July 28, 2006: Home buyers should negotiate compensation for their real estate agents
Last week we established that the buyer pays for everything in the purchase of a home. Why, then, does the seller negotiate the sales commissions?
The short answer is, because that's the way it's always been done. The longer answer is not as pretty: Historically, only sellers were represented in a real estate transaction, and, despite efforts at reform, the buyer is still often treated as a second-class citizen.
Consider the buyer's agent's bonus, for example. It will be there as plain as day in the listing: "Seller to pay buyer's agent a bonus of $5,000 for successful close of escrow by Aug. 31."
What does that say? It says in the plainest possible language that both the seller and the listing agent believe that the buyer's agent really works for the seller, not for the buyer. The objective of the bonus is to induce the buyer's agent to push the buyer into buying the home that is offering the bonus, rather than another.
The goal, motive and purpose of a buyer's agent's bonus are to give the buyer's agent an incentive to betray his agency. His fiduciary duty is to the buyer. The seller and the listing agent are using the bonus to "buy" his fidelity.
So what should a buyer's agent do, when showing a home for which a bonus is offered? Disclose the bonus to the buyer and commit to either waiving the bonus or passing it through to the buyer. There should be no doubts in the buyer's mind about the agent's loyalties.
But there's more to this issue: If the seller can negotiate compensation with the listing agent, why can't the buyer negotiate compensation with the buyer's agent?
The short answer is, because it's never been done that way. The longer answer is not as pretty: Often, buyer's agents infantilize buyers. "Our services cost you nothing," Realtors say. "The seller pays for everything."
In fact, the buyer pays for everything. The seller negotiates what the listing agent will be paid. But the buyer can - and should - negotiate the buyer's agent's compensation.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
Spread the word: Click here for a printer-ready version of this column.
Or: Steal this book: I've written over 200 of these real estate columns. They are consistently one of the most popular features on our blogs. Many of them are dated and/or entirely Phoenixocentric. But many others are timeless and generic. If you want to use any of my columns on your weblog or web site, feel free. Three rules: Don't change my text, credit me as the author and give me a link back to http://www.bloodhoundrealty.com/ with appropriate anchor text. Something like this, perhaps:
Am I link-baiting? You bet. The quid pro quo is free content for your site that pulls eyeballs and excites interest.<a href="http://www.bloodhoundrealty.com/" target="_blank"> Phoenix Realtor Greg Swann</a> suggested I share this with you:
