Do buyer representatives look out only for No. 1?

Patrick Healy

Patrick Healy, who heads Lucky Strikers Social Media Club (LSSMC), sounded a favorite theme of his at one of our recent monthly meetings.  So taken with his ideas was this social media guru that he followed up with a long blog post.  Alas, I am moved to rebut him.

In a nutshell, Patrick maintains that those of us who represent buyers don’t actually represent buyers.

Patrick — founder of Phacient management, marketing and technology firm — contends that we work only for the sellers.  Why?  Our income always comes from the seller, as any experienced buyer or seller knows, via the brokerage firms with which we are affiliated.  Healy’s argument:

. . . [I]f the listing agent is indirectly paid by the seller and the buyer’s agent is indirectly paid by the seller, then they are both motivated to sell the property for the owner to be compensated. No sale, no commission.

As I see it, his larger point is that we are mightily conflicted by the desire to make money and thus will do anything to increase our income at the expense of our buyers’ best interests.  I’ll concede that we arguably are working for ourselves rather than anyone else.

But I think that the majority of brokers and agents tend to be well-intentioned.  We’re selling homes, not cars, and I’ve written before how meaningful the experience can be. 

Moreover, the successful brokers among us are enlightened — they are many — and appreciate the necessity of building a relationship rather than simply making a sale.  The investment in advising against an unwise purchase for a particular buyer and promoting a smart one can be expected to pay off handsomely with referrals and future business.

Patrick goes on to suggest that not even the seller pays the brokers, though some might say he thus undermines his point:

The irony is that, in reality, it’s the BUYER who is paying everyone – owner included. The commission is inherently built into the price of the home. And yet the agents are both so focused on getting an offer that the seller won’t reject.

True enough, but the same can be said of literally every sale, whether a bar of soap at a supermarket, a hamburger at Shake Shack or a flat-screen TV at Best Buy.

His solution to the inherent conflict is an idea that I agree with in principle.  However, I don’t agree with it in practice.  Here’s how Patrick puts it:

There are a few things that really need to change but I think they need to be on a legislative level. The person who represents you must be paid by you.  This is the case with M&A, private sales, and just about any other negotiation process. Why is this any different?

Along with his other observations, the question he poses is a fair one.  My concern is that having buyers pay our commissions will add to their already overwhelming burden of raising enough cash for the downpayment alone, never mind closing costs.

I guarantee you that it ain’t gonna happen in my lifetime.

Tomorrow: Expect the worst

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

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One thought on “Do buyer representatives look out only for No. 1?

  1. I think you are right Malcolm. Buyers won’t pay to be sold a house. The conflict is, how can you hope to be represented if you are not paying for it? Would you make your lawyer’s compensation dependent on the defendant’s lawyer’s firm being paid for their services? Of course not. So the dance goes round and round until the industry wakes up along with the consumer. Personally, I would be happy to pay for my agent as long as I could: a) build the fee into my mortgage and b) receive what their split is from the seller’s broker in the event that I could not negotiate the difference down. I’d be happy to sign a buyer’s agreement that stipulates that. Then again, I am an industry insider so I understand the value of it.


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