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If I Buy Privately, Do I Even Need An Agent?

Technically, no. But, I have yet to see an opportunity that couldn't have been made better by using a buyer's representative. Terms, conditions and price.

Often, first-time buyers don't know differently and embark on their home hunt by looking at random homes by calling every agent that has a listing on a particular street. And they call all the private sellers too. This would be like them contacting the coach of the opposing football team for advice -- you wouldn't do that would you?

A better use of their time is to find an agent that they get to know and trust and then use them to set up convenient appointments all at one time. That single agent can also compare and contrast the homes (which had they called all the listings agents, they would likely skew all the comments in favour of their own listing or more likely omitted the ones that weren't favourable. Obviously, if they called seller then they couldn't get any factual information on the other homes available).

Occasionally repeat buyers decide not to find their own agent too. This is usually because their past experience with an agent was so poor and the agent appeared to provide little more than "tour guide" services. Perhaps that had been the case, but I can tell you from many personal experiences and hard-fought negotiations with other agents and their sellers (or directly with builders reps. or other unrepresented sellers), a buyer's agent is worth far more to a buyer in a transaction than any listing agent can possibly provide in value to the seller.

In real estate, similar to many other businesses, in absence of differentiating value in a home, it comes down to timing and PRICE. Market value is defined as including a buyer's agent fee. If it is on the MLS System it has that fee included in the price. If it is a private seller, they are almost always willing to include a fair fee in their price.

I always encourage my clients to keep their eyes open for opportunities.


One of the benefits or having a Buyer's Representation Agreement in place before looking at too many homes is that it allows me to look for For Sale By Owner (FSBO) properties for my clients. New construction also fits into this FSBO category by definition (although they have a sales staff, they work for the builder to get them the best price and cannot represent the buyer at all. In Alberta, builder's sales staff are NOT required to be licensed real estate agents).


While it is usually rare that a client will identify a property that may meet their needs to me before I have provided information on it to them, I strongly encourage clients to keep their eyes open for these opportunities. too. Clearly, I can't be in all places at all times. So if a client sees a home that is being sold privately, I encourage them to tell me about it and I can help them "seal the deal" if that is, in fact, the home for them.


Trying to sell a home privately had become quite a novelty, but lately with the addition of mere postings to our MLS® System database, it has somewhat fallen out of favour. In reality, a mere posting is not significantly any more effective but there is a notion that being on REALTOR.ca will bring them added exposure and therefore a higher likelihood of a buyer. Perhaps it's true (it obvously can't be measured), but the success of the MLS® System is not in the database, it's in the co-operation between agents of the listing data and in the provision of guaranteed compensation. As purely a database, having well over 90% of available homes in one listing service is really also quite useful though to buyers, sellers, real estate agents, lenders and appraisers.


But looking at FSBOs can be a very real possibility in finding an attractive home for sale with little serious competition. Not many serious, "ready-to-purchase" buyers (or their agents) are looking at them.


All too often, we see that FSBO sellers are priced too high. In all likelihood they've had several real estate agents provide them with an opinion of Fair Market Value and provide them with a "estimated net proceeds" amount. Often they have rejected this amount. They somehow believe that without representation they will attract the same effectiveness in marketing and negotiations, and therefore be able to attract the same selling price (or higher) and keep more in terms of net proceeds from the sale. After their marketing costs and time exerted, they may be surprised how much they didn't save.


For the buyer, the first thing in the consideration of buying a FSBO property is that you really need a good idea of what the home is truly worth. I'm pretty sure that you know that taking the seller's "word for it" is probably not the best course of action. Hiring your own agent can help. They will help you with determining value, the risks involved in the purchase of that particular home and can draft up a compelling offer to purchase. Armed with all of this knowledge, you and your agent can determine whether or not the seller is realistic in their pricing and can provide the seller with fact-based details to support the opinion of value.


By using your own agent you also get the advantage of being able to use a "standard form" Agreement of Purchase and Sale that has been vetted by probably hundreds of real estate lawyers and is equally balanced between the buyer's and the seller's interests. These forms are also updated constantly to keep up with recent changes in the local real estate industry. Buying directly with the seller will probably require the use of the seller's contract that may or may not have been written by the seller's lawyer (to protect their interests, and not yours). Or worse still, they may try to use a generic purchase contract that was purchased at an office supply store that doesn't cover some of the unique, important characteristics of this real estate jurisdiction.


By using your own agent you also get neutral, third-party negotiations. This could save you from getting emotionally invested too early in a property, or having your emotions sabotage your efforts in buying the home.


Your own agent will also verify the information provided by the seller. While you can do much of this yourself, knowing where and how to find the information can be very challenging and is certainly time consuming.

Your own agent should also do some digging. Was the place a past grow-op? Is it currently in a flood plain? Are their easements that will impact the home's value today or in the future? Is the use of the home in line with the current zoning of the property?


Here are some of the on-going myths that buyers sometimes have about buying FSBOs:

  • I will have to pay my own agent. Market value of a home has always included the buyer's agent being fully compensated through the purchase price and therefore the proceeds of the sale. While there is a term in the buyer representation agreement that the buyer will have to pay their own agent a pre-determined fee, there is also a term that clearly stipulates that the buyer's agent is directed to seek their total compensation from the seller first. While not all agents know how to do this, we always negotiate to get our fees paid out of the proceeds of the sale – afterall, it is your money that is paying the seller that they, in turn, pays us. By having it paid out of the proceeds of the sale (and not in addition to it), your lender will accept the fee as part of the total sale price and won't likely reject it from inclusion in the financing amount. If the seller refuses to pay the agent that brings the buyer, or offers to pay them less than market normal rates, the buyer has a choice to reduce the amount they offer for purchase price so they can pay their own agent, renegotiate the buyer agent fee for this one home, or look at other homes. Most often they decide to purchase a different home altogether since if they can't finance the normally included commission/fixed fee, then it has to come out of their down payment and it could impact their loan qualifications.
  • FSBOs don't work with real estate agents. While they have decided to save on the commissions/fees to market their homes, most sellers readily offer adequate commissions to the agent that brings the successful buyer. A sane seller will look at all offers and not just ones that don't involve agents. Their goal is to sell their home – quickly and for the most net money – just like any other seller. Most builders (FSBOs by definition) factor in a substantial amount of their sales will include a real estate agents so they have already budgeted a certain percentage of their marketing dollars towards the commissions. The commissions aren't extra -- they are included -- just like their own sales reps' fees are.
  • Real estate agents will only work with other real estate agents. That's just plain not true. Finding the right home for you is our primary focus. If that means seeking out FSBO properties – whether on the Calgary MLS® System or not – we source whatever is available. I have been known to visit dozens of builder showhomes and other FSBO properties seeking information for many of my buyer clients. [Technically, once a home is placed on any MLS® System, they are no longer FSBO since their are legally working with a REALTOR®. It may be quite limited in scope - meaning no negotiation or coaching - but they are working WITH a REALTOR®.]
  • I can save money by buying directly from the seller. It is possible, but you could also spend thousands of dollars too much or buy the wrong house for you and your needs. Sellers are already trying to save as much money as they can: Allowing the buyer to save exactly the same money isn't in the hearts of most sellers. The last prospect that I worked with that decided to buy direct from a FSBO, paid what I had indicated what it was worth -- unfortunately they didn't get representation in the negotiations and the seller got to pocket the commission that could have been set aside for the buyer's agent. So they overpaid by about $7,000. When an agent tells you what a home is worth, it includes paying both agents' commissions/fees. This particular home was a FSBO on the MLS and they paid their listing "commission free" agent within $300 of what I would have charged them for FULL representation and services throughout the transaction (including holding deposits, advice throughout the transaction and providing the only type of lockbox permitted on MLS® System listings) and not just listing entry into the MLS® System and "offerAssist".

If you're needing some advice about where to start or help in finding a home, don't hesitate to contact us directly.


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