Boston Real Estate and Boston Condos
I saw some cool Boston lofts today in downtown Boston, on Beach Street. The interiors were done quite nicely – the flooring is especially well-done (maple), and the kitchens were done with great maple cabinets, GE Profile appliances, and nice granite counter tops.
However, an issue came up which I think is important to address. It has to do with Boston Buyer’s Agency. You see, in the not-so-distant past, just about everyone in Boston real estate worked as either the listing agent (the “seller’s agent”) or as a “sub-agent”.
The sub-agent actually was working on behalf of the seller and the seller’s agent, NOT for the buyer. Pretty much any buyer in Massachusetts was being taken around and looking at houses by someone WHO DIDN’T WORK FOR THEM. In many cases, the buyers weren’t even aware of it, at least until they wanted to make an offer, at which point they found out that they were pretty much on their own.
Things are different these days, much to my relief. Boston Buyer agency means that an agent works on behalf of the buyer – pretty logical, huh? The seller has their agent, so isn’t it fair that the buyer has one, too? The buyer’s agent gets to do a bunch of stuff that the seller’s agent or the sub-agent CAN’T do. Like, the seller’s agent can’t tell you that the property is horribly overpriced (although it might seem obvious), and, while the seller’s agent will be honest, they might not be terribly forthcoming about information such as “what’s going up in that empty lot across the street?” or “why are fifteen units in this building suddenly on the market?” They are working on behalf of the seller, and their job is to get the best price possible for the seller, not the lowest price for the buyer.
Almost every sale involves two agents – the listing agent and the buyer’s agent. And, almost every sale involves a commission paid to both of those agents. The commission is almost always paid for out of the sales proceeds from the purchase – so, the seller pays any commission at closing, but in effect, the buyer is the one who plunks down the cash to buy the place. The seller’s agent and buyer’s agent usually split any commission 50/50, so if it’s 5% commission on the sale, then each gets 2.5% (which is then split between the agent and the company they work for).
Lately, there’s been a lot of major projects being built in Boston. These developments often are represented by in-house sales and marketing staffs.
These people may be on salary, or on a salary plus commission. Their goal is to make as many sales as possible directly between the developer and buyers. It’s logical – if they can make a sale directly, they don’t have to pay out any commission to another real estate agent.
HOWEVER, I don’t think any developer in the city is in any way assuming they will be able to sell ALL of the units in their building directly. It’s just not possible (not possible if they intend to sell the units quickly or in a timely manner, at least). They realize that the real estate agents in the city have access to a HUGE number of clients who are looking to buy. And, of course, those clients want to use a buyer’s agent, because they want to trust that someone is looking out for their (the buyers’) best interest.
Boston real estate buyers can certainly go directly to the sales office of any major development and take a look around and make an offer on their own. If they do so, they are putting themselves at risk of making a major mistake. There are only two ways for them to minimize this risk:
1) do all of the research themselves on the property as well as other properties on the market as well as
sales in the neighborhood over the past several months as well as research future developments and projects in the neighborhood as well as research public documents and newspapers to find out what if anything is going on in the neighborhood that may cause problems for them in the future; or, 2) use a buyer’s agent.
Some buyers might want to work directly with the sales office, because they are under the impression that they will be able to negotiate a better deal than their buyer’s agent. I disagree, but I can understand the logic. I say, your buyer’s agent can get you at least as good a deal, if not better. The buyer’s agent has relationships with most other agents and this can help. Plus, again, the buyer’s agent knows what else is out there, as well as how many of the units are under agreement plus the history of the sales process, etc. The buyer’s agent is in a much better position to negotiate than a buyer just walking in the door.
The only thing I think the buyer can do that might get them a better price is to negotiate with the developer by saying, “Look, I’m not using an agent, so you’re saving 2 – 2.5% right there, in commission. Lower the purchase price on my unit by that amount, and we’ve got a deal.” That might work. The buyer has to realize that a buyer’s agent may have been able to negotiate that percentage reduction, as well, plus, if the buyer doesn’t have an agent, the buyer is missing out on all the other things that a buyer’s agent can do for them.
It’s obviously hard for me to be objective, since I make my living off commissions. Here’s how it is for me, though. I feel as though certain buyers can buy a home on their own, without using an agent. That’s goes for sellers, as well. The thing is, it’s not worth it to do so for most people. You lose so much time, effort, and possibly money by doing it yourself, plus there’s WAY more frustration. I mean, most people don’t even change their own oil these days.
But, they want to enter into a financial transaction for $500,000, on their own?
Use a Boston buyer’s agent. It’s worth it.