sell them to you because you want those shoes specifically and they’re working with you. The shoe store wins either way.

This is how it is in real estate. A real estate agency who holds a listing wants to sell that listing. If they get it under agreement, they win whether it was from an outside agent or not. The difference is, if you come in with an agent that just advocates and works for you, you stand to benefit from the commitment they have to getting you that house, because the only way this agent benefits is if YOU win.

Bottom line: friends don’t let friends hire dual agents.

Find an exclusive buyer agent today.

Nicholas Martin is broker/owner of Buyer’s Choice Realty in Wenham, Massachusetts.  He has worked under Ronald Huth, founder of Buyer’s Choice Realty who has more than 40 years of experience in the Real Estate industry. Feel free to reach out to Nicholas Martin; [email protected] or 978-468-2138.

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