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Buyer agency and why it is a sham!

Buyer agency is a sham! Until your buyer client pays you directly it is a sham. Why would any intelligent person want to be in negotiations and have their negotiator be paid by the opposition. Would you want your quarterback or pitcher paid by the other team? Of course not, but everyday consumers are allowing themselves to be represented by someone who is paid by the other side.

Would it make a difference if the buyer paid the agent directly. Of course, for one the agent is going to have to make sure they evaluate what services they are offering and why they are valuable and what value they have and how they want to be paid.

We have to disclose under RESPA to consumers that our brokerage has this and that business and they can use them but our brokerage owns them and will make money from them although they don't have to use them.

But buyer agents smile when they tell their clients, don't worry my services are FREE, I am paid by the seller. Where do the funds come from for this transaction? If the buyer does not buy the agent does not get paid, so why not pay the agent directly and stop this farce. Would it mean that maybe we need to be more professional and explain what we can do for the client and why they want to work with us. Would it save the consumer money because it would make them ask harder questions? Would some agents get out of the business because they can not explain their value? Would it encourage agents to choose between what they do, seller or buyer agency and make them more educated and thus better in their chosen field?

The question raises many of it's own all of which are interesting because I believe that our business is changing rapidly and many people involved are trying to hang on to how it was, unwilling to change, unwilling to offer consumers what they want preferring what is best for themselves.

Which raises the point that in agency you put your clients interests ahead of your own. If the buyer agent is paid directly by the buyer it removes the whole issue of how much compensation is offered and whether agents will show this house or that because the commission offered is better, whether if it is a for sale by owner there is a special procedure. It all becomes moot, because the buyer has already agreed to how they are going to pay their agent ahead of time, maybe with a retainer, maybe on an hourly basis, maybe per showing who knows, there are so many options it is exciting to just sit and think about it.

I admit it is easier to say the seller is going to pay me, but as many consumers, 97% according to NAR statistics, are online searching for homes they are already thinking that if they use the listing agent they can get a better deal, something I will deal with in another post, so is it really out of the realm of thinking that our consumers have already moved on and may just be waiting for us to catch up with them or that they may just leave us behind completely.

Buyers and agents what do you think?

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Comments

Nick & Trudy, I appreciate your vigor and candor. I wrote a similar post on Trulia some time ago and got some intense negative feedback from a few. I had one come back with, "If buyer's are asking for closing costs because they don't have it, then how are they going to afford you?"  It certainly made me think.  It's sort of like the tax debacle we have with the IRS. Everybody knows it's a mess but how would we change the system without creating major havoc?  I am interested to see what you get.

Posted by Cathy Criado, Making Real Estate Profitable (Criado Realty ) over 7 years ago

You are exactly correct, the buyer agency has problems. But do you have a good alternative? Consumers might have to only buy from the listing agent, and shop the listings each brokerage has. How would this help the consumer?

Posted by Patrick Harvey (West USA Realty) over 7 years ago

Nick and Trudy, 

     I like your thoughts on this.  "Paid by the Opposition"... that is classic!

     Here in Florida, most Brokerages practice "Transaction Brokerage" as defined by Florida Statute.  We may offer "Single Agency" if we desire, or "No Brokerage Relationship".

    You can read about Authorized Brokerage Relationships in the Florida Statutes Online .

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Fred Griffin Real Estate) over 7 years ago

I really do not agree here - just went through a transaction representing the buyer, and it was a good thing they had me in their court. The seller wanted to negotiate directly with the buyer and was overstepping the listing agent at every turn, including contacting me directly. Consequently the seller was strong arming me and the buyer on several points and not an honest sort at all. The listing agent completely checked out of any conversation until the deal fell through.

 

Posted by Roseanne Campagna, Kent/DesMoines/Blk Diamond/Renton/Maple Valley, WA (John L. Scott RE Maple Valley, WA ) over 7 years ago

Buyers already have so much coming out of pocket: closing costs, transfer fees, down payment, moving expenses, etc.  I don't think they would be thrilled to also pay a commission no matter what kind of representation they got. 

More buyers would try to represent themselves.  There would be more lawsuits and more unhappy buyers who were mislead by the seller and who didn't have the representation of a professional who has done this hundreds of times before.

Posted by Allan Sanchez, Rocklin & Roseville, Short Sale Agent (Roseville CA & Rocklin CA Short Sale Agent) over 7 years ago

Cathy change is coming, consumers are already circumventing the traditional model. I am not saying do away with buyer agency just to think about how you are compensated and address it differently and see what alternatives come up. I don't thinkI have all the answers, but have several ideas.

Patrick, while the consumer feels there is no value in the buyer agent they will go direct to the listing agent. We need to explain and express our value and how we want to be compensated. I suggested a couple, but really seeing what else people come up with.

Fred yes we have transacation agency, basically no representation at all in PA, rarely used in our area although it is starting to grow as you get the pay to list your home in the MLS agent acting as a transaction licensee. I think when agents understand and can verbalize what they bring to the table, the local expert who knows the area and can advise and how much that knowledge is worth then we will see true buyer agency.

Roseanne buyer agents are important and valuable and your case is a good point but if you are paid by the seller why should I trust you. Why not pay you myself and know that you are truly working for me.

Posted by Nick & Trudy Vandekar, 610-203-4543, Tredyffrin Easttown Realtors, Philly Main Line (Long & Foster Real Estate Inc 610-225-7400) over 7 years ago

Allan, you are expressing your value and who funds the transaction anyway. Can't your buyer ask for an assist, just like for a repair to pay their fees if they don't have the total funds. And if they are that short, should they be buying, maybe they would be better off renting or staying home with parents till they have saved enough.

Posted by Nick & Trudy Vandekar, 610-203-4543, Tredyffrin Easttown Realtors, Philly Main Line (Long & Foster Real Estate Inc 610-225-7400) over 7 years ago

You're right.  When I make a listing presentation, I always tell the sellers not to worry because the buyer pays the commission.  What a wonderful situation, as the seller, you decide how much the buyer will pay, and he has to pay it when he buys your house. 

Does an attorney working on a contingency have issues with the fact that the other side will pay the bill?  I don't think so. Does the client have issues with the arrangement?  Again, I don't think so. 

Do you really feel that buyer agency is a sham?

Posted by Mike Carlier, More opinions than you want to hear about. over 7 years ago

Mike I think "buyer agency" is important as you can see from my comments above, but I also think an agent should be paid by their client. We can all use semantics to say it is really the other side who pays me, but I think as agents we need to know our value, be able to express it, and ask for payment in what ever way we want to be paid. As I mentioned above, a buyer can ask for a seller assist to pay their agency fees, as one way to cover their costs.

Posted by Nick & Trudy Vandekar, 610-203-4543, Tredyffrin Easttown Realtors, Philly Main Line (Long & Foster Real Estate Inc 610-225-7400) over 7 years ago

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