Sometimes Buyers believe they can negotiate a better price if they don’t use a Buyer’s Agent also known as an unrepresented buyer. This strategy rarely works because of the way in which listing agreements are structured.
- The Seller strikes a commission agreement with the List Agent’s Brokerage firm for a list fee equal to a percentage of the home’s eventual purchase price.
- Based on this list fee between Seller and Brokerage firm, the Seller’s Agent advertises a co-op commission in the MLS to all prospective Buyers’ Agents, payable at closing in consideration for the Buyer’s Agent who brings the Buyer to the transaction.
- It is important to note that the contract exists between the Seller and the List Agent’s Brokerage Firm and any prospective Buyer is an outside third party to that agreement. A separate Co-Op Offer also exists which is advertised in the MLS and relied upon by other agents when showing the property. Again, the Buyer is an outside third party regarding this offer/advertisement.
- Because the Buyer is not a party to either contract, it becomes very difficult for a Buyer to command other parties to renegotiate two separate contracts so that some proposed cost savings can trickle down to him should the transaction move forward.
- For a Buyer to find success with this strategy, the Seller would a) need to renegotiate his contract with the List Agent’s Brokerage firm to save money and b) the Brokerage would need to change its co-op fee in the MLS to reflect the lower commission (which is tricky if other agents have already relied upon it by bringing clients through the home). If both things happen, then the Buyer could theortically see some cost savings passed along. It should be noted that there is little incentive for most of these parties to engage in this type of renegotiation and rarely will it happen. It is also dangerous for a firm to renegotiate because the deal could fall through and then the firm is harming their interests going forward on any future deals as well.
- Most importantly, without a Buyer’s Agent looking out for the Buyer’s best interests, the Buyer risks overpaying and/or having something go wrong in the transaction.
At the end of the day, the list agent owes a duty of loyalty to his client, the seller, so you remain unrepresented and with nobody watching out for your own interests during one of the largest financial transaction of your life. Remaining unrepresented and dealing directly with the List Agent instead rarely saves a Buyer money (usually, the List Agent just gets both sides of the deal instead).
