Myth Busters: 5 Real Estate Myths That Need To Be Busted!
/1. Buying new construction without agent representation saves money
This myth is a huge misnomer. Most reputable builders account for the commission as part of their marketing budget. They recognize that working with a real estate agent can be a significant source of business and serious buyers that result in a sale, as opposed to tire kickers that wander in to look at models for design ideas.
It is important for the consumer to remember that the builder represents themselves and only that. In other words, the builder is the seller and any agent from the builder is representing the seller, not the buyer. They are in the business of selling homes and while they may be concerned with delivering a quality product, the term “quality” can be quite subjective and mean different things to different people. Think of having agent representation as your own personal watchdog to ensure that expectations are being managed.
2. I will get a better deal by going through the listing agent
Speaking of representation, many buyers think that if they don’t use an agent to assist them, they will get a better deal on a home they are interested in by just working with the listing agent.
First of all, state licensing laws do not allow an agent to represent both a buyer and seller at the same time. So working through a listing agent means that the only agent in the transaction is working in the best interest of the seller and the seller alone. The listing agent technically has the option to amend their contract with the seller to become a neutral party to both the buyer and seller but any reputable agent would never do that. This would create a precarious professional position as the agent works to get a seller the best terms and price trying to balance that against what is important to a buyer. There is often a disconnect between the two and trying to achieve a fair solution can be difficult with one agent involved. Inevitably, either one or both parties may feel as if they got the short end of the stick which is not the best way to conclude a transaction.
If you come in without an agent to represent you, typically what would happen is the listing agent will refer you out to a buyers agent in their office to draft your offer. The listing agent typically doesn’t keep both ends of the commission like most buyers think. Which means, there is no added benefit for the either the listing agent or the seller to accept an offer from a buyer without representation. In fact, it is much riskier for them. Without an agent, that buyer has not been vetted as a competent buyer by an industry professional. There is no one keeping them on track through the transaction, keeping them informed, meeting deadlines, or giving advice about contingencies, and it’s more likely for the transaction to fall apart. If you are trying to gain a competitive edge, it would be much more impactful to show that you are a strong buyer by using a knowledgable agent to write a solid offer and communicate with the listing agent on your behalf.
Bottom line, if you find a listing agent willing to stay neutral and work both sides of the deal, you may have found yourself an unethical agent. Otherwise you will find yourself entering into the biggest purchase of your life without proper representation at all. Is that worth it to you?
3. I don’t need to stick with the agent I’m working with – it doesn’t matter who I buy the house from
In theory, yes you can buy a property from whatever agent you want. If you started with one agent and they were not a fit for you, you can shift gears to another agent. But in reality, there is an important loyalty when it comes to a buyer/agent relationship from both sides and it’s best to find an agent in the beginning of your home buying journey that you trust and are happy to stick with until the end.
In Wisconsin, we have a Buyer Agency contract. This is our state contract that establishes the client/agent relationship, gives your agent the right to work in your best interest, and allows your agent to negotiate on your behalf. This contract gives you as the buyer true representation.
With that being said, if you have been working with an agent and you just aren’t clicking, then by all means, find a new agent. And even if you have signed a Buyer Agency Agreement, most reputable agents will terminate the contract for you if it’s just not working out between you. But since no one wants to have that awkward conversation, it’s best to try and find the right match from the start. Find someone who you trust and who you enjoy, you are going to be spending a lot of time together!
There are also legal issues that can arise from working with varying agents. If you set up a private showing with one agent and then bounce to a different agent, there will likely be an issue within the realtors association for whom is owed the commission from the sale.
In addition, the real estate community is pretty insular and it will quickly become known in the community that you were the same buyer that has looked at the property five times with three different agents. It may raise some eyebrows as to your seriousness and what kind of buyer you will be to deal with.
Bottom line, respect earns respect. Don’t waste an agent’s time if you are not serious about working with them in the long term.
4. Agents are hungry for business, so of course they will work with me, no matter what I want to buy or sell
Not so much. While most agents are motivated by opportunity, they also recognize that time is money. One of the most precious commodities that an agent is giving is of their time, and that is often more valuable than money.
Agents want to focus their time on activities that will lead to productivity. So while consumers may think every agent is waiting to drop everything to run out and show them a property no matter where or what it is, think again. It can be costly for an agent to work on something that is a road to nowhere.
An unrealistic property search looking for the impossible, exhausting every possible option only for nothing to be suitable, results in a lot of lost time. Marketing the heck out of an overpriced listing and leaving no stone unturned, only to result in it not selling, or sellers rejecting reasonable offers, leaves an agent with a lot of bills for photos, video, staging, print advertising and digital ad campaigns.
So no, not every agent wants to continually handle these situations. These are often encounters taken on by unsuspecting real estate rookies who are ripe with hope and desperate for opportunity. Wise agents learn to assess the opportunity cost of every client to determine what is and isn’t viable. If you don’t trust your agent’s advice and are unrealistic with your search criteria or sale, you may end up on the “most unwanted list” that top agents will not want to deal with.
5. Selling my home to an iBuyer will result in a similar price as an open market transaction
Not at all. While it sounds easy to sell your house with the click of a mouse, there is so much more to it than that.
The price an iBuyer is willing to pay is a bargain to them. In most cases not a true reflection of market value. With property values pushing higher throughout the country and available inventory at an all time low, everyone is looking for an off-market deal. iBuyers are a modern day real estate investor looking for an advantageous situation. Unfortunately, what an unsuspecting seller may not know can hurt them. While selling your home “as is” may be appealing, they will discount the purchase price to reflect that fact, even if potential issues are not that costly to fix.
An iBuyer may go through the home with a fine tooth comb with a host of specialty contractors that find much more than a home inspector would notate with a regular buyer as justification for paying a lower price. There are often a slew of closing fees that an unsuspecting seller does not understand and may not think to question because they are selling their home instantly.
When it comes time for closing, it may be handled by a mobile notary that is not well versed in a real estate transaction like a local title agent or attorney is. Do you really want to risk your single largest transaction for the sake of convenience? You don’t know what you don’t know, and it can hurt you.
Leverage and exposure are two elements that always help bring the highest and best price that a property should sell for. On a related note, you can read more about Why Sellers Need An Agent here: https://kohlrealtywi.com/blog/2019/10/31/why-sellers-should-never-fsbo