Throughout history and in every generation, plot, and book summary, there has always been that individual. The person on the inside, who enjoyed the benefits of knowing classified information and whose will, when broken, can divulge all military secrets.
In the real estate industry, that individual is a real estate agent. But the real question is, what benefits do they enjoy on the premise of their job? Do real estate agents get discounts on homes? Yes, they do. Real estate agents have the freedom to represent themselves in a real estate transaction. In this case, we would still regard them as the buyer’s agent.
As with standard transactions, both agents get a share of the commission from the sale. But if you decide to subtract the commission from the purchase price, you’d find yourself with a house discount.
By exploring this topic together, you’ll gain valuable knowledge that could save money in your future home-buying endeavors. So grab a cup of coffee or tea as we delve into the advantages agents have when buying their own homes.
The House Discount Explained
When real estate agents decide to play both agent and client, they have a perk to enjoy: the commission.
This doesn’t take away their roles and responsibilities in the transaction. It only means their service is unto themselves.
Look at it this way: if you are working on a 6% commission, you and the seller’s agent would each get 3% of the sale price. If we say the house you set your heart on is $750,000, you and the listing agent would have to split $45,000.
A simple division trick, and you walk away with $22,500. Yes, you just got a check for buying your home.
This type of essential math dominates the industry, so be sure to grasp it clearly before embarking on agent duties. But if you haven’t written your real estate exam yet, we have a test crafted with you in mind.
You can use our real estate math practice test to prepare yourself to tackle exam day.
Of course, we will have to factor in the agent-broker split. Your income from the transaction will depend on this agreement. At a 70/30 split, your total take-home will be $15,750.
But what if you consider a redirect?
Instead of receiving your share of the commission, you can redirect it to the house price. At the end of the day, the sale price would total $734,250. You would have earned a pretty good discount.
Uphold Your Duty
Though representing yourself in a transaction is not illegal, you still have your fiduciary duty to uphold. As a licensed real estate agent, representing yourself as the buyer, you must notify both the seller and the seller’s agent about your position in the transaction.
You will have to do so at the very beginning of conversations. It is better to do it in writing so you have a reference point should any issues concerning your honesty arise later on.
If you have ever read our article on dual agency, then you know the importance of honesty in every transaction.
Should You Handle Your Own Purchase?
That depends wholly on you. I know several agents who have and, should the opportunity arise, who will represent themselves in a transaction.
The self-representation debate stems from the question of experience.
If you have several years of experience finding homes and closing deals, then there should be no fear in handling your own purchase. But if you are a newly licensed agent, hiring a colleague to represent you in the transaction may be the better route.
Real estate closings are hectic. They are long processes that involve a list of participants and legal procedures that demand strict adherence. This is where most rookie agents make costly mistakes.
But by hiring an agent to represent you, you will not only protect your interests but also guarantee fewer mistakes. You can also use this opportunity to glean from their knowledge and industry experience.
Seize Savings on Your Own Deals
Real estate agents do get discounts on homes by representing themselves in the transaction and redirecting their commission into a price discount. This not only results in immediate savings but also provides tax benefits and better financing options.
Next Steps
If you’re a real estate agent considering buying your own home:
1. Evaluate your experience: If you have enough industry knowledge, consider handling your purchase yourself.
2. Partner up: If you are a new agent, consider hiring another experienced agent who will protect your interests while allowing you to learn from them
3. Be transparent: Always maintain transparency with all stakeholders during transactions where you’re representing yourself.
Do you agree that real estate agents should handle their own purchases? Or do they risk losing sight of details due to personal involvement?
Share your thoughts below! And if you’ve ever used this strategy before, we’d love to hear how it worked out for you!
