The Blinding Excitement of Buying a House
I recently chatted with my life-long best friend, Phil, who lives in Edmonton. Phil mentioned that a house he and his wife love was back on the market. They were ready to buy it but wanted to pick my brain as his best friend and a savvy Realtor.
The house was previously offered for around $2M, but this time reduced to $1.6M. By his calculation, this more accurately reflected its true value. He planned to go direct to the seller’s Realtor and convince them to reduce the price by foregoing some of their commission. By his estimation, he figured he’d save between one and two percent, the equivalent of $16,000 to $32,000.
Hire Your Own Realtor
“BIG MISTAKE!,” I said.
I explained that the seller’s Real Estate Agent had a legal, fiduciary obligation to do everything in their ability to serve the seller, ensuring a successful sale. The concept of “going direct” to save is misleading. Not only is the seller under contract to pay the full commission, regardless of whether they represent the buyer or not, if a special arrangement to reduce the commission in the case of multiple representation exists, it’s established to benefit the seller, not the buyer.
Fortunately, Phil took my advice. He and his wife sought their own representation and subsequently found out that the house was over-priced by approximately $200,000!
No. 1 Real Estate Mistake to Avoid
Many people buy and/or sell using discount brokerages, selling privately or “going direct” with hopes of saving money. In some cases, perhaps they do (but somebody in the transaction loses). The unfortunate thing is that in many of these cases, Phil’s included, they believe that they came out on the winning end of the deal when they usually do not. Phil would have been thrilled to have saved $30,000 on the purchase of the beautiful $1,600,000 house; little would he know, he still over-paid by $170,000.
In the case of this particular house, the Realtor representing the Seller had helped the buyer purchase the home a few years prior for a price higher than the current price. It was likely over-priced at that time too. Don’t gamble with such a large purchase or sale. Seek professional advice and representation; interviewing real estate agents costs nothing but a bit of time.