Listing Representative vs. Buyer’s Representative: Who’s Looking Out for Your Best Interests When You’re Looking to Buy?

The other day, I was grabbing a cup of coffee and ran into an acquaintance who is hoping to buy soon. After some initial catching up, we got to talking about the market.

“I have to ask, Rick,” he started. “A friend of mine told me that rather than signing up with a Buyer’s agent, I should just work directly with the Listing agent for a property. She says I’ll get a better deal that way, because then there is only one agent involved and so the commission is less. I was wondering if you had any thoughts on that?”

I had a lot of thoughts on it.

At first, this mentality might seem like smart thinking. Who wouldn’t want to pay less of a commission? Working with just one agent simplifies the entire process, right?

It could. But when you really start to peel it apart and look at all the factors, there are some big red flags that pop up. I will explain in this blog how working with a Buyer’s agent can actually save you significant money in the end.

Side note: In order to comply with new RI state laws, I will now be using the term “representative” or “rep” for short, instead of “agent.” You can read more about it here: http://www.dbr.state.ri.us/documents/divisions/commlicensing/realestate/RE-Revised_Title5-20-6.pdf

With that bit of legalese out of the way, let’s begin:

At a real estate brokerage office, the commission for a property is set when the Listing representative takes on the property. The Listing rep agrees to represent the seller and to work to get the seller the highest price and best terms possible. (Did you catch that? I italicized it for a reason.) The Listing rep also agrees to split the commission with the co-broking Buyer’s rep. So the commission that the seller ultimately pays usually does not change, whether the Listing rep sells the property, or if they co-broke with a Buyer’s rep.

It’s true that there are some advantages for you, as a buyer, if you work with a Listing rep: they generally have more information and knowledge about the property and its location. They might have more of an incentive to push your offer to the seller, since their office would then receive the full commission. They also have greater insight into the seller’s needs, and might provide you with information you can use to make a more compelling offer.

Now I will list some advantages to working with a Buyer’s rep:

• The Listing rep is contractually obligated to work in the seller’s best interests. The Buyer’s rep is contractually obligated to work in your best interests, to help you negotiate the best price and terms that you can.
  
• The Listing rep is obligated to tell the seller anything that you tell them that could pertain to the purchase of the property, such as whether you are willing to move your offer up, or if you are under pressure and need to purchase something in a short time frame. The Buyer’s rep has an obligation of confidentiality to you.
  
• The Listing rep is required to be honest and fair to the buyer, but they are not required to point out the property’s limitations to you, the buyer (red flag!). A knowledgeable and experienced Buyer’s rep can save you a lot of heartache by pointing out possible problems before you buy, as well as recommending inspections that you should have performed.
  
• The Listing rep cannot do a comparative market analysis to help you determine an offering price for the property without the seller’s consent and agreement; a Buyer’s rep will help you with a market analysis and advice on what to offer.
  
• The Listing rep will be reluctant to suggest other properties that might work better for you because it would conflict with their duty to the seller. A Buyer’s rep can recommend several properties that might fit your needs, and schedule appointments to view those properties with different Seller’s representatives, saving you the time and hassle of having to make separate phone calls to set up property tours.
  

I said it to my friend in the coffee shop, and I’ll say it to all of you: if you’re new to town or new to purchasing real estate in general, I recommend finding a reputable, experienced, full-time real estate professional to represent you exclusively and guide you through the process. If you’re an experienced buyer who knows the town and has negotiated purchases of property before, you may be better prepared to deal directly with a Listing rep. Just don’t assume that working directly with the Listing rep is necessarily the right way to go.

Newport’s Real Estate Market: Not as Bad Right Now as You Might Think!

You hear it everywhere: the doom-and-gloom forecasts, “the market is the worst it’s been in a decade and only getting worse.” I have some good news to share: the Newport real estate market is not so bad after all! For buyers with cash or with good credit and a good down payment, there is a silver lining of opportunity around this dark cloud of economic downturn.

You may not have heard that real estate inventory in Newport County is close to the highest it has been in at least ten years. Inventory, which usually peaks in August, is about 100 units higher in 2010 than it was in 2009. Not only that, but we’ve had almost three years of a down market to dampen prices, so new homes being listed tend to be more realistically priced for today’s market (as opposed to the overinflated prices of the “bubble” days prior to 2008).

Another sign that things aren’t so bleak is that sales that are in contract and pending closing are higher this year than last; this is an indicator that market is turning back up again. It’s also an indicator that sellers are getting more realistic about the types of bids they’ll accept. Part of this increase is due to Baby Boomers coming of age and wanting to move to areas that are attractive for retiring or buying a second home: as we all know, Newport County is a big destination for that!

It’s really a great market for prepared and savvy buyers, for many reasons. Interest rates on mortgages are close to record lows. Consumer purchasing power is high. Right now, buyers who are sitting on cash can obtain a home that would have been out of their reach just a few years ago.

What are some of the main drawbacks to today’s market in general? If you’re trying to sell your home, the initial bids you receive might come in low. Loan requirements are stiffer and mortgages are more difficult to obtain in general. Across the board, appraisals are coming in lower, and foreclosures are causing certain areas to skew lower because of it. But the good thing about being in a resort area (like Newport) is that you don’t typically see as many foreclosures. Buyers who might expect a 50% drop in value while shopping in other markets are being unrealistic if they expect that here. Nationwide trends are not applicable to all areas, and Newport County is one of those places that, while certainly influenced, is still a desirable enough location to keep foreclosures at a low rate.

Sellers should remember that Aquidneck Island is just that – an island. There is limited space to build here, especially with historical restrictions. Waterfront property will always be desirable and rare, so waterfront homes have still been selling quickly over the last few years. In general, if a well-located property in good condition comes on the market, priced appropriately, it will go quickly. I am seeing some properties sell within the first week of coming on! I’m currently aware of a multiple bid situation on a three-family house and have heard of other multiple bid contests as well. This indicates that there is a pent-up demand for affordable homes in Newport County.

So the overall message is: the market is certainly not as bad as you think. It is thriving, but in a way that is more realistic and hopefully sustainable than prior to 2008. The pie-in-the-sky days of paying nothing down for your dream house or buying something dirt cheap and selling it two years later at an overinflated price are not here anymore, but opportunities abound for sensible buyers and for sellers who picked quality homes in nice locations. Times are great for buyers with down payments, a good credit history, and a job. There are also opportunities for buyers who have liquidated stocks, which will enable them to buy at depressed market prices.

Newport County sellers are lucky compared to sellers in many other parts of the country. If you are a seller looking to relocate, the losses you might see selling your home here could be ameliorated by the buying advantages you will find in other communities.

Check with your local real estate agent to discover what types of opportunities might be awaiting you.