By Gary Lucido
I've run into this home selling myth enough times that I finally decided to write an entire blog post on it - not to mention that I think I've finally heard enough variations on this myth that I can write a substantial post on the topic. And here it is: Home sellers often believe - in fact they are often told by unscrupulous realtors who are trying to get a listing - that they should select a listing agent who has their own buyers who would be interested in the home which is being sold.
A variation of this story, often told during the listing sales pitch, is that the listing agent either recently has sold or currently has for sale similar properties and therefore "has buyers". This is actually a favorite ploy used by the top producer (see Celebrity Realtor) in my neighborhood.
Regardless of the particular flavor of myth being flung around or clung to the implication is the same: the only way to reach these buyers and get a quick sale is by using this particular realtor to list the home.
What? It's not true?
Well, let's start with the facts. Last month 93.1% of all the non-distressed closings (distressed closings is another blog post) involved a buyer represented by an agent other than the listing agent. So the listing agent only produced their own buyer 6.9% of the time and some large but unknown percentage of these buyers were produced after the home went on the market - as a result of the marketing that any half-way decent agent could do.
You know that top producer in my neighborhood? He hasn't closed a single deal in the last 12 months with his own buyer. When he says he "has buyers" what he really means is that he knows buyers' agents that saw his recent listings and he can give them a call. Of course, they and their clients would eventually find out about your home anyway regardless of who lists it and let's not forget that they were not interested in the other home that is supposedly similar to yours.
I've had listing agents occasionally try to convince my buyers to look at another listing of theirs during a showing and frankly I find it extremely annoying. Do they really think that we missed their other listing during our search? If we were interested in that other home we would have requested a showing. Invariably it's missing some key attribute. And what would the seller of the place we are touring think of their realtor plugging the competition?
Here is another statistic for you. A typical home that goes on the market will match the search criteria of about 150 buyers that are in the market, maybe 4 or 5 of which will want to see the property right away. So what are the odds that a particular listing agent is working with one of these 4 or 5 buyers out of 150 out of the thousands looking?
The bottom line is that it's extremely rare for the listing agent to have a buyer in their pocket ready to buy a home.
So Then What Do You Hire A Listing Agent For?
If a listing agent doesn't produce the buyer what good are they? Simple. The listing agent's role is to a) market the property to buyers and their agents and b) represent you in the transaction which results from a successful marketing effort. And the primary tool for marketing the listing is the Multiple Listing Service, which will directly reach those buyers and their agents. Increasingly, even buyers with agents, also use third party search sites like Zillow, Trulia, or Realtor.com but those are fed by the MLS.
Buyers' agents are motivated to show their buyers all listed homes that meet their buyers' criteria, regardless of the listing agent, because they will be paid anywhere from 2% - 3% of the purchase price (typically in Chicago) when the deal closes. And there is no longer a way for them to bury a listing, even if they wanted to, because their buyers are going to find it on one of the third party sites I mentioned above and then they would have egg on their face.
But Suppose An Agent Really Does Have A Buyer?
Rarely a realtor really will have a buyer in their pocket and you can't ever tell for sure if they are telling the truth. So call their bluff! Respond to their claim by saying "Wonderful! If you already have a buyer I don't need a listing agent. Bring your buyer by and show them the place and if we close a deal I'll pay you a 2.5% co-op commission." That should stop them in their tracks and forces them to put up or shut up. And if they really do produce a buyer you will have saved yourself the listing side of the commission - up to 3.5%.
As I mentioned above, if you end up listing with another agent and one of the agents you rejected comes up with a viable buyer you have nothing to fear. They will absolutely show your home because of the considerable incentive provided by the co-op commission.
The Dual Agency Problem
A listing agent that has or produces their own buyer is actually a problem for sellers. It creates what is called a dual agency problem. How can the listing agent simultaneously represent both the buyer and the seller? It's legal to attempt to do this but it creates such an onerous conflict of interest that Illinois requires a special disclosure that all parties must sign that puts everyone on notice of the conflict of interest and sets forth specific rules of conduct for the realtor in such circumstances.
My only advice to you is to be really careful if you find yourself in this situation.
The Bottom Line
The bottom line on this one is really simple. When picking a listing agent claims of "having buyers" should be ignored. Like I've said before, all that really matters in this decision is what the listing agent will do for you and how smart and responsive they are.