The concept of services that help land owners and sellers complete their own real estate transactions is relatively recent, and it may have people wondering whether using a real estate agent is becoming a thing of the past. While doing the work yourself can save you commission fees, for many, flying solo may not be the way to go–and could end up being more costly than paying commission in the long run.
Buying or selling property is a major financial (and emotional) undertaking. Here are some reasons why you shouldn’t write off using a specialised professional.
A real estate representative’s job is to act as a liaison between buyers and sellers. This means that they will have access to properties listed by other agents as well. For example, if you are looking to buy a rural property, a real estate agent will be often have an idea of properties that may meet your criteria, get in touch with the sellers’ agents and make appointments for you to view the properties. If you are buying on your own, you will have to play this telephone tag yourself. This may be especially difficult if you’re shopping for properties that are for sale by owner.
Similarly, if you are looking to sell your property yourself, you will have to solicit calls from interested parties, answer questions and make appointments. Keep in mind that potential buyers are likely to move on if you tend to be busy or don’t respond quickly enough. Alternatively, you may find yourself making an appointment and rushing to meet them, only to find that no one shows up.
- Negotiating Is Tricky Business
Many people don’t like the idea of doing a real estate deal through an agent and feel that direct negotiation between buyers and sellers is more transparent and allows the parties to better look after their own best interests. This is probably true–assuming that both the buyer and seller in a given transaction are reasonable people who are able to get along. Unfortunately, this isn’t always an easy relationship.
What if you, as a buyer, like a property but think the homestead is run down and in need of some decent renovations? If you are working with an agent, you can express your contempt for the current owner’s decorating skills and rant about how much it’ll cost you to upgrade the home without insulting the owner. For all you know, the owner’s late mother may have lovingly chosen the décor. Your real estate agent can convey your concerns to the sellers’ agent. Acting as a messenger, the agent may be in a better position to negotiate a discount without ruffling the homeowner’s feathers.
A real estate agent can also play the bad guy in a transaction, preventing the bad blood between a buyer and seller that can kill a deal. An agent can help keep dealings from getting too personal. This can put you in a better position to represent your best interests without turning off potential buyers who want to niggle about the price.
- Contracts Can Be Hard To Handle
If you decide to buy or sell a property, the offer to purchase contract is there to protect you and ensure that you are able to back out of the deal if certain conditions aren’t met. For example, if you plan to buy a home with a mortgage but you fail to make financing one of the conditions of the sale–and you aren’t approved for the mortgage–you can lose your deposit on the home and could even be sued by the seller for failing to fulfil your end of the contract.
An experienced real estate agent deals with the same contracts and conditions on a regular basis, and is familiar with which conditions should be used, when they can safely be removed and how to use the contract to protect you, whether you’re buying or selling your property.
- Legal Honesty
Licensed professionals are faced with heavy repercussions if they deceive clients than a private buyer or seller. If you are working with a licensed real estate agent under an agency agreement, (i.e., a conventional, full-service commission agreement in which the agent agrees to represent you), your agent will be bound law to act in their clients’ best interest (not his or her own).
Most Agents also rely on referrals and repeat business to build the kind of clientele base they’ll need to survive in the industry. This means that doing what’s best for their clients should be as important to them as any individual sale.
Finally, if you do find that your agent has gotten away with lying to you, you will have more avenues for recourse, such as REIWA or the Department of Commerce, or possibly in court if you can prove that your agent has failed to uphold his legal obligations.
When a buyer and seller work together directly, they can (and should) seek legal counsel, but because each is expected to act in his or her best interest, there isn’t much you can do if you find out later that you’ve been duped about multiple offers or the home’s condition. And having a lawyer on retainer any time you want to talk about potentially buying or selling a house could cost far more than an agent’s commissions by the time the transaction is complete.
- Not Everyone Can Save Money
Many people wish to avoid using a real estate agent to save money. It’s important to keep in mind that it is unlikely that both the buyer and seller will reap the benefits of not having to pay commissions. For example, if you are selling your property on your own, you will price it based on the sale prices of other comparable properties in your area. Many of these properties will be sold with the help of an agent. This means that the seller gets the keep the percentage of the property sale price that might otherwise be paid to the real estate agent.
However, buyers who are looking to purchase a privately listed property may also believe they can save some money on the sale by not having an agent involved. They might even expect it and make an offer accordingly. However, unless buyer and seller agree to split the savings, they can’t both save the commission.
6. It is highly likely that owners will undersell their main asset
Historically it shows that vendors that elected not to use an experienced agent did undersell their most valuable asset.
There are many reasons for this but basically as the Agent deals with buyers on a daily basis, they are acutely aware of what price they will likely pay, and they also know who is in the market. Sellers only have historical information and rumour to determine a value and will invariably have no idea who all the buyers actually are.
Underselling is common and can result in a discount of 10% – 15% of the actual true value. When you consider what the agent’s commission is, this is a potentially huge loss!
7. Huge risk of legal problems
These are many and we have heard of them all. But generally the end result is a financial loss which can run into the hundreds of thousands of dollars. Anything from double stamp duty for wrong buying entity to notwithstanding when a property is actually unconditionally sold.
Case in point: One seller sold their asset privately, then bought another asset unconditionally, only to have the first sale fall over because of non-finance approval! Two properties: potentially a very big problem.
And remember buyers are trying to pay as little as they possibly can!