Always Use a Buyer's Agent
When you're going to buy a property, you hire a buyer's agent to represent your interests. But do you understand why, or how it works? Do you PAY a buyer's agent? The answer's a bit complicated, but it's a no-brainer once you understand it.
How Buyer's Agency Works in Nanaimo
The seller pays a commission to the listing agent, who usually splits it with the buyer's agent.
Imagine a buyer, Bob, who wants Sally's home. Sally has hired a real estate agent, Rita, to market and sell the property. Rita and Sally negotiate a commission to be paid to Rita in the event of a sale.
Bob may be at a disadvantage because Rita is experienced and it's her legal duty to get the best terms for Sally. So Bob asks Gerry (yay Gerry!) to be his buyer's agent.
Imagine the deal goes through and Bob pays Sally. Even though two agents were involved, the commission doesn't increase, and neither does Bob's purchase price. Rita simply splits her commission with Gerry.
How Does The Seller Agent Feel About This?
In the example above, Rita only got half of the potential commission. But that is actually normal - the abnormal circumstances seen in our market are detailed below and you can see how they don't benefit the buyer. Besides, by offering a share of the commission to every agent in the area, Rita's far more likely to accomplish her task of selling the property quickly and on good terms. This is the typical arrangement for property transactions in Nanaimo and most of BC.
An agent gets both commissions when he or she "double ends" a transaction - by representing both the buyer and the seller. It's quite a profitable arrangement! This often happens because an inexperienced buyer approached the listing agent to inquire about the property, and accepted the listing agent's offer of buyer's agency services.
The laws of agency require a professional agent to represent their clients' best interest. This is impossible to do while one is "double ending" both sides; the agent can no longer advise about price, etc. and is therefore providing a LESSER service to each party. It is also sadly true that in many cases, the agent has greater loyalty to the seller - their initial client.
Because double-ending is not in the public's best interest in most situations, the provincial government is looking for a way to abolish the arrangement. However, this could present issues in small towns that have only a couple of real estate agents. We will watch and see what happens with the regulations. In the meantime, I maintain my position that it is better to advise an unrepresented buyer to seek representation, than it is to risk liability in a double-ended situation.
Can I Get a Better Deal Without a Buyer's Agent?
You may have heard of a friend who was buying a property, who went straight to the seller's agent and made an offer with an understanding that the purchase price would be lower as a result of NOT involving a buyer's agent.
This might be an effective approach in certain rare situations. But even if the listing agent is genuine, you should remember that they have an obligation to work for the sole benefit of their seller. This is true even if you sign something saying you are their "customer". Unless you are their "client" (i.e., they are "double ending" the deal, see above), then you are unrepresented in a potentially exploitative situation.
Conclusion: Use a Buyer's Agent when Buying
Got questions about all this? I'm happy to explain myself in person or over the phone, no strings attached. Call the number above or email me.