A Buyer's Agent is FREE!!! Really?

You hear it all the time, "work with me when you're looking to buy a home, it doesn't cost you anything because the seller pays my commission!"

This is frustrating. This phrase or some variant of it is used a lot by agents to try and convince buyers to work with them. After all, what have they got to lose since it's free? The problem is that it's not free. Buyers pay for the services of a real estate agent whether they use one or not. Sure there are some exceptions but for the most part this is the reality.

Buyers pay for this service through the purchase price of the home. Just like all other products and services, the cost of the service is baked into the price. Think about it. A certain percentage of the purchase price (the money a buyer pays for a home) goes directly to the buyer's broker. It's just reduced from the seller's proceeds for accounting purposes.

If real estate commissions (both the list side and buy side) were all of the sudden paid by buyers separate from the sales price, those sales prices would drop 5 to 6 percent across the board.

What is interesting about the real estate industry is that sellers, along with their listing agent, set the price the services of a buyer's representative. This has been the practice for years and it is unlikely to change anytime soon. However, you can start to make a change by using buyer-broker agreements more often, contractually define your obligations as a buyer's agent and stake a value claim on your services.

Listen, if you are telling buyers that working with you as an agent is "free," you are basically telling them your services are worth nothing. Not only that, you are misrepresenting what the buyer is paying for when they purchase a home! If someone is buying a home listed by a Realtor, the majority of the time a buyer's broker fee is being paid out from those purchase monies even if it is the listing broker collecting that fee.

A buyer's agent brings tremendous value to the process of buying a home and if done right it's something that clients have no problem paying for. Let me ask you, would you pay for a service that helps you save time, helps you become clear on your goals and helps you save money through the expert knowledge and negotiation skills of a professional proactive advisor? YES!

So next time you are about to propose to a buyer that working with you won't cost them a penny, think about what you are really saying to them...