One question that causes much debate among the real estate community and confusion among home buyers is “should you buy a home directly from the listing agent?”. Many home buyers feel like they will get a better deal buying directly from the listing agent, thinking that it will save the seller some money in the form of commission and that the savings will benefit them, the buyer. This premise is flawed though as it is extremely rare that this would result in any commission savings (for more info see an article I did on the topic a couple of years ago here) but instead just results in the listing agent making more commission on the sale. Then, there is the question of representation which, since the listing agent represents the seller, buyers that buy through them are either not represented or, in the case of an agent that does dual agency (which I personally think is a really bad idea) is represented by the same person that represents the seller at the same time. I’m not going to get into the dual agency issues, or representation issues today though, and instead and just going to address the financial side of the topic.
Being an “Acts 17:11” guy (go to the source) and a data nerd, I’m going to turn to our market data to address the question. As you will see, how the buyers and sellers come out when the buyer buys directly from the listing agent varies depending on what factors we take into consideration. So, first, let’s look at listings that hit the market and sell right away. These seem to be the ones that buyers often think they will have a better chance of not losing out on the house if they go to the listing agent, or buy a “coming soon” listing through the listing agent directly before it actually hits the open market. For all my analysis today, I’m going to focus on St Charles County since it is such a large and active market.
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Homes that sell right away…At first glance, it looks like it may not matter who buyer bought through…
The first table below shows data for homes sold in St Charles County during the past 12 months that sold in the first week of being on the market when the listing agent and the selling agent were different. As you can see from the table, these homes sold for a median amount of 100% of the original list price and 100% of the current list price.
St Charles County- Sold in Past 12 Months In 7 Days or Less – Selling Agent was Not The Listing Agent
The next table is the same data as above but shows the data when the listing agent was the agent that sold the house as well. To begin with, we can see that nearly 83% of the time buyers did not buy from the listing agent as only 200 of the 2,421 home sales were done in this manner, but then the next thing we see is the median price these homes sold for was 100% of the current list price as well as 100% of the original list price as well, same as the group where the buyers had a different agent. So, if we stop here, we may come to the conclusion there are no winners or losers (except perhaps the listing agents who “won” but getting both sides of the commission. However, we need to dig a little deeper to see the difference.
St Charles County- Sold in Past 12 Months In 7 Days or Less – Selling Agent Was The Listing Agent
Realize that in the market we have been in for a couple of years now, it has become common for homes to sell for full price and, in many cases, even above full price about as soon as they hit the market. However, “full price” is a misnomer though, as just because someone paid the price the home was listed at, we don’t really know that was the “full price” the home would bear in the current market if fully exposed to the market. This is why I coach agents to encourage their seller clients not to accept an offer before the listing has been fully exposed to the market even if it is for 100% of the list price. This is something that savvy buyers, especially those with good buyers agents, know and try to take advantage of by getting their offer in and pushing for acceptance prior to the listing coming on the open market. However, savvy listing agents know this too and structure things to avoid putting their seller in this spot.
Here’s where the sellers lose and buyers and listing agents win…
To examine the “full price” issue I just addressed, I then produced data, same as the two tables above, only this time I just pulled the number of listings that sold in the first week for above list price. The first table below reflects those transactions where they selling agent was not the listing agent. As you can see, of the 2,221 homes that sold in the first 7 days (data in the table above), 972 of them actually sold for more than the list price. So, when the listing agent was NOT the selling agent, 44% of the sales were above the list price.
St Charles County- Sold in Past 12 Months In 7 Days or Less For MORE Than The List Price – Selling Agent was Not The Listing Agent
The next table is the same data as above but shows the data when the listing agent was the agent that sold the house as well. As this table illustrates, of the 200 homes that sold in the first 7 days by the listing agents directly to buyers, 49 were sold for above the list price. So, when the listing agent WAS the selling agent, just 24.5% of the sales were above the list price.
St Charles County- Sold in Past 12 Months In 7 Days or Less For MORE Than The List Price – Selling Agent WAS The Listing Agent
Conclusion…
While my data is based upon just a one year period for one county, and there may be other factors at work too, I believe there is enough here to confirm that there is a reasonable likelihood that a seller may not realize the highest price possible for their home, when the listing agent is also the agent that sells the home. I’m not at all saying that their listing agent would have to be dishonest for this to happen, in fact, the listing agent may think they have done a great job by getting the full asking price for the home even before putting it on the market, or right after it hits the market. However, as the data here shows, in the case of homes that sold in the first week, nearly half of the sellers received above full price.
