Statistics... Listing Agent vs. Buyer's Agent

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IrvineRealtor_IHB

IrvineRealtor_IHB

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Another data dump for your perusal...



The question was raised in another thread about whether it is better to work with the listing agent, or better to bring your own buyer's agent.



I've gone back through 1/1/2000, and downloaded 18,974 closed Irvine sales with complete data. There were more, but with the limitations of the download parameters, I felt this was a fair estimation of market activity. In years that had more than 2500 sales, the first 2500 were the only ones integrated.



The findings I had were as such:



77.97% of the time, buyers are using their own (buyer's) agent.

22.03% of the time, buyers are working with the listing agent, who acts in a dual-agency role.



Compared to list price, closing price was:

1.64% lower when using a buyer's agent.

1.93% lower when working directly with the listing agent.



From this info, it appears on the surface, that when buying a home, buyers can get a better rate going with the listing agent.



Take a look, and see what you can discern for yourselves...



<a href="http://www.irvinerealtorsite.com/SameListSellAgent.xls">Excel Sheet: Advantage of Listing Agent vs. Buyer's Agent</a>
 
IR2 - First, I want to thank you for your willingness to discuss this subject on an objective level and not take it personally. I think I would not have same ability were I in your shoes. The following is a post I copied from the other thread you refer to, but wrote before I saw this thread. Maybe I would work with a buyer's agent if they were will to kick back between 1% to 2% of the commission. Thanks again.<p>
lll<p>








IR2 - IMO, it would seem the pay structure for re agents puts their best interest at odds with their client?s best interest. Since the pay is not for performance, but rather a closed sale, which may not be in the client?s best interest, there seems to be an inherent conflict of interest between the re agent and his/her client.



Without being personal, because very few or none of us actually know you, consider how many re agents are willing to tell a client that it may be best for them to wait a few months or years before they buy or sell? I am not asking about you, but rather the majority of agents. Most of the folks in here realize that if they had taken the advice of 99 out of 100 agents, they would have purchased this year or last and would now have lost most if not all of their equity or even be upside down. All the advice that ?now is a good time to buy? is being proved to be a lode of hooey. And the advisers are losing credibility. How many of the subprime borrowers were egged on by an agent who told them any number of lies about how they could afford a home or how home prices always go up.

The agent?s pay structure necessitates a sale. If the buyer is hesitant to pay an amount that the seller is willing to accept, how many times does the agent say, ?Hey, maybe we need to look at some less expensive properties.?? Honestly, won?t most agents tell their clients, ?I think the seller may be willing to accept such and such. Or, the ever popular, ?The selling agent told me their is another offer coming in today.??

Admit it or not, it is obvious to anyone with half a brain that the commission based on a closed sale pay structure creates a conflict of interest between the agent and his/her client and agents will not hear of any change to their pay structure.

Isn?t there some way agents could get paid by the hour, like so many other servicers? Why is that so threatening? Maybe I will open up an re brokerage where the agent is paid by the hour, as is the brokerage.
 
[quote author="awgee" date=1210626344]IR2 - First, I want to thank you for your willingness to discuss this subject on an objective level and not take it personally. I think I would not have same ability were I in your shoes. The following is a post I copied from the other thread you refer to, but wrote before I saw this thread. Maybe I would work with a buyer's agent if they were will to kick back between 1% to 2% of the commission. Thanks again.<p>
lll<p>








IR2 - IMO, it would seem the pay structure for re agents puts their best interest at odds with their client?s best interest. Since the pay is not for performance, but rather a closed sale, which may not be in the client?s best interest, there seems to be an inherent conflict of interest between the re agent and his/her client.



Without being personal, because very few or none of us actually know you, consider how many re agents are willing to tell a client that it may be best for them to wait a few months or years before they buy or sell? I am not asking about you, but rather the majority of agents. Most of the folks in here realize that if they had taken the advice of 99 out of 100 agents, they would have purchased this year or last and would now have lost most if not all of their equity or even be upside down. All the advice that ?now is a good time to buy? is being proved to be a lode of hooey. And the advisers are losing credibility. How many of the subprime borrowers were egged on by an agent who told them any number of lies about how they could afford a home or how home prices always go up.

The agent?s pay structure necessitates a sale. If the buyer is hesitant to pay an amount that the seller is willing to accept, how many times does the agent say, ?Hey, maybe we need to look at some less expensive properties.?? Honestly, won?t most agents tell their clients, ?I think the seller may be willing to accept such and such. Or, the ever popular, ?The selling agent told me their is another offer coming in today.??

Admit it or not, it is obvious to anyone with half a brain that the commission based on a closed sale pay structure creates a conflict of interest between the agent and his/her client and agents will not hear of any change to their pay structure.

Isn?t there some way agents could get paid by the hour, like so many other servicers? Why is that so threatening? Maybe I will open up an re brokerage where the agent is paid by the hour, as is the brokerage.</blockquote>


Awgee,

There are different sides of the transaction to consider...



Representing the seller - the listing agent - I think the commission approach to pay makes sense and I think you would agree. The agent is incentivized to get top dollar for the client and is rewarded for doing so, but only if the sale is consummated. Everyone is aligned.

Representing the buyer - the buyer's agent (in realtorspeak "the selling agent") - I agree there is a conflict of interest. Big time. How is it that the reward for negotiating a lower/better price for a client is a LOWER paycheck for the agent?



The problem I see with this approach, however, is that it takes into consideration just a single transaction, and not the broader picture. People who buy or sell will do so again. They also have friends. They also give feedback about their experiences. Brokers who "get it" understand that it is too difficult to hunt and scratch to run a business one deal at a time. It takes referrals and word-of-mouth to keep a R.E. career going over any sustainable amount of time. You can't please everyone, but then again, in R.E. you don't have to work with everyone. When you also understand that bad news travels a lot faster than good news, it becomes saliently clear that giving clients bad advice to press a sale is penny-wise but pound-foolish.

A good buyer's agent is not trying to convince a buyer of anything. It is more of an investigative role: Why are you buying? What is a reasonable expenditure? When do you need to make a decision by? etc. There are a litany of pre-qualification questions that a buyer should be able to answer of themselves before wasting their own time. It is not ever, "What can I do today to put you in THIS home tomorrow? :cheese:



As I've written before, the best way to work is to state your intentions up front. Be clear on how much you are willing to pay someone to work on your behalf. Find out how much skin they have in the game. If you are uncertain, shame on you. It is important and just takes the initiative to ask the question. Come with a proposal. Bring value. And they can always say, "No, thank you."
 
IR,



I wonder about other details of the transaction utilizing a buyer's agent that may offset that .3 % difference in price. Agents understand the psychology of sellers where the price they get for the house may mean more to them than what they actually net. I've seen buyers agents ask for concessions outside of price that would add up to more than .3% off the purchase price...seller paying points, home warranty, cash back for repairs or towards closing costs, etc... 6% of .3% of the sales price is just a few bucks.



Did anyone read Freakonomics? One of the things he looked at was real estate agents. He suspected that 3% of $10K was so miniscule compared to the commission on the sale that listing agents don't do their best to get the seller the most money that they can. Instead, he suspected that agent's priority would be selling the property quickly. Sure enough, the data proved him right. RE agents who sell their own homes average a higher sales price, but they have more days on the market. When it's their own house, the $10K more that they get for the house is entirely in their pocket.
 
[quote author="stepping_up" date=1210635491]IR,



I wonder about other details of the transaction utilizing a buyer's agent that may offset that .3 % difference in price. Agents understand the psychology of sellers where the price they get for the house may mean more to them than what they actually net. I've seen buyers agents ask for concessions outside of price that would add up to more than .3% off the purchase price...seller paying points, home warranty, cash back for repairs or towards closing costs, etc... 6% of .3% of the sales price is just a few bucks.



Did anyone read Freakonomics? One of the things he looked at was real estate agents. He suspected that 3% of $10K was so miniscule compared to the commission on the sale that listing agents don't do their best to get the seller the most money that they can. Instead, he suspected that agent's priority would be selling the property quickly. Sure enough, the data proved him right. RE agents who sell their own homes average a higher sales price, but they have more days on the market. When it's their own house, the $10K more that they get for the house is entirely in their pocket.</blockquote>


I did consider that, but I think that there would be concessions outside of price in both instances. Are you suggesting that it may be moreso when using a buyer's agent? Could be, but how would you quantify that? Also, has it taken into consideration that many (most) buyer's agents are giving a concession, as well? There are so many other variables: original list price, days on market, price point, and more. I thought that staking the info to just one point would give less noise and clutter. It doesn't mean that one causes the other; it just states that there is a positive correlation between the two.



My hypothesis was that there would be a difference between the two groups. Even though by appearances it is small, 0.3% <strong>is </strong>statistically significant given the data population size.
 
Let's not forget .3% can be quite alot given the price of some homes. And being close to 2% does mean quite alot overall. Nice information, I guess the incentive being theyget the full 4-6% versus half of that.



-bix
 
I have read Freakonomics and it provides cold, hard, statistical evidence that listing agents are much more motivated to close a deal than they are to get the best price for their clients.
 
I like cold, hard, statistics. I hope you understand that's what I'm trying to provide here, with as much transparency as possible.

If we've got a better method to determine it, let me know and I'll be happy to crunch and post numbers.
 
I, for one, do not doubt your sincerity. And I am not being sarcastic, not do I see any of your posts as being argumentative or disengenuous. This is a discussion and I appreciate your participation and willingness to promote a minority position. How can information hurt, and you certainly spend some time and effort researching and providing information. Gotta go to a meeting. More later.
 
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