Working directly with a listing agent in NYC as a buyer is uncommon. This is because 75% to 90% of buyers in NYC are represented by buyer’s agents. The main reason why virtually all buyers are represented is because sellers pay all commissions in NYC, including the fee to buyer agents. Moreover, a typical seller in NYC does not save any money on commission if a buyer is unrepresented. Instead, the listing agent simply collects double commission.
For these reasons, it’s fairly unusual for a buyer to submit an offer directly to a listing agent. We explain the pros and cons of working directly with a listing agent in NYC in this article.
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One possible advantage of working directly with a listing agent is the fact that the listing agent may pay more attention to your offer due to the prospect of earning double commission. This benefit is questionable however, as it is ultimately the seller’s decision as to how to negotiate and who to sell to.
Because the average seller does not save any money on commission if a buyer is unrepresented, there’s arguably no reason why a buyer would show preferential treatment to a direct buyer as a result.
So as much as a listing agent chooses to prioritize a direct buyer, it ultimately doesn’t guarantee that it will translate into any benefit in the eyes of the seller.
In addition, many sellers are uncomfortable with the prospect of dual agency. A seller may actually negotiate more cautiously if a buyer is unrepresented due the perceived conflict of interest between the seller and their listing agent caused by dual agency.
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One of the easiest ways to save money as a buyer and reduce your closing costs in NYC is by working with a buyer’s agent who offers a Buyer Closing Credit. A Buyer Closing Credit can save you $20,000 more on your purchase.
The savings are provided by your buyer’s broker who agrees to credit you back up to 2/3rds of the buyer agent commission paid by the seller post-closing. Working directly with a listing agent will obviously preclude you from taking advantage of these automatic savings.
Often times, listing agents will suggest that a buyer can get a better deal by working directly with a listing agent.
However, this is not always true since we know that the typical seller does not save money on commission if a buyer is unrepresented.
The challenge with taking a listing agent’s word for it is that there is objectively no way to quantify or prove that any form of discount on price is a direct result of not having a buyer’s agent.
The listing agent can simply claim that the seller’s counter is lower as a result of not having a buyer’s agent, but there’s actually no way to prove this.
In all likelihood, the seller’s counter would have been the same even if the buyer was represented.
The savings from a Buyer Closing Credit, on the other hand, can be easily measured since it’s unrelated to the negotiation itself. Better yet, requesting a Buyer Closing Credit prevents the negotiation from being muddled by the purely theoretical and unquantifiable concept of receiving a discount as a result of being a direct buyer.
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Many buyers who are otherwise excellent negotiators in the workplace are often ineffective and overly emotional when it comes to negotiating principally on their own behalf.
Studies show that it’s much easier to become emotionally compromised and make poor choices when negotiating for one’s self as opposed to negotiation on behalf of another.
The risks of negotiating directly against a listing agent are even higher when you consider that brokers negotiate real estate deals all day long for a living.
Most listing agents are highly skilled and well practiced, and it’s often easier for them to persuade a buyer to pay more as opposed to persuading a buyer’s broker to bring their client up on price or to sweeten other deal terms.
Therefore, the most prudent way to secure the lowest price on a property is to retain an experienced and emotionally neutral buyer’s broker to negotiate on your own behalf. Representation can help secure the lowest price on your purchase, and it can also help you unlock additional savings through a Buyer Closing Credit.
Pro Tip: Estimate your seller closing costs in NYC with Hauseit’s Interactive Closing Cost Calculator for Sellers.
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Con: Risks of Dual Agency
Dual agency in NYC real estate occurs when the same broker or salesperson simultaneously represents both the buyer and seller in a transaction. Dual agency is risky for a buyer because it means that the agent cannot offer undivided loyalty to the buyer, as would be the case when working with a dedicated buyer’s agent.
Typically, hiring an agent to represent you signifies the establishment of a principal agent relationship which is fiduciary in nature. For example, a buyer’s agent has the following fiduciary duties to the buyer: “reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account.”
The key risk to a buyer under dual agency is that the listing agent is not necessarily incentivized to secure the lowest possible purchase price and most attractive deal terms since there’s no duty of loyalty to the purchaser.
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