This morning I read a post that suggested agents are more interested in receiving a larger commission than they are in negotiating the best price. First, I would like to state that rebating buyer's commissions is illegal in the state of Tennessee.
While I found many faults in this article, I was especially concerned about his statement suggesting because an agent's commission is based upon a percentage of the purchase price, we are in favor of the buyers paying more for a home to up our commission.
I am currently in the process of negotiating a contract on the purchase of a new home for one of my buyers. She is looking at new construction and I am trying to save her $25,000, almost 10% of the purchase price. This would be a significant savings to my buyer. However, my increased commission if the home sells at a higher price is a measly $750 to me. I would never throw my client under the bus to earn an additional commission. I'm more interested in saving my clients money than upping my commission!
It is true that commissions are based upon a percentage of the purchase price and some buyers feel that if they don't use an agent or if they use the listing agent, the 3% that would have been paid to the buyer's agent will be passed onto them. This doesn't happen. Why? Because they usually end up overpaying for a home.
A buyer's agent provides recent sales data that helps buyers determine a fair market value purchase price. Without this information, it's like shooting an arrow at a target you can't see. You don't know where to aim.
Several years ago, I was working an open house for another agent. I was not the listing agent or on her team. Later that evening, I received a call from a man who had attended the open house. There were five homes in that neighborhood all with the same floor plan that were currently for sale. He was contacting the listing agents to broker a deal without a buyer's agent.
I explained that I was not the listing agent but I could represent him in the purchase of a home as a buyer's agent. I also explained the advantages of using a buyer's agent. He was adamant that he wanted that 3% commission passed on to him. I told him I could save him more than that 3% but he didn't understand how I could do that.
A few weeks later, I saw that he had, in fact, used one of the listing agents for the purchase of one of those five homes. And, unfortunately, paid more than he should have based upon the most recent sales in that neighborhood. He didn't even save the 3% off the purchase price. All because he thought he could negotiate a better deal than a buyer's agent.
I always tell buyers, "Everything is negotiable in real estate." And in some states, buyers can receive a rebate from their buyer's agent. If you are in a state that allows such a practice, I would definitely encourage you to look into doing that.
However, if you are in a state which prohibits this practice, like Tennessee, it is still in your best interest to use a buyer's agent. They will save you far more than the savings received through a rebate. Additionally, I can't think of any agent who would encourage their buyer pay more for a home than they should for a few hundred dollars.
I'm more interested in saving my clients money than upping my commission!