I can tell by the questions he asks in class that he’s looking for all the angles. What will help him get the best house for the least money?
And then he says, “I’m not going to use a buyer’s agent. I want to save the commission.”
Except it doesn’t work that way because of how most real estate agents get paid.
How Do (Most) Real Estate Agents Get Paid?
I’m glad you asked.
When someone decides to sell her house, she signs a contract with a listing agent. The contract spells out how much the agent will earn when he sells the house.
If a buyer comes with her own agent, the listing agent shares his commission with the buyer’s agent. The amount of the split is spelled out in the contract.
So if you buy a house without your own agent, the seller’s agent gets to keep the whole commission. And you’re paying for it (how nice of you!) since you’re the one paying for the house.
Even worse, you’re not getting the help of an agent representing your interests. But the seller is.
What About a House That’s For Sale By Owner?
That might be different. Or it might not.
Why does someone sell his house without hiring a real estate agent? There are lots of little reasons. But the big one is that he doesn’t want to pay a commission for work he believes he can do himself.
If the seller lowers the house price accordingly, you might do great.
But what if he sells his house for the same price as every other house for sale in the neighborhood that does have a listing agent? Then you’d be paying the same price for the house and the seller would be pocketing the money he’d normally pay as a commission.
If you’re already working with a buyer’s agent and become interested in a FSBO (for sale by owner) house, ask her about it. Maybe she can negotiate with the seller to receive a small commission from the sale and help you negotiate a fair price at the same time.
Saving Money When You Buy a House
You can save money lots of ways from shopping for houses over Christmas to offering a seller something she wants more than money.
But you’re probably not going to save money by refusing good (and the crucial adjective is good) representation in a deal.
Your Turn: Have you thought of ways to save money when you buy a house? Do you want to know if they’re likely to work?