So what is a good deal?
A deal is an agreement between two parties. A good deal is a voluntary agreement between two parties where both parties receive goods or services from each other in equal value. A great deal is when both parties exchange goods or services where both parties feel as though they are receiving more in return for what they gave up.
Trading is the oldest form of exchange, a basic deal. In the past, a hunter would exchange his time and energy to kill an animal that will have more meat and hide than he would need to survive and cloth and feed himself and his family. This excess food and hide is not valuable to him if he doesn't need it and the food spoils, but that food and hide are of great value to a fellow tribesman who doesn't hunt but spends his time creating arrowheads and arrows that the hunter doesn't have time or skill to create himself. Because the weapon maker spent his time making arrows, he didn't have time to hunt for food. Both the hunter and the arrow maker traded their time to generate goods that they each needed (a demand) so they voluntarily engage in trade and both walk away satisfied that they received greater value than what they conceded, a great deal. This is the foundation of free trade, the voluntary exchange of goods and services.
To fully understand the elements of a free market and how they apply to a good deal, click here.
So are Real Estate Buyers Agents a good Deal?
As previously mentioned, part of what determines a good deal vs a great deal is perception and relative value. Beauty, for instance, is in the eye of the beholder and varies from person to person. People decide what they find beautiful. Someone might be willing to pay $2M for a painting of scribbles that someone else would throw away as worthless. On the other hand, an 8 year old's drawing given to her grandmother might be the most precious gift the grandmother has ever received. Some find great value in spending $2000 for the experience of a courtside basketball ticket vs some find no value at all in watching basketball. In these examples the products and values are transparent and understood.
What is the values of services are not fully understood? What if the services offered and compensations received are not fully understood due to the niche or complex nature of the service? Lawyers might fall in this category. They go to school for about 7 years trading their money for skills and then enter the market offering those skills on behalf of those who can't understand the law. For this they charge on average about $70/hr as of 2023. Someone might need those skills to prevent them from paying penalties in excess to what they have to pay the lawyer which is a good deal, or even better the lawyer can prevent them from going to prison another good deal. That said, if I were to hire a lawyer to prevent me from paying a $15,000 fine and he told me he could do this but in the end I have to pay the $15,000 fine then pay him $5,000 for his effort, I would tell him that he didn't provide the service he claimed to provide and not pay him. If he had told me before signing his contract that his services were not a guarantee and I fully understood this risk and chose to accept that risk then I would pay him the $5,000 and not use him again. This disclosure would offer me the opportunity to negotiate the terms so that he would get a reduced rate in the event of failure as well. Alternately, if the lawyer told me that he could get me the $15k, but made no mention of the risk of loss, but put it into a contract without verbally disclosing it, I would be required by law to pay him but this failure to point me to this risk goes against his fiduciary responsibility to act in my best interest. If he was dishonest he would then claim otherwise and use his skill against me. In this scenario, he knew that disclosing that information to me might prevent me from signing for his services or give me a desire to renegotiate (his self interest) so he relied on my ignorance in reading/understanding the carefully worded contract on my own to learn of the risk rather than informing me directly as he should have if he were truly acting in my best interest. Further, the lawyer with 7 years of experience has skills in writing and wording contracts that the average individual might not comprehend, so even if the average person does read the contract, he might not fully understand the implication of what he is signing. This use of obscure language would be obfuscating the terms at the expense of the less educated party. For instance, a caveman would have no reference point to comprehend an airplane flying overhead, so for a modern individual to take advantage of this ignorance is dishonest.
So is paying for a Realtor a good deal? Only if buyer or seller fully understand what services they are receiving and fully understand exactly what they are paying for those services and fully understand what options they have in the marketplace, or in other words, they understand the market and value of those services. If those conditions are met and both the buyer and agent willfully engage in an agreement on those terms, then yes, it is a good deal. This is where the Realtor Association has failed for a hundred years and unscrupulous agents continue to scam today. This is the core reason why the National Association of Realtors (NAR) was sued and settled the antitrust lawsuit in 2024.
First of all, not all real estate agents are Realtors, but all Realtors can be seller or buyer's agents. Realtors, like lawyers, get some training to learn the rules of a very niche market that is largely unknown to the average person. Realtors also are under fiduciary duty to act in their clients best interest like lawyers as well and they are governed under a professional body. The gaping difference is the difficulty to get licensed and in my experience their utter failure in putting their client's best interest above their own. Unlike lawyers who spend 7 years and must pass a rigorous bar exam to practice law to earn $70/hr, Realtors are just required to take a 77 hour pre-licensing course and pass a salesperson exam. Not exactly in the same league. For another professional comparison, therapists must earn a master's degree which takes 7 to 8 years, and get between 1500 and 4000 hours of supervised experience before they can get licensed and they earn on average wage of about $40/hr. With that in mind, we must now consider what services buyer's Agents perform to make an informed decision on if we might desire their services.
Real Estate Agents primarily perform concierge services or serve as your personal assistant to assist in acquiring a home. Of note, the average hourly wage for concierge services is $45/hr. Here is an optimistic breakdown of the specific services they provide from chase.com:
PROs:
Providing expert advice: While you may have an idea about the type of home you want, it may be helpful to have someone identify your priorities. A buyer’s agent can help you determine your must-haves and nice-to-haves while keeping you realistic about what this might look like within your budget.
Finding potential homes: The next step is finding potential homes. After getting to know their client, buyer’s agents will find potential homes that target all, or most, of the buyer’s needs. While there are public listings available to any homebuyer, a buyer’s agent has specific, exclusive access to multiple listing services (MLS) that market homes only people with real estate licenses can access.
Setting up tours: Your buyer’s agent can help you set up tours. If they find a house of interest, they can contact the listing agent or seller to set up a tour for you. Depending on their network, some buyer’s agents may even get exclusive access to tour a home before it’s listed for sale. Having someone to set up a tour helps relieve you from spending time organizing the back-and-forth logistics.
Helping with offers and negotiations: Once you find a home you want to bid on, your buyer’s agent can help send out an offer and negotiate with the seller. Due to their familiarity with the housing market, they can help you decide on a strategic first bid that sets negotiations off to a good start. When the seller responds, the buyer’s agent will receive the communication, help you decide on a next step and finally communicate that to the seller’s agent.
Connecting you with other relevant parties along the way: As your homebuying journey moves forward, your buyer’s agent can help connect you with other relevant parties along the way. For example, they may help continue communications with relevant parties during closing, or help you organize a home inspection.
Review the inspection report with you and suggest potential concessions you could from the seller
Make sure deadlines are met on the escrow timeline.
Now for the Cons.
They won't voluntarily give you the list above. Their contract will only state some vague description of their duties such as "locate and negotiate for the acquisition of a property". That's it, no exaggeration, please refer to section 1 here: Actual Contract. They do not offer any other information unless you specifically ask, even then they will likely not give you the full information needed to make an informed choice.
Most people don't ever buy a home and those that do may only do it once in their life. We just don't know what we don't know. We don't even know what questions to ask the questions or have a reference point to know what questions to ask. We largely just assume that the Agent is the one that knows what is best and that they will disclose what information is actually in our best interest over their own as is their fiduciary duty, this assumption is wrong.
Here is my personal list of CONS relating directly to the services and value I received in exchange for signing a contract with my buyers agent, Agent X. Please note, Agent X never did tell me what he was going to do for the $22200 plus bonus fee of $650 he requested as compensation and the contract he gave me only said that he would do the following, "locate and negotiate for the acquisition of a property". This is what he actually did:
Find a home. Value received by me. ($0). My wife and I found our own home on Zillow. Real estate agents are to act with honesty with the buyer’s best interest in mind. At no point did Agent X offer to reduce his requested compensation due to the fact that he was providing zero home finding services, had Agent X been honest and had the buyer’s best interest in mind as was his duty, he would have offered to reduce his requested fee. Nothing but the best for $22850.
Acquisition-Negotiation: Value received by the buyer (-$5000): Agent X made a few phone calls to the seller making offers on the home on the buyer’s behalf. This negotiation resulted in the buyer paying $5000 more than the original asking price. Over 99% of homes in Utah go for the asking price, thus Agent X's negotiation performance was in the bottom 1%. I learned later of the condition that prevented the seller from accepting my offer of the seller's asking price immediately. This concern over the condition led to two days of delay and a competing offer coming in for $5k more. Had I not used Agent X just had a conversation with the seller on day one, I could have resolved the condition immediately before the other offer came in. Having a middle man that didn't fully understand what I was willing to negotiate and failing to come back and offer solutions after the initial failure led to my paying $5000 over asking price and Agent X actually recommending that I pay $10000 over asking. Nothing but the best for $22850.
Acquisition-ensuring all requirements are met before closing: Value received: (-$150 with a side helping of frustration and stress). The buyer texted Agent X to request an estimate on the age of the roof and he did not get an answer for 3 days but even then only after a 2nd solicitation from the buyer. The answer received was “nobody knows”. Not helpful for an insurance quote. Further, Agent X coordinated to use his favorite home inspector which I should not have relied on according to the fine print in his contract. The inspector charged the buyer $630 which is about $150 more than what many other inspectors were willing to charge for a 3600 sqft home which was not in the best interest of his buyer. Full disclosure would have been "This inspector costs about $150 more but reason X is why I think they are worth the extra money." Since then I've come to the realization that it is not a good idea to use an inspector who is friends with someone who is making money off keeping the sale of the home as high as possible. Further, Agent X mis-scheduled the inspection and failed to inform the buyer of his mistake until 15 minutes after the expected inspection time proving his unreliability. Nothing but the best for $22850.
Acquisition-negotiating concessions due to findings on inspection: Value received ($0), value claimed by Agent X, $15-$20K. This misrepresentation of skill cost the buyer the opportunity cost of negotiating down the cost of the property up to the full buyer’s broker fee of (3%, $22200). This misrepresentation cost the buyer tremendously. Agent X never even attempted to negotiate down for the age of the appliances as he boasted he could. Worse, when I confronted him about it I learned that he never intended to talk down the seller with respect to the age of the utilities and attempted to gas-light me into believing he never claimed he could. I have 3 witnesses to Agent X's claim during the initial home walk through and I have texts proving after the fact that I was fully expecting him to deliver on this claim. This false claim was the primary reason I chose to sign the contract. Nothing but the best for $22850.
Buyer-Broker Contract creation: Value for Buyer:$0, Value for Broker: $22,850, potential opportunity cost for the buyer: $27850 with a major helping of frustration, anger, feelings of betrayal, and documented medical issues due to the stress. The buyer broker-agreement, as previously mentioned, is completely one-sided. It does not benefit the buyer at all. Every paragraph is specially designed to give every advantage to the agent and broker to include using purposely vague language so that no person reading the contract would understand what responsibilities and services the broker would provide other than the vague and generic description of “find a property” and “negotiate the acquisition”. The use of this contract is predatory in nature, using niche expertise not to benefit those they purportedly serve but to take advantage of anyone not intimately familiar with real estate or contracts. This buyer was one of these ignorant masses who made the mistake of trusting Agent X to have his best interest in mind as is required by fiduciary obligation. The issue is that this is not just Agent X and his Broker who is at fault. This is the contract that this broker uses for all of their Agents and all of their agreements. As far as I know this is the contract that the entire Utah Association of Realtors uses as it has their logo on the top. If this is the case, the whole system is egregiously complicit in this travesty of preying on ignorance of unwitting buyers and sellers. Nothing but the best for $22850.
Buyer-Seller contract: Value received, $0. The buyer didn’t need Agent X to create the buyer-seller contract, the seller as an Agent would have done it for free and made the whole sale happen had Agent X never inserted himself into the process unnecessarily. Agent X withheld this information purposely before I signed the contract for his sole benefit. Nothing but the best for $22850.
Coordinating the escrow deadlines and the closing: Value received $20 and the buyer had to initiate it himself. He never followed up about the loan. He never went over the inspection report with me. As mentioned, he never followed through with asking for concessions as he claimed he could do. Wondering what was going on with the closing, the buyer called up the title company one week before closing, and nothing had been coordinated other than the closing “might” happen. The buyer initiated action at this point with the title company. After that, a clerk working for the broker called him and asked him which home warranty he wanted to go with ($20 maybe?). A home warranty that was offered by the seller initially but Agent X claimed he was the one that requested it. I believe the seller. Nothing but the best for $22850.
Conclusion of value received for the buyer agreeing to contract with Agent X for his requested $22,850:
Finding a home: $0 - buyer found the home
Acquiring the home: -$5000 in negotiations
Total total opportunity cost for contracting with Agent X and his Brokerage in this purchase, -$27,830.
If anyone were to solicit anyone of sober mind if they would be willing to pay them $22,850 for the services offered as summarized in (8) above, no one would agree as it would be insane to agree to pay that amount for the services provided, especially in my circumstances where the seller was an agent herself. Agent X knew this and yet he along with most all Real Estate Agents willfully obfuscate the real dollar value of compensation requested behind vague language and %s to mask what they are asking in compensation. They then shoot for the moon when contracting with people who largely have zero context of how to negotiate a dollar amount for unknown services offered because there are no metrics, just vague descriptions and promises.
So, is it worth it to get a buyer's agent? Only if you find one that is willing to do a la carte services for set fees and all the services have metrics for success. Even then, all you really need is a checklist of requirements to make a deal and you can just do it yourself. You have to do it anyway, the agent won't do it for you, he'll just make the phone calls and might give you the phone numbers. He will likely create the buyer-seller contract which you can do yourself. Example of Buyer-Seller Contract Here. You can simply hire a lawyer if required by your state or pay an a la cart Realtor to help you with the paperwork if you aren't comfortable.
Here is are those requirements: