Another example of how working with a buyers agent protects your interests
When Matt was first introduced to me I was immediately told that he did not want to work with a buying agent and that he was looking to work with selling agents only. He felt that he could get a better deal working with listing agents exclusively. Having experienced this sentiment before I sent him my pre-crafted email that tells three stories of why having a buyers agent representing you is in your best interest. I get it. I understand why people want to save money on a purchase but the reality is most agents won't drop their commission and when you work with selling agent to buy a home you forfeit the opportunity to have someone watching out FOR YOU.
The email I send out It has worked every time I have sent it. In an industry where ethics and integrity are not at the forefront, why take the risk of not having someone looking out for your interests? Here is the penalty from the Real Estate Council of Alberta (RECA) for being unethical and not cooperating with an investigation. First off, the chances of getting caught are slim and than this is the punishment.
On February, 2016 the Real Estate Council of Alberta (RECA) suspended the real estate licence of Jane Doe. RECA suspended Jane Doe for refusing to cooperate with a person conducting an investigation. As a result of this suspension, Jane Doe may not trade in real estate in Alberta. Her suspension will continue until the executive director is satisfied she has cooperated with the investigation.
So, the punishment is a suspension and likely a mediocre fine if anything is uncovered, do you think it is a deterrent?
Here is one of the stories I send out in that email. It simply re-tells what I have seen in the industry. I have already published an article about another one of the stories I send out; you can find it here. I don't need to convince anyone to use a buyers agent, I just show them what can happen and how working with a selling agent to buy a home; someone who is going to 'double end' a sale and is representing the seller and buyer can be risky. There is a reason that an advisory panel tasked with looking into the Vancouver real estate market recently released a recommendation that agents no longer be allowed to 'double end' a deal. I wrote about this a few weeks ago. Certainly not every listing agent is looking out for themselves first, but thinking that a selling agent will reduce their commission and you will get a better deal is not always worth it.
Another story of how an agent trying to 'double end' a property may have gone a bit too far.
"Tim, what can you tell me about this house?" I get that call a lot, it's not always from buyers that I am working with but this time it was. I had been working with this builder for a couple years at this point and we had become friends and developed a mutually beneficial relationship. The builder was approached by a realtor in Calgary who was representing a seller that had a lot which was zoned R2 and in a desirable neighbourhood. The builder specializes in building duplex style new infills and the lot seemed 'too good to be true'. It was priced to move quick and the selling agent was applying some pressure on the builder; creating a sense of urgency and letting them know that there were already interested parties. He said it was a 'perfect opportunity for them' and encouraged them to write an offer quickly with him. The selling agent had called them and was trying to 'double end' his sale. I initially thought this was creative and that the selling agent was working hard for his sellers. In the end I thought it was deceivious and here's why...
First off, I was happy that they had called me, the selling realtor was really pushing the property on them and if what he said was true it was a 'great deal' for them. I looked into the home and everything seemed legit as presented online but still I knew that something was wrong. If it is 'too good to be true' it likely is so I dug deeper.
The builder had previously purchased a detached home with R2 zoning in Calgary and had problems when they went to develop the lot because the telephone poll in the backyard could not be moved. This interfered with any chance of a being able to build a garage. They made that purchase privately, before we started working together but we had just gone through the process of selling that home for them, so I was familiar with the situation.
Keep in mind this was at a time in Calgary when some buyers were purchasing homes to redevelop sight unseen. We had previously been involved in a couple competing offers that had 12-20 offers on a property; time was of the essence.
I went down to the lot in Hillhurst that this realtor had called them about to see if there was something we were missing; was there a reason why you might not be able to develop the land? While I was at the property checking it out I noticed that the home beside the property sat on a R2 lot but that the new home built there was only a single family home. I saw a neighbour and decided to ask him if he knew anything about that recent build because the best use for that land would have been a duplex style infill.
What was wrong with the lot?
Fortunately the neighbour gave me a heads up that there was a very old caveat on the title. He said the caveat stated the lot could not be developed as a duplex and when the builder for the recently developed lot next door applied for a permit with the city, one of the neighbours made sure that they were not able to build a duplex and pushed the city to enforce the caveat on title from 1912...Prior to the neighbour giving me this info I had already discovered the caveat on the title but it was almost impossible to read; written by lawyers in 1912 it was challenging to figure out what it was for...
Armed with this new information I questioned the selling realtor about the caveat and he told me not to worry, that it was an old caveat and no one would enforce it. Did he not know about the lot next door where it was an issue within the last couple of years? Or, did he know about the lot next door and the fact that they were unable to build a duplex? Was he trying to fire-sale the property so that he could get a competing offer; a quick sale and a buyer who would not do the proper due diligence to figure this out? Why else would the home be priced $100,000 less then market value?
Worse still, this selling realtor intentionally reached out to builders in Calgary that specialize in knocking down old bungalows and turning them into new duplexes with the intent of selling them a property they actually could not develop. He pressured them into writing an offer with him as the buyer and seller agent on this 'great deal' before it went to a competing offer. Without their own representation, maybe another builder who was presented the 'too good to be true' home might have purchased the property and regretted the decision when they decided to re-develop the land. Clearly, spending $650,000+ on a home that you can not develop for your business is not in your best interests but the realtor would have still gotten paid; realtor wins, buyer loses.
Don't you want your own representation?
It always surprises me when I talk to someone interested in real estate and they bring up the notion that they want to work with selling realtors exclusively because they feel that they will be able to get a good deal. Does it happen? Sometimes. Does it happen often? No. If a realtor is willing to discount their commission; to do anything to get the next sale; is that someone you want to represent you in one of the largest purchases of your life time?
I have several people that I am working with now, representing them as a 'buyer's agent' that were once of the mantra of solely working with 'seller's agents' only. When I meet people like this, I ask them why are you working with the selling agent? The reason 99% of the time is because of commission; they think that if a realtor is going to 'double end' a sale that they will be open to reducing the amount that they charge to the sellers and that the sale price will be lower. Like I said above, this does happen on occasion but what happens when a realtor who is trying to 'double end' a deal looks out for themselves first? Often nothing, because like in the preceding examples no one but the realtors knew and their are no consequences for this behaviour really...Rarely does someone get caught. Don't you want to make sure you are represented?
Do you know someone looking to buy a home, who thinks working with the selling agent will benefit them? If you do, and you think reading these articles might benefit them, please direct them to my posts, tell them to check out the recent articles; maybe we'd be a good fit like Darren, who recently found me the same way.
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PPS: People seem to love the previously published articles too.