Why Direct Deals Are Bad for the Seller?
Ooh, a direct deal. That’s when the home buyer is not represented by an agent so the listing agent works directly with the buyer. Every agent wants a direct deal so they can keep double the commission. And sellers like it because often, without a co-broke, the commission will be cut (say from 5% to 4%).
Listing agent makes more money while seller pays less commission, so what is the problem?
I don’t like direct deals and I think they are a rotten situation for sellers!
This unconventional piece of wisdom comes from years of experience, and has recently been reenforced during a condo sale.
At an open house I hosted two weeks ago a buyer came to me and wanted to write the offer directly with me. The next day We met, sat down, wrote the offer….well, most of it.
First, by law, I had to disclose to the buyer that I work for the seller. With this in mind, we started the money conversation.
Buyer wanted to offer well under the asking price. As I discuss the price with her, she listens, she nods, and she says (I paraphrase), “You work for the seller, why should I listen to you?”
As someone representing the seller, I do not have the authority to represent any price but the full asking price. I am not free to negotiate money which is not mine. Which is besides the fact I thought the asking price was reasonable.
As I asked her to sign the offer, she hesitates, “You know, maybe I should have my own agent review this.”
I asked her if she knew anyone, she does, she calls and books an appointment with this other agent immediately.
Two hours later, I received an offer from this buyer through her buyer’s agent. It was a much higher, much better offer. It reflected a buyer who understood the market and the process.
Seems to defy logic, that a buyer’s agent will write a much better offer than the seller’s agent?
The fact is, as long as my ficuciary obligation is to the seller, nothing I say to a buyer carries much weight. I may be giving excellent and honest advice, but none of it can be contrary to my clients best interests, or what they tell me to represent.
A buyer knows there is a choice to be represented, and once she is aware of the fact she is not, hesitation sets in. Buying a condo is a bit complex and expensive.
By seeking reprentation, the buyer agent is there through the whole transaction to explain everyting, and ensure the buyer understands it. The buyer receives advice congruent with her interests, and thus she is a more informed and eager.
Financially my client is ahead because the home buyer trusted her agent’s advice – a trust I can’t instill as someone representing the seller.
An educated, well represented buyer will make stronger offers, take the transaction more seriously, and is much more likely to close.
Isn’t that the goal?