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.