Will I Make More Money if My Listing Agent Also Represents the Buyer?

A surprising number of U.S. listings – about 1 in 10 — are sold by a real estate agent who also represents the buyer. How, we wondered, does this work out for the seller who originally hired the real estate agent?

To answer that question, Redfin’s real estate analyst Tim Ellis dug up every sale from January 1, 2011 – December 1, 2011 across 22 counties in nine different states — over 230,000 records in all. The results were remarkably consistent.

For the full report visit the Redfin Research Center.

Discussion

  • http://www.facebook.com/cynthianowak Cynthia Pang Nowak

    The “just click here” link is broken …

  • Me

    “…By contrast, among Redfin’s 10,000+ clients, dual agency or its
    equivalent has never happened. We also don’t allow dual agency among our
    partners…”

    Really? Then please explain why 2031 W Crystal St in Chicago, IL was sold by a Redin agent representing both sellers and buyers.

    • Greg Whelan

      Good
      question, thanks for asking.  I was the listing agent on 2031 W Crystal
      St..  As Glenn mentioned in the post, “if the Multiple Listing
      Service used by agents to record transactions listed the same agent as
      representing buyer and seller,” we counted that as “dual
      agency.”  It wasn't explicitly explained in the post, but there are
      some instances where a buyer is completely unrepresented, but the listing agent
      has to fill in a “buyer's agent” field when closing out the deal in
      the MLS, so they will put themselves.  There is unfortunately no way to
      filter these rare occasions out of the statistics, which is why we are just
      reporting broad statistics in this post, not calling out any particular agents.

       

      That is
      what happened in our situation with 2031 W Crystal St.  We had a buyer
      that was unrepresented make an offer.  We required them to sign a form
      that made it explicitly clear to them that we would not be their agent.
       Also, unlike most other agents who are representing a seller whose buyer
      has no agent, we did not collect both sides of the commission.  In fact,
      our seller simply kept the portion of the commission that would have gone to a
      buyer's agent.

       

      Hope that
      clears things up for you. 

      • Me

        “…Hope that clears things up for you…”

        Yes, it does. Thanks for the explanation. I'll take your word for the statement that the buyers had to sign a non-representation form, and the sellers kept the buy-side commission.

  • http://teardowns.com/ Brian Hickey

    The question is a bit misleading.  Let's remember, buyers don't need to be represented.  In fact, with so much information about the prospective home online – just how valuable is the buyers agent?  Are they worth half the listing commission?  Sometimes for sure.

    The question may also be asked as such: Will I make more money if the buyer contacts my listing agent directly?  The answer phrased that way is – you should.

    In the traditional world of real estate the commission that the seller and listing agent/broker agree on is usually split 50/50 with the buyers agent at the closing table.

    If however, the buyer decides not to have representation (other than counsel – maybe), the listing agent has some wiggle room with their commission – otherwise they are keeping 100% of the commission – in the business that's called “double-dipping”.

    No one know this better than Redfin – since as I understand they turn around and share their share with their client – seems fair enough.

    Thanks,

    Brian

  • http://www.usinvest.com.au/services.php property sale in usa

    Thank you for posting this detailed real estate information.

  • Paul W

    Great article and it matches my experience. I have bough twice using the listing agent to represent me and both times I felt like it worked in my favor. I felt like the listing agent wanted to make sure I got the place because their commission increased dramatically. I was buying in competitive markets where that edge was needed. Both times I also reccomended the listing agent give back part of the commission to the seller and they did. I think it was a point each time but I actually did not have visibility to that side. And I have never lost a bid on a house where I had the listing agent representing me, 2 for 2 vs about 4 for 12 without dual agency.

  • A. Lewis

    I know you say the point of the series is supporting home sellers, but the buyer's viewpoint, and their obvious interest in spending less on a home, is woefully missing. The perception that some have that real estate transactions as currently practice are a scam designed to drive up home prices is reinforced by your choice of wording:

    “worse prices” “the extent to which it does or does not damage the seller”

    From the buyer's viewpoint, those are “better prices” and “the extent to which it helps/protects the buyer”. Every penny of that home value must be paid by the buyer (and his loan), and it all has future costs (taxes, interest, less potential appreciation).

    Just looking out for the other half…

    • http://blog.redfin.com/ GlennKelman

      It's a fair point. We generally take the buyer's point of view, but it's hard to do that when the seller was the one who originally hired the agent.

  • https://plus.google.com/u/0/103257063467205137912 National Help Center Law Group

    Amazing how simple it can be to communicate with people and have them understand a certain topic, you made my day.

  • JanelleS

    Will I spend less time in jail if my defense attorney also represents the plaintiff?

  • Cindy

    Your statistics leave out a few details.

    Was the net to the seller actually 1.6% less?  In many instances a “dual” agent may reduce their commission in order to secure both sides of the transaction.  As a result the net to the seller could be the same or even more than with buyer's agent. 

    We have Redfin agents here who have taken credit for both sides and in my quick look at those sales they all sold for less than the list price.  Do you know if the lower prices were caused by the dual agency or an appraisal issue?  Did you look at original list price or last list price to sold to compute the numbers?  Statistics can say just about anything you want them to say.

    I'm not a proponent of dual agency but think your numbers don't paint the whole picture and I'm sure that when you tackle designated agency you'll leave out details there as well.

  • http://jphilip.com J Philip Faranda

    Glen, thanks for the link. You asserted your disagreement, but you didn't really address my core point. That is something we'll take up another time ;).

    Full disclosure: I was Redfin's first partner agent when they opened business in New York. I remain good friends with Michael Daly, who is, in my view, a valuable asset to their enterprise and a top shelf man.

    In one of those transactions, a Redfin buyer client, after months of looking with me, ended up wanting to see one of my own listings. On the advice of Redfin's Kevin Broveleit, I stepped back and designated an agent in my firm for both buyer and seller, as I am principal broker. This was an “in house sale” where I got MLS credit on both sides, but was not the type of dual agency Mr Kelman refers to. The devil in the details is that Redfin is assuming that MLS credit to one agent includes in house sales where buyer and seller had designated agents (which Redfin does engage in themselves) or simply a buyer customer who did not have the fiduciary service from the listing agent whose client remained the seller. Neither of those cases is the dual agency Redfin warns against.

    Another issue with Mr Kelman's hypothesis is that buyers reading this will erroneously conclude that they will get a 1.6% better deal if they unwittingly deal directly with the listing agent. In doing so, Glen does the public no service.

    There are other issues with this, such as the very valid point that IDX and VOW levels of data access, which are really meant for consumer home searches and not granular market analysis, is even a valid pool of data to study the issue. The number of variables that should be used to normalize the data are nearly impossible to ascertain. For example: Would a buyer agent recommend an overpriced listing to their client? Probably not. Does a listing agent have a fiduciary duty  to their seller to continue to market the home aggressively? Of course. Do overpriced listings, which end up stale, sell for a higher percentage than aggressively priced homes that garner vast attention from cooperating firms? I think we know the answer. So, yes, listing agents often end up selling their overpriced inventory, (if they sell at all) themselves. And some of the “lowballers” do deal directly with the listing agent as part of their strategy. Even in those cases, with the seller as client and the buyer as customer, it is invalid to conclude that dual agency occurred.

    This reminds me of the Freakonomics study of Chicago real estate that concluded that agents threw their clients under the bus in comparison to the transactions where they were principals. Rather than paint a broad stroke with 230,000 deals, I'd suggest a far closer look at 100 random transactions where the details tell the full story.

    • http://www.leadplace.com Ray Schmitz

      I agree that the specific details of any given transaction matter more than generalizations, but these points do not invalidate the statistical results.  Someone needs to propose a more compelling alternative interpretations or the results stand.   230,000 deals is a very large sample.  

      BTW, I think we can interpret the Freakonomics study differently, too:  of course agents stayed on market longer (started selling sooner), and got more money when they were selling their own homes, because, well, they are agents.  Other people don't do exactly what their agent tells them, when their agent tells them.

  • http://www.facebook.com/renee.zychburrows Renee Zych-Burrows

    OF COURSE R**fin DOES NOT want buyers to use the list agent in MY market. They have NO listings in my market.  They have NO liability in my market.  They have NO agents in my market.  They have NO production in my market.  They refer everything out to other broker's agents in my market and depend on mailbox money (referral fees) in my market.
    Very timely considering inventory crunches in my market where buyers are going directly to the list agents out of frustration.
    Many listing agreements do have variable commissions which reduce the commission in the event of a dual agency.  This changes the net also and in many cases with this structure, the seller will be netting MORE even though on the surface it appears they are netting LESS.

    • http://blog.redfin.com/ GlennKelman

      Actually, the data show that buyers benefit, even though we mostly represent buyers, and we acknowledged in the post above that dual agency can be more efficient, reducing total commissions paid by the seller. 

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