Which Makes More Difference - Buyer's Agent or Listing Agent?

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Having done both, there's no question in my mind. For the average person and the average transaction, the buyer's agent makes a lot more difference. In the aggregate, a good buyer's agent has the opportunity to make a lot more difference to the situation than a listing agent.

There are exceptions. I don't know any rule of thumb that don't. But the leverage is all on the side of the buyer's agent. There is nothing about the situation that the listing agent deals with that does not have its roots in the purchase of that property.

That listing agent does a lot of work, and provides a lot of value. They have absolutely no input, however, on the identity of the property being sold. You can clean it, paint it, put additions in, landscape it. It's still the same property the people originally bought, however long ago. Nothing that listing agent can do is going to change the location or basic construction. If those are a problem, it's because of the buyer's agent, who could have directed the owners to a different property. Without a bulldozer, nobody is changing the basic construction, and nobody is changing the location of the property, period.

Maybe there was no buyer's agent. The observation stands. Whether the people acted as their own agent or went along with Dual Agency, somebody did it. If a better buyer's agent, or one actually working for the buyers, could or would have brought something to the owner's attention that led to them not making an offer on that property, they wouldn't own it now. Therefore, it lies squarely in the purview of the buyer's agent.

From the first moment prospective owners consider visiting a property, the buyer's agent is involved. Even before. The buyer's agent should be working with the prospective owners on what they can afford, what they must have, and what they can live without. Everything in real estate is a tradeoff. Price versus number of bedrooms versus location versus time to buy versus literally hundreds of other characteristics. Amenities that will make a positive difference later, whether in price or in ease of sale, are a buyer's agent's responsibility, as is keeping people from paying extra for things that don't make a difference.

Your ability to enjoy a property for the period of time you live in it traces directly to how well the buyer's agent did their job. All of that time you lived in the property, whether you realize it or not, you were either praising or cursing that buyer's agent. Maybe you could have done better with a bigger budget - but the buyer's agent can always make a difference. Maybe you could have done better with more patience -it's up to the buyer's agent to make that clear. Whether you're able to rent it afterwards, how easily and for how much, the marketability of the property when it comes time to sell, the repairs you have to make, and the differential between that property and the rest of the neighborhood as far as desirability and sale price, all trace back to how well the buyer's agent did their job.

Owners can modify property. The buyer's agent should have made clear what's likely to make a difference in the sale price, and what's more likely to end up being simply for your own enjoyment. Most major work typically does not return anything like 100% of the cost in terms of sale price, meaning the remainder of that cost had better be indicative of how much enjoyment you personally got out of it in the interim. A good agent will go over likely remodels that will do you some good, whether they're helping you buy or sell, but truthfully, in which case is it more likely you'll do some significant work?

The most salient part of a buyer's agent's job is to keep you from wasting money - paying more for the property than you can get an equally valuable property for nearby. By the time the listing agent comes on the scene, that's a moot point. The property is what it is and is worth what it's worth. If it's good, the listing agent has a much better success story. If it's not, all the listing agent can do amounts to rearranging the deck chairs on the Titanic. On listings, it's really rare that I have have more than two weeks to work with a property before it hits the market. I can help the owners make what's there more visually attractive, but I can't really change it much in most cases. When I'm helping buyers, the vast majority of the time I can keep them from dealing with a problem property at all.

When I'm listing, my clients own a property, and they would like to exchange it for cash. I can get more people interested enough to view it, I can stage it so it's more attractive to them, and I can definitely concentrate my efforts on people fitting the property in terms of lifestyle and requirements. But the property itself pretty much already has to fit their requirements, at a price they can afford. If it doesn't do the former, they won't make an offer, and if it doesn't do the latter, the escrow will fail, as the era of make-believe loans is over. I can't really make a two bedroom structure into a three, no matter how many agents try by entering the larger number. I can't magically add another tub, or an entire bathroom, either. If the lot is 5000 square feet, steeply sloped, and planted in water efficient desert plants, that property is not likely to be attractive to the family who wants a place for their young children to play outside. Potential buyers are going to figure the basic elements of this out, and they'll do it before they make an offer. It's not like it requires any intellectual feats more impressive than Og the Australopithecus was capable of. Or even George of the Jungle. I can market the property ahead of this curve, or behind it. The former leads to fewer showings, but better, more qualified prospects. The latter leads to frustrated clients who have opened their house to dozens of prospects, but no offers. That's one of many real differences the listing agent makes.

But when I'm helping some people buy, the only limits upon the process are the number of properties that match my client requirements. My buyer has either cash, or the ability to get it, and that's what every seller wants. Consider groceries: With two or three dollars you can always walk into the store and buy a loaf of bread of your choice. But if you choose the wrong loaf, changing that loaf of bread back into dollars is a lot more problematical. The same thing applies, greatly magnified, to real estate.

Good agents can spot most of the signs of destructive settling, of likely non-permitted additions, leaky roofs, bad plumbing, ancient wiring, and the vast majority of the time, good agents will talk clients out of a problem property before it gets to the point of an offer, and steer them to a property that they're going to be much happier with (and usually for about the same price, if not less). This translates to a property that's much easier to sell, and for a higher price, than the one I talked them out of. Not to mention fewer, less costly repairs, and increased general enjoyment for the time they live there. Not to mention administrative details such as if the sellers of the Nightmare (house) on Elm Street never have my client's deposit money, we definitely don't have to go hand to hand combat in the courts to get it back, and if they don't get into a bad situation in the first place, my clients don't have to pay attorneys to get them out of it - Maybe.

If our clients want to know what my company's stake in them buying one property versus another, I think we should tell them (once we look it up). It shouldn't be relevant to the thought process of either client or agent. Either this property is the one with the better trade-offs for the buyers, or it isn't. If it's not, I shouldn't be trying to sell it to them. If it is the best possible purchase, the fact that the seller wants to pay my company eight percent of the sales price to get it sold versus two and a half or three doesn't make it not so (and no, I've never seen anything higher than five, although the ones offering more than customary are as likely to be overpriced as the ones offering too little, and more likely to have problems that will be revealed at some point in the escrow process). If my client wants to weigh my motivation, they're entitled to do so. If I need to do some introspection on my own motivations, pretending I don't isn't going to help me. But the vast majority of the time, it means I need to explain myself better, and show the client so they can see what I'm talking about with their own eyes.

When you really think about who makes the most difference to the future of the prospective client, basically all of the factors line up on the side of the buyer's agent. There is usually nothing about any situation any listing agent ever deals with that does not have its roots in an issue a buyer's agent did or did not deal with. Talk with successful, experienced, long term, multiple property investors. They'll tell you the same thing - they made most of what they made because of what they bought or didn't buy. The money was really made on the purchase; the sale only formalized the exact dollar amount. This also illustrates why you need to be able to get rid of ineffective buyer's agents, hence my recommendation of non-exclusive buyer's agency agreements. It's easy for agents to talk a good game in the office, and it's easy to burn a few listings they don't really want you to buy. You want someone who will continue to be a good buyer's agent, because they haven't got you trapped by their agreement for months. The vast majority of the people I work with never go see another agent, but that's always their choice, because they know from having seen me in action that they're not likely to find anyone as good, not because I have them stuck in an exclusive agreement for six months. Show me someone who requires an exclusive agreement, and I'll show you someone who isn't secure in their own ability.

Caveat Emptor


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This page contains a single entry by Dan Melson published on December 12, 2007 7:00 AM.

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