Ballard renters Anurag Kamasamudram and Mayuri Gupta started their home search casually this fall. They hoped to get a feel for the market, “window shopping” before they hired an agent and started searching more seriously in the spring.
But the couple quickly ran into problems. Agents representing home sellers seemed hesitant to share information about properties until they had their own broker.
“It didn’t feel like we could just negotiate directly,” Kamasamudram said.
Kamasamudram and Gupta were part of an emerging group in Seattle real estate: shoppers wondering if they can search for their next home on their own without a real estate broker.
Data is limited and the practice remains rare, but real estate agents, consumer advocates and other industry experts say more Seattle-area home shoppers are attempting to search for and tour homes — and, in rare cases, write up offers — without real estate agents.
Several factors are likely at play. A high-profile legal case this summer involving the National Association of Realtors, a powerful industry trade group, drew new attention to the way agents are paid and made some consumers wonder if they can save money on the homebuying process.
In Washington, a new state law took effect in January requiring agents to sign written agreements with buyers early in the home search. That has spooked some shoppers who are searching casually or worried about the implications of committing to an agent.
And the rise of listing sites like Zillow and Redfin has left some shoppers feeling equipped to find their next home with little more than a laptop or cellphone.
But going it alone comes with risks. Sellers may be hesitant to work with unrepresented buyers, making it harder for shoppers to access homes, learn more details about those properties or win bidding wars. And the sheer scale of the purchase — the most expensive investment of most people’s lifetimes — raises the stakes on going through the process without an expert.
The Northwest Multiple Listing Service, the database where homes for sale are listed across Western Washington, said it could not provide data on how many sales involved buyers without real estate agents. Anecdotal information from real estate brokers who spoke to The Seattle Times indicates most buyers still use agents, though the number of unrepresented shoppers has ticked up.
In his work representing home sellers, Seattle Redfin agent David Palmer has received few written offers from unrepresented buyers but said he’s hearing more from buyers without agents as they shop. In one month this fall, Palmer heard from half a dozen unrepresented buyers. That was more than all of last year.
John L. Scott agent Kimberly Shaeffer, who often lists newly built town homes in Seattle, has noticed more unrepresented shoppers coming through open houses. Some hope the listing agent — whose allegiance is to the seller — can help them instead.
A year or two ago, Shaeffer’s colleague Andy Sather added, unrepresented buyers “would have been very rare.”
‘Married on the first date’
As Kamasamudram and Gupta realized they may need a broker and began vetting agents, “what we immediately noticed is that a lot of times brokers showed up with paperwork,” Kamasamudram said.
State law now requires contracts known as brokerage services agreements between buyers and their agents outlining how long they’ll work together, how much the agent will earn in commissions and other details.
While Washington has long required similar agreements with sellers and some buyers’ agents voluntarily used similar agreements, the requirement for buyers to sign those deals took effect at the start of this year. Backed by industry groups that said the agreements would help protect agents’ commissions and boost transparency for buyers, the new requirement has launched more conversations about the specifics of a buyer’s relationship with their agent.
And instead of hashing out the fine print after viewing a dozen homes or when the buyer is ready to make an offer, those conversations are happening early in the process.
Buyers’ agents are required to sign written agreements with buyers before or soon after, in legal parlance, “rendering real estate brokerage services.” While there’s some disagreement in the industry about just how soon those agreements must be signed, many agree they’re required before an agent can show a potential client a house or very soon after.
Agents say they’re working to communicate the purpose of these agreements, but buyers are still sometimes confused.
“Everybody mentioned the law, but we didn’t really understand what it meant,” Kamasamudram said.
After Googling, for example, he realized the percent commission paid to an agent is negotiable. “That was news to me,” Kamasamudram said.
Some details of the agreements may vary among different real estate brokerages. A bit of comfort for Seattle-area buyers is that the most common form in our region, produced by the Northwest Multiple Listing Service, is relatively straightforward and consumer-friendly, said Stephen Brobeck, a senior fellow at the Consumer Federation of America. Brobeck has critiqued forms elsewhere in the country as too convoluted and lengthy.
Although consumer advocates would prefer some tweaks, the form is “short, understandable, and it’s fair to both consumers and agents,” Brobeck said.
Supporters say the contract can ensure agents treat clients consistently and can help buyers understand the process for what may be the biggest investment of their life.
“Even my mom signs my buyer agreement,” said Windermere agent Cassie Walker Johnson.
Still, signing on with an agent so quickly can be intimidating.
“Not everyone wants to get married on the first date,” said Redfin’s Palmer.
But a casual fling isn’t off the table.
Buyers can ask to sign only a nonexclusive agreement, meaning they can work with other agents at the same time. They can seek a short time frame for the agreement or ask that it only cover certain neighborhoods or properties.
All those factors can help a buyer feel confident they know an agent well before signing a longer-term deal. Not all agents will be open to every change, but brokers and consumer advocates say it’s worth asking.
“All of the terms inside of that contract are negotiable,” said Anne Jones, who owns a Windermere office in Tacoma and sits on the NWMLS board.
An agent’s worth
For some homebuyers, the question is more fundamental than paperwork: Can’t I just do this myself?
Seattle homeowner Shaun Han, who works in finance and hopes to eventually trade his Mount Baker home for a property closer to his wife’s job in Burien, regularly checks Zillow and Redfin listings.
In hopes of saving some money, he wonders if he could find a house on his own, have a contractor take a look at the home’s condition and get a lawyer to look over the deal. When he sells his current home, he wonders if he can avoid hiring an agent then, too.
“For some people, it’s worth 2%,” a common commission percentage for one broker, Han said. “I feel like I can represent myself on both sides.”
“You know, 2% of a Seattle house is not penny change,” he added. “It’s real money.”
Real estate agents say that since this summer’s blockbuster NAR legal settlement, they’re hearing more questions like Han’s.
The NAR settlement centered on the way real estate agents are paid commissions and allegations that the association helped keep those commissions high.
For years, the custom has been that sellers pay both agents, splitting a percentage of the home price between their agent and the agent representing the buyer. Buyers typically did not pay their agents directly.
While the industry insists those commission rates have always been negotiable, in practice they have long hovered around the same rate across various listings — in Seattle, often around 2.5% for a buyer’s agent, according to one review.
Today, sellers are free to offer no commission to the buyer’s agent, leaving the buyer on the hook to pay their own agent, but agents say that remains rare.
NAR denied wrongdoing but agreed to change some of its policies, including no longer listing sellers’ commission offers in multiple listing services affiliated with NAR.
Washington’s largest listing service, the Northwest Multiple Listing Service, is not affiliated with NAR and so the settlement had little direct effect here. But the publicity around the settlement has generated questions about agent pay.
Retired Olympia homeowner Dan Fazio isn’t new to homebuying, but he was never offered a signed agreement with a buyer’s agent and got little insight into what the agents were paid. This time around, as he prepares to sell his home while also looking to buy a rental property in Boise, Idaho, he’s thinking more about how much to pay each agent involved. And formal contracts are helping those conversations along.
“I formalized my relationship with that person, saying please don’t worry about having to have this conversation, you’re going to get a 3% fee,” Fazio said. “And then I expect you to be working very hard for me.”
Sellers continue to offer commissions on most listings, agents say. Nationwide, commission percentages paid to buyers’ agents have declined in the last decade, but the average buyer’s agent commission on homes sold last month was nearly identical to the average rate in August, when the NAR settlement took effect, indicating little immediate effect, according to an analysis of Redfin transactions.
Yet, because of headlines around the NAR settlement, some buyers are worried they’ll be on the hook to pay their agent, Shaeffer said.
“I think in the buyer’s mind, they’re like, ‘We can barely come up with a down payment. We can’t pay a buyer agent. Do we just keep on renting for now?’ “ she said.
Risks to buyers
Buying a home without an agent carries both potential benefits and significant risks.
On one hand, without a buyer’s agent, a buyer may convince a seller to deduct the amount otherwise paid to the buyer’s agent off the sale price. On the other, a seller, in consultation with their agent, may be hesitant to sell to an unrepresented buyer because of concerns the deal may be more likely to fall through if the buyer encounters financing issues or misses deadlines.
While sellers’ agents shouldn’t unilaterally decide to refuse to show a home to an unrepresented buyer, they can do so if their client has instructed them to, said Annie Fitzsimmons, an attorney for the Washington Realtors who educates agents on industry rules.
On such an expensive purchase, there are other factors to consider, too.
Real estate agents argue they can put together a more competitive deal thanks to their expertise in the local market. They say they can also help protect buyers in the inspection and financing process by connecting them with trusted inspectors and helping them understand their contingencies and rights.
“The public consistently underestimates the value of a skilled broker — period, underline, exclamation mark,” Jones said. “Showing a house is not the value of a skilled broker.
“The risk in most cases is that (buyers) give away more than they need to in order to get into a contract,” Jones said.
While online listing sites give buyers extensive information about homes listed for sale, “there’s more to a house than just the pictures and the marketing remarks,” said Coldwell Banker Bain agent Forrest Reda. Title reports, tax data and other records that agents typically review can also shed light on whether a property is a safe bet, he said.
Even a good negotiator can run into issues.
Buyers are “educated. They know what they want. It’s what comes next” that can pose a problem, Sather said, pointing to deadlines for depositing earnest money, risks around wire transactions and the importance of finding a reliable local inspector.
In the end, first-time homebuyers especially should remember they can negotiate with agents over their commissions but also be wary of taking on the process without at least a real estate attorney, if not a broker, said Brobeck from the Consumer Federation of America. Brobeck has been critical of the real estate industry and agent pay practices.
Buyers who’ve been through the process before or investors who buy frequently may have an easier time doing it alone, industry observers say.
Working with an attorney instead of an agent may save buyers money. At the same time, because accessing homes without an agent can be tricky and the sale process is complex, working with an attorney instead of an agent takes “a degree of moxie and ambition,” said Craig Blackmon, a Seattle attorney who charges a flat $3,000 fee to represent homebuyers during a sale.
If buyers do opt to hire an agent, they should shop around to find a good fit.
Look for agents who have specific knowledge in the area you’re shopping in, ask for references from past clients and interview at least two or three brokers, or more if you’re shopping in a broad area, said Real Residential broker Nick Glant.
Han learned firsthand the limits of shopping without an agent. When he attempted to schedule a tour at one Burien home, the listing broker refused to show him the house and told him to call back when he had his own agent, Han said. At an open house for another property, a different listing broker told him she and the seller preferred to work with a buyer represented by their own agent.
After running into similar challenges, Kamasamudram and Gupta felt like they got a clear message.
“The market just kind of kept telling us that you need to have a buyer’s agent,” Kamasamudram said.
