Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column publishes every Wednesday.
If you have been selling real estate for more than a couple of weeks, there’s no doubt you’ve gotten calls or emails or had conversations with buyers that go something like this:
- “I can get a better deal working with the listing agent!”
- “The listing agent will cut the commission if I use them.”
- “I have a better chance of getting my offer accepted if I use the listing agent.”
- “I’ve already found the house I want, why would I need a buyer’s agent?”
If you haven’t had a conversation like this, it’s only a matter of time before you do. You need to know how to deal with it and understand why these conversations happen.
Generally speaking, this sort of exchange occurs because the buyer doesn’t understand three things, all basic tenets of buying and selling real estate.
- What agents do (both listing and buyer’s agents)
- Fiduciary responsibilities
- How agents get paid
None of this is the fault of buyers. It’s not because they are stupid. It occurs because, for the vast majority of individuals, buying a home is an infrequent occurrence. We as an industry also tend to do a poor job of explaining how things work and what we do. Communicating our “value proposition” is not a strong point for many agents.
The standard answer to any buyer question surrounding using the listing agent is almost always some flavor of, “But I’m an excellent negotiator!” which agents rapidly follow with, “and you need a good negotiator for the largest financial transaction of your life!”
To be frank, that’s a lame answer. Sure, you might well be the world’s greatest negotiator. It’s certainly an important and pertinent skill to possess. But “negotiating” is far from all you provide to a buyer.
Unpopular opinion: It might not even be the most important service you provide.
We’re no longer the gatekeepers
The days of real estate agents being the knowledge keeper of all the available inventory are long gone. You can blame Zillow, Redfin, realtor.com or NAR. Blame whoever you like, but it’s not going to change the fact that buyers can, and do, look at listings online.
Oh, you might pound the pavement, send letters and knock on doors in an attempt to find someone willing to sell their home that your buyer covets. (Though I’d make a big bet most agents don’t.)
You might throw out your “database” as a source of potential listings. Your brokerage may have (gasp!) pocket listings known only to their agents. But the simple fact is anyone with internet access can search for the vast majority of available housing inventory. You might not like this, but you’re just going to have to deal with it.
What you do provide that the internet does not, and cannot, are two things: intimate local knowledge and fiduciary duty (in most states). These areas are where your actual value to a buyer lies, and you need to communicate that to a buyer who’s chomping at the bit to enlist the listing agent’s services.
“Oh come on Jay, the internet is wide and vast, and contains all the collective knowledge of humankind. You can find anything on the internet,” some reader is probably thinking.
It is indeed chock-full of knowledge. It’s also full of crap. Most importantly, it’s also challenging to find answers to questions you don’t even know to ask.
If you don’t believe the internet is full of bad advice, one needs to look no further than any real estate Facebook group. There, you will find questions posed by agents and answers from their fellow professionals that can range from outstanding and truly helpful to woefully ignorant and even illegal.
In my 60 years on this earth, I’ve bought several homes for personal use. As a real estate agent and former brokerage owner, I’ve taken part in thousands of real estate transactions. Although no one has full and intimate knowledge of all things real estate, it’s safe to say that I have far more knowledge than the typical homebuyer.
And I still use a buyer’s agent. Why wouldn’t I? After all, they have intimate local knowledge that I don’t possess. They have a fiduciary duty to me and only me. They understand local laws, customs and practices when it comes to managing a successful real estate transaction. It would be silly not to utilize a buyer’s agent services.
I’ll give you two personal, real-life examples of how an agent’s local knowledge has helped me in the homebuying process.
Decades ago, I was involved in a corporate relocation from Austin to Phoenix. Over a weekend, we bought a home in Gilbert, Arizona. Like many buyers, we looked at a ton of listings, but as soon as we walked into one in particular, we had a “this is the one” moment.
We knew it, and our agent knew it. Our now-adult children were just entering school at the time, and our agent Nick was a wealth of info about the local school systems, far beyond what one can glean from online school ranking systems. Then there was the real nitty-gritty about the neighborhood.
“Speaking of schools, you should be aware that the elementary school just down the road only has one entrance and exit, right on the road through this subdivision. On school days, from about 7-8 a.m. and then again from 2:30-3:30 p.m., the traffic will back up, and make it difficult to get out of the subdivision.”
And, as Nick points toward the south, “There’s a dairy farm about two miles that way. When the wind blows from the south, as it usually does in the fall and early winter, the odor can be quite strong.”
Good luck finding that info on the World Wide Web.
Nick also gave us sage advice on the pros and cons of owning an outdoor pool, which we’d never done before. His mastery of local knowledge was invaluable. Does anyone think the listing agent, who may have had the same level of mastery would have freely shared the negatives of the property and neighborhood?
Remember, they have a fiduciary responsibility to the seller. They represented the seller, not us, the buyers.
Almost exactly a year ago, we bought a home on the Texas coast. Right on a canal leading out to the Intracoastal Waterway and Redfish Bay. I’ve never owned a home on the water — saltwater, no less. Never sold or brokered a waterfront home. I researched diligently but simply didn’t know what questions to ask about living on saltwater.
Our agent was wonderful and knowledgeable and helped us navigate the ins and outs of buying a canal-front home. She pointed out that a few neighborhoods we were looking at had historical structural issues with the bulkheads — the “canal walls.” Again, something a listing agent wouldn’t do. That local knowledge saved us major headaches and a small fortune.
The level of knowledge mentioned above is what you need to communicate to those wannabe users of listing agents to buy their homes.
Then there’s fiduciary duty. A shocking number of agents don’t understand what it encompasses, and even more potential buyers have no clue.
In states without transactional brokerage, a fiduciary owes their client loyalty, confidentiality, disclosure, obedience, reasonable care and diligence, and accounting.
The listing agent is a fiduciary for the seller, not a potential buyer. The listing agent represents the sellers and their interests. They don’t represent the buyer.
A buyer wants a fiduciary. A buyer needs a fiduciary.
There’s an oldie but a goodie objection handler that helps buyers understand the importance of fiduciary and having their own representation. It goes like this:
“Imagine yourself in a divorce. Would you want your spouse’s divorce lawyer to represent you?”
I’ve been through a divorce. And while my ex-wife had a fantastic attorney, I wouldn’t have wanted her representing both of us. (I just wish I’d found her first. She ran circles around my attorney.)
Explain to your buyer why representation and fiduciary matter. It’s the most important thing you offer.
The commission “savings” argument is probably the easiest one to handle. Explain to your buyer that if they use the listing agent, that agent is taking on double the work, and importantly, increased liability. Very few are likely to eliminate the buyer-side commission entirely. Yes, some will reduce it a bit, but what the buyer gives up for that sight reduction is far more significant.
So, when you get the buyers telling you they’re thinking of using the listing agent, you can undoubtedly deal the negotiation card. That’ll work best if you have actual examples of what you’ve negotiated in the past.
But don’t neglect to explain how valuable local knowledge can be, along with the importance of representation and being a fiduciary.
Jay Thompson is a real estate veteran and retiree living in the Texas Coastal Bend, as well as the one spinning the wheels at Now Pondering. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. “Retired but not dead,” Jay speaks around the world on many things real estate.