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A listing agreement is a form signed between a seller and any brokerage and agent that represents them. Prior to the home being listed on the market, this agreement has been signed and agreed upon between both parties. Why is this important?
Well, on this document, the seller and the brokerage have already agreed to a commission that will be paid. Throughout the years, it’s been common that this number is right around 6%, with 3% being set aside for the listing agent, and the other 3% set aside for the buyer’s agent.
We find buyers all the time who think that if they just go out and find a home themselves, they will be able to knock off 3% of that commission, but they are mistaken. To explain how this works to buyers, we use what is called “The Costco Analogy.”
When you go to Costco and get your groceries, you can pay with either your credit card or cash. If you pay with cash, would you demand that Costco whack 3% off your purchase price because they didn’t have to pay the credit card transaction fee?
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Hiring a buyer’s agent doesn’t cost you a thing.
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Of course you wouldn’t, that’s ridiculous. Well, that’s the same idea as somebody “saving” 3% on a commission when they don’t hire a buyer’s agent. The listing agreement has already been signed and whether you are represented or not, that 3% commission is set aside for a buyer’s agent. All you accomplish by not using an agent to help you find a home is giving the seller’s agent a bonus.
This is probably the most common question I’ve gotten in my entire career. The reality is, Costco has a preexisting agreement with the credit card companies before you walk in the door, the same goes for the seller and listing agent.
So, hire a buyer’s agent if you’re out looking for a home. They don’t cost you a thing, and can really help you sort through all the listings out there in order to find the perfect one. They can also negotiate on your behalf to make sure you get the best deal possible.
If you have any questions for us or are looking to buy a home on the Wasatch Front, give us a call or send us an email. We would love to hear from you!
