One of the most common myths that persists in the real estate world is the idea that if you’re a buyer without your own agent, you can get a discount on the sale price of a property.
It continues to exist because people want it to be true, it can have the appearance of being true, but at the end of the day, it just ain’t true for three very important reasons.
Listing Agreements Don’t Include It
Every home that is listed for sale with a Realtor, whether it goes on the Multiple Listing Service (MLS) or as an exclusive, has a listing agreement in writing. You can’t transact real estate transactions verbally and we must have a listing agreement signed by the owner in order to sell a property.
That listing agreement contains a section for commission to the listing agent and the co-operating agent, which is the buyer’s agent. In Toronto, it is commonly 5% total, with the co-operating agent receiving half of that commission, or 2.5%.
The way listing agreements are written, the total commission is listed (5%) and then the amount that the listing brokerage will share with any co-operating brokerage (2.5%) is listed. No other agent involved, the listing agent’s brokerage keeps the full 5%.
Unless the listing agent has written in other wording about if no other agent is involved, the commission is reduced, all that happens when no other agent is involved is the listing agent keeps the full 5% commission.
That’s the way it’s written. Can an agent agree to lower their commission after the fact? Sure. Do they have to? Nope.
We Could Negotiate It
One of the perks of having your own agent representing you as a buyer is that your agent can negotiate on your behalf. There’s lots of other things your agent can and will do, but trying to get you a better price is an important part of the job.
When a buyer doesn’t have their own agent, the “discount” that is applied because the seller doesn’t have to pay a buyer’s agent is often nothing different than what a buyer’s agent would have negotiated.
It may be framed as “We wouldn’t normally accept that price, but because we’re saving on commission, we’ll give it to you for a steal.” but make no mistake, it’s often a price the seller would have accepted anyway.
It’s Risky for Little Benefit
The idea that a buyer can suddenly get a 2.5% discount because they don’t have their own agent ignores the fact that if the seller accepts 2.5% less than what they wanted, they’re no better off than if they paid an agent. If the buyer and seller split the “benefit”, then the seller gets 1.25% off, which is so minimal it begs the question as to why it would be done.
When there is no agent involved on the other side, the responsibility and risk on the seller’s side increases significantly. The seller’s agent has to provide customer service at a minimum to the buyer, and there is no one else to blame if a deal falls apart. The listing agent and the seller are much more likely to be sued or run into problems with the deal closing if the buyer doesn’t have someone they trust advising and guiding them through the process.
To sum it all up, most contracts are written in such a way that there is no discount if no buying agent is involved, the apparent discount offered is likely something the buyer’s agent could have negotiated anyway, and the risk to the seller and their agent increases dramatically.
There are people out there who swear it exists, but it’s a myth, just like unicorns. Look a bit closer and you’ll see it’s just a horse with a weird hat. If you’re interested in getting the best price on buying a home, hire an agent who will negotiate you the best price.