Recently, my partner and I put a house on the market and held an open house the first weekend. A young couple came to the open house and, on the spot, expressed an interest in making an offer. As they were not working with an agent, I said I would be happy to write up the offer with them.
You might say I found myself representing both the buyer and the seller in the transaction, except that legally, that is not exactly the case. As a listing broker, I have a signed contract with the seller and an obligation to represent his interests in a transaction. I have no contract with the buyer and although the law specifies that I have to be fair to all parties, that’s not exactly the same as representing the buyer’s interests, is it?
Am I saying that as the seller’s agent I was trying to dupe this young couple into buying a house? Not at all. You might think that agents get dollar signs in their eyes when they see the possibility of “double-ending” a deal, and I’ll admit the possibility of keeping the whole commission has its allure, but for me at least, there’s also a measure of dread whenever I’m in this position because it’s going to be twice the work for me and I’m probably not going to be able to make either side happy.
With the young couple, I did what I could to reassure them that what they were offering was in keeping with the market by showing them recently sold houses in the neighbourhood, but I sensed from the beginning that they were suspicious of me, and I can’t blame them. They knew (because I explained the law to them) that my primary loyalty had to be to the seller. In simple terms, the seller’s agent is trying to get the best possible price and terms for the seller; the buyer’s agent is trying to get the same thing for the buyer. When one person tries to wear both those hats, they are in a truly bizarre position.
About once a week I hear someone say, “We’re looking around but we’re not really ready to buy yet. When we find something we like we’ll get an agent.” I can think of two reasons buyers might do this: a) they mistakenly think it will be costly to hire their own agent, and b) they don’t want to waste someone’s time.
If there was one thing I wish consumers knew about real estate brokers, it’s that it doesn’t cost anything to hire us. We only get paid when we sell a house, and that means only after the parties have gone to the notary.
As for wasting our time, there are clients who will do that, but it’s never the ones who worry about it! Even if you’re at the beginning of the house-hunting process, an agent can help you decide what area of the city to focus on, and can help you draft a list of priorities. These things can reduce the amount of time spent looking. To buyers who feel bad about “dragging us around”, most agents would say, “Please, drag me around!”
What buyers don’t understand is that, according to the Quebec Real Estate Act, once you’ve seen the house of your dreams it’s too late to hire your own agent. In among the legalese of the REA, there’s a clause that says compensation (i.e. commission) is paid to whoever was the “effective cause of sale”. We like to translate this as “whoever makes you fall in love with the house”. When a buyer contacts a listing agent directly, the listing agent is considered the effective cause of sale. When a buyer goes to visit properties with his own agent, there may be a listing agent present as well, but the person who sets up the visit and is present with you is considered the effective cause of sale. If you buy the house, your agent will be paid whatever portion of the commission has been spelled out by the seller and listing broker in their contract (usually half). The payment comes out of the seller’s profits. There is absolutely no difference in cost to the buyers whether they have their own agent or not.
You might wonder why I didn’t suggest to the buyers who came to my open house that they ask another agent to write up the offer for them. I could have, but they would have been hard pressed to find anyone willing to take that risk. Since I was the one who showed them the house, legally I am considered the “effective cause of sale” and have a right to claim the full commission. Even if I promised I wouldn’t exercise that right, a collaborating agent would be in a precarious position. I have been in a similar position myself at least once, and it’s a terrible feeling not knowing until the cheque is in your hand whether you’ve done all that work for nothing.
If you still need convincing, consider this: that young couple was on the ball: they saw my new listing come up on MLS and visited within a few days. Pretty good, but I was getting calls and texts from other agents within an hour of sending the listing in. That’s because agents have access to new listings about a day sooner than they appear to the general public, and we also see a lot more information than you do when searching properties online, which we can pass on to our clients at the click of a button. Another buyer who was working with an agent would have had an edge over my young couple. Very often, when you have a desirable product, the agents will come in with their clients in the first couple of days and the place will be sold before the general public even realizes it’s on the market.
In the end, the buyers who came to my open house ended up pulling out of the deal following the inspection. They may have genuinely been frightened off by something in the report, but I think more importantly they couldn’t shake the feeling that someone was trying to take them for a ride. If the buyers had shown up with their own agent, would the sale have gone through? Probably not, but they would have had someone in their corner clearly advocating for their interests. If they are still looking for a house, I hope they have hired an agent, so that when the right house for them does come along, they won’t miss out.