Reposted with permission from Matt Bonelli.
You’ve heard agents say this to prospects before: “Work with me when you’re looking to buy a home — it doesn’t cost you anything because the seller pays my commission!”
That is frustrating.
That phrase, or some variant of it, is used a lot by agents to convince buyers to work with them. After all, what would a client have to lose if working with that agent is free?
The problem is that it’s not free.
The truth about ‘free’ services
While there are a few exceptions, most buyers pay for the services of a real estate agent whether they use one or not.
Buyers pay for this service through the purchase price of the home.
Just like all other products and services, the cost of the service is baked into the price.
Think about it.
A certain percentage of the purchase price goes directly to the buyer’s broker. It’s just reduced from the seller’s proceeds for accounting purposes.
If real estate commissions were paid by buyers separate from the sales price, those sales prices would drop 5 to 6 percent across the board.
Interestingly, sellers and their listing agents set the price of buyer’s representative services. This has been the case for years, and it is unlikely to change anytime soon.
A message to buyer’s agents
If you’re a buyer’s agent who wants to initiate change, you can start by using buyer-broker agreements more often, contractually defining your obligations as a buyer’s agent and staking a value claim on your services.
If you are telling buyers that working with you is “free,” you are basically telling them your services are worth nothing.
Not only that, you are misrepresenting what buyers are paying for when they purchase a home!
If someone is buying a home listed by a Realtor, a buyer’s broker fee is probably being paid out from those purchase monies (even if it is the listing broker collecting that fee).
Buyer’s agents brings tremendous value to the homebuying process, and clients have no problem paying for their services when those services are performed correctly.
Would you pay for a service that helps you save time, set clear goals and save money through the expert knowledge and negotiation skills of a professional proactive adviser?
Yes, you would!
So, before you tell buyers that working with you won’t cost them a penny, think about what you are really saying to them.
Matt Bonelli is a manager and broker associate for Turpin Realtors’ Chatham office in Chatham, New Jersey. You can follow him on Twitter or learn more about him on LinkedIn.