Some home buyers strategize by hiring the listing agent of a home they’re looking to buy.
They’re under the assumption that they can get a better deal if they use the listing agent even though they don’t have someone working solely on their behalf in the transaction. Instead of using their own buyers agent, they’ll see if the listing agent is willing to cut their commission and pass along a better deal.
This is not good advice and will ultimately backfire on you as a home buyer in terms of saving money. Here are some important steps to the process that will make you consider hiring your own agent:
- The norm for a listing commission is 6% and in most markets they will be offering to pay a buyers agent 3% to co-op a listing.
- If you’re asking the agent to negotiate their commission, you’re banking on the fact that they aren’t paying the 3% co-op so that amount is in “in play”.
- At best you’re negotiating 3% of the purchase price and likely only 1% to 2%. Meaning a listing agent may be willing to give up something from the 3% co-op but will try to keep some of it.
Assume you’re looking at a $300,000 home. If you’re negotiating on 1-2%, this amounts to $3,000-6,000 and best case is $9,000. What you aren’t negotiating on is the other $297,000 to $291,000. You’re only negotiating on the commission but not the price.
The reason is the listing agent is legally obligated to get the price and terms for the seller. If they dropped the price by $6,000 and the listing agent reduced their commission how do you know you couldn’t have gotten the seller to reduce the price by that amount or more?
If you have your own buyers agent working for you they are going to negotiate for your best interest and protect your position.
In theory, it sounds plausible in hiring the listing agent to ask them to reduce their commission. In practice, you don’t have your own agent and you never really know if you got the best deal possible.