Both the buyer and seller have an agent
Simply put, in most markets, and most situations, as a buyer, you don’t.
The seller usually pays for both the buyer’s and seller’s agents.
However, it is a little more obscure than that. Many times, a seller tends to bake the expected cost of both agents (which hovers around 3% for each side, totaling to 6%, across the nation) into the home sale price. This makes sense – the seller naturally has it in their best interest to make a profit on the sale of the property.
It gets complicated from here if there’s an agent on only one side of the transaction.
Only the buyer has an agent
The seller should probably anticipate that most buyers will use an agent to represent them, statistically speaking, and they have the information that they aren’t using an agent to sell their home. To stay competitive in the market (if the market calls for a competitive price because of high demand), a seller might list their home at a lower price by essentially deducting that 3% that they would have paid an agent to represent them.
This means that as a buyer, you’ve gotten lucky and found a cheaper home!
These types of deals are referred to as For Sale by Owner (FSOB). They aren’t too common, usually because selling a home is a tedious process, and most sellers end up opting for an agent to get the work done.
Neither the buyer nor the seller has an agent
These are very rare situations, probably the rarest of them all. Likely because both the buyer and the seller are veteran real estate investors who are trying to maximize their profits, and are experienced with the process. If you come across such a situation, count yourself lucky but make sure to read through the inspection report, title search and other disclosure documents well to ensure you aren’t being scammed.
Only the seller has an agent
This situation tends to rare as well, because most home buyers, especially first time home buyers, feel that they want to have someone to guide them through the process and negotiate for them to get the best deals.
As logic would follow, an educated home buyer who isn’t using a buyer’s agent should feel confident placing an offer to sellers below list price, and indicating that they don’t have an agent so closing costs come down for the seller (excluding extremely hot markets, where most rules of thumb fall apart).
However, if not wary of the situation, two things might happen.
The obvious one is that the buyer ends up paying extra for what they could have probably negotiated down, and the seller pockets the extra profit. Of course, since it’s not in the best interest of the seller to indicate this (unless they are benevolent souls), the buyer ends up losing out.
In some situations, the seller’s agent will try to pitch themselves to you, as the buyer, to try to represent you as well. This is a very messy situation, and agents are regulated to proceed down this path very carefully to avoid getting into a lot of legal trouble, but there are shady folks out there that do try to get away with being opaque.
In the worst-case scenario, the agent charges 6% anyways and ends up costing both the seller AND buyer unnecessary money.
Usually, the agent brings down their cost to 4% (just as before, usually paid for by the seller). In this situation, the buyer gets a slightly sweeter deal, and the seller sees almost no difference, ceteris paribus. What could happen, though, is that because the agent now has a conflict of interest, they may end up negotiating for one side more than the other. (This isn’t legal, but sometimes agents get away with this. If you notice this happening, immediately report the agent to their broker.)
At Hutsy, we ONLY ever represent you as the home buyer, because we’ve seen too many homebuyers getting screwed over by their agents, or brokerages, due to conflict of interest on many levels. We want to make you feel comfortable every single time that we have only your best interest at heart, so we’ve taken the pledge to only work with you.