2.7.5 Loss of Assistance and Representation
Smart buyers use the seller’s commission money to hire a good buyer agent to help them locate and evaluate homes and represent their interests in working through the purchase process. Public access to a limited MLS system discourages that, to the benefit of the listing agent and seller, and to the sometimes substantial detriment of the buyer.
The agent listing a home for sale has a marketing or “listing” contract with the owner that typically obligates them to pay the agent a 4-7% commission when the home sells. This contract will also specify that the listing agent will split that commission with any agent who brings a buyer to the home, shows it, and submits an offer that results in the sale of the property. The seller pays the same commission whether the listing agent sells the property directly or through another agent who brings to the buyer to the property. From the seller’s point of view, this is a great marketing system. It provides an incentive for the listing agent to locate a buyer directly, since they keep the whole commission that way. It also encourages other agents in the area to bring their buyers to the home, since they’ll get a split of the commission if “their buyer” makes the purchase.
By using the web to market homes, and particularly by making their listings available through the public versions of the MLS, listing brokers dramatically increase the chances that they can make a direct sale to a buyer and thus double their money by retaining the full commission. This direct access to buyers becomes even more important with a home that is overpriced or that has deficiencies that are making it difficult to sell. If the listing agent can find a buyer who is not represented by a knowledgeable agent, and who doesn’t have the ability to analyze pricing data on prior home sales, the agent has an advantage. He is more likely to make the sale than he would be if there were another agent getting in the way by advising the buyer to offer less or to just move on and find a better property.