A little while ago, I was wondering... why do consumers and potential home buyers call the agent that represents the seller in order to see a home and potentially make an offer on it?
Well there are probably lots of reasons. Here may be a few:
1. They think buying a house is like buying a car: You have to go to each and every car dealership and dirt lot to see all the inventory.
2. They think that the agent with the sign has insider knowledge about the home that other agents can't find out.
3. They think the agent with all the signs in the neighbourhood is the neighbourhood "specialist".
4. Their agent is too busy and they don't want to bother them.
5. They think that by only having one agent involved in the purchase/sale that they can get a better deal on the home.
Let's provide some clarity on these points...
1. Inventory: If a homeowner hires their agent to put up their property for sale and doesn't allow them to share the property's listing with other agents then that is called an exclusive listing (like in car sales — only that single car dealership can sell it). The real estate agent would have to find the buyer all by themselves without the aid of other agents (or the MLS System); or, a buyer would have to stumble upon the for sale sign on the property or the agent's advertising and then call the agent themselves (like when working with a car dealership). This is really not an effective way to market a home for sale and would not be much more effective than the homeowner marketing the home themselves (and is probably why "For Sale by Owner" marketing companies sprang up a few years ago when the market was hot, but have now almost all disappeared or evolved into licensed brokerages to get MLS System access and therefore have other agents market their listings and bring buyers.) Car dealerships are more effective with this method because all their inventory of several dozen very similar cars are all in one place and are easily viewed and compared. Imagine how unproductive it would be to drive all over the city to look at a single car on each car lot.
In some European countries it's done that way in real estate, still today. The buyer does all the work and has to call each and every "estate agent" or the home seller directly to make appointments to view homes. What an incredibly inefficient system for them.
Of course there's a better way: When almost all homeowners today decide to sell their property they hire a real estate agent to get as much interest in their home as possible. This is done with an MLS System listing. Sellers hire their agent to place their home listing on the local MLS System database so that all agents in the real estate board's membership has access to the listing and, in turn, the seller guarantees payment to both their agent and any agent that may bring a buyer. The seller hires one agent, and gets 5,000+ real estate agents marketing and trying to sell their home. For buyers, they can hire one agent and that agent can help them with thousands of homes that are on the market and, additionally, even ones that aren't.
2. Insider knowledge: Any insider knowledge that an agent has about a home or the seller, is protected by contract and by privacy legislation. The agent has a legal duty to protect almost every piece of that special knowledge. Any experienced real estate agent, other than the seller's agent, can research a property, take a tour of it and probably provide you more information about the home and the seller than the seller's agent is willing to share. However, they can only provide most of this information to you once you commit to them in writing.
3. Market Specialist: An agent chooses an area they wish to market and work in. Sometimes it is near where they live or close to the office they chose to be associated with. Sometimes it's based on demographics and and economics (how much the homes are worth). The more expensive the house, the more agents can expect to make in income with similar expenditure in energies. A more expensive home doesn't take any more to sell than a home at half the value.
Are they more knowledgable about a community than anyone else? Possibly, but really not likely. I specialize in west and northwest Calgary homes because I like the area and the age and styles of the homes. I really know the areas inside and out. But many of my sales are because of buyers seeking me out to help them find a home. It's not because I have dozens of signs up in a neighbourhood (because I don't). I can tell you that, most likely, I am as knowledgable about any area as any agent that has a dozen or two signs up in that area. I am also a specialist in condominiums: That only means that I have special training and an expertise in condominium ownership homes — it doesn't mean that I only work in sales that involve condos.
4. My agent is too busy: This sounds way too funny, but we've heard it as a reason from a consumer for not calling their own agent and they called me instead. There are two problems with this: a) If the agent is too busy to help, and they don't yet have a written representation agreement with you then they won't get paid from the sale — no agent is that busy to not earn their pay. And, b) if the buyer is a client of, and therefore already has a written buyer representation agreement with, their "too busy" agent, it's a very stong possiblity that the buyer will have to pay their agent directly and (through the purchase price) pay the total commission to the seller's agent (including the amount that would have been set aside for their own agent). Yep, double jeopardy — double commission! That's how many of the buyer representation agreements are written. If you're working with an agent - CALL THEM. They will appreciate the work. (If they're on holiday, they will have a plan in place to get help for you right away that doesn't have you double paying the commissions.)
5. I can save some money by only involving one agent: Well, this is probably the main reason that consumers make this mistake. What they don't know or don't realize is when hiring an agent to list a home for sale the seller agrees to the section on commissions which is written this way,
"10.1 Our fee is ____ (plus GST) and is due when the sale of the property is complete."
"10.2 We will offer ____ (pus GST) from our fee to the buyer's brokerage."
So, if a buyer deals directly with the seller's agent is there a savings to be had? (No - the seller's agent doesn't share "their earned fee" with anyone.)
Will the agent go against their client's interests and beat down the seller's price so the buyer can get an added benefit? (No - that's illegal.)
Will the agent offer to renegotiate their fee with the seller because a buyer asked them to? (Not very likely — it's not at all in their own interest. Twice the work, double the liability, and a smaller pay cheque than just waiting for another buyer.)
So, should you call the seller's agent? You can if you wish, but you're really not going to benefit from it and it could hurt you in the long run. If you don't have your own agent already and you don't want to spend the time finding one, it just may well be what you end up doing.
Can I Call The Seller's Agent?
Sure you can. I think I've shown a number of reasons why you wouldn't want to, but sure you can. There may be a number of reasons you would wish to proceed this way.
Here are several reasons:
- You're looking for a real estate agent to represent you on the purchase of another home and you wish to get to know a few agents a bit before interviewing them for the job. (You'd be looking for loyalty to their client, their knowledge about homes in general, and home values in the area.)
- You don't have an agent already and you don't wish to spend the time getting to know one enough to trust them to help with your purchase.
- You already have a written, exclusive buyer representation agreement with this particular agent.
- You have been a past client of this particular agent and you believe they will reduce their services to the seller (in writing) and then provide impartial services to both you and the seller.
- You are an astute negotiator and have some expertise in residential construction and local by-laws — i.e. you'll know when to walk away from a bad situation.
- You want to buy a particular home whatever the cost or risks involved.
- You just don't trust real estate agents at all. You don't believe they serve a valuable service and don't want to spend the time learning what they do.
Just don't expect either any representation or a "better deal" because there is only one agent involved.