Saving Tens of Thousands of Dollars
Buying/Selling a Home in the Pacific Northwest
Last published on Dec 23, 2020 by Koshy John

This post is geared towards people living in the Pacific Northwest of the United States, and is meant to capture the answer to an often-asked, highly consequential question that rarely gets the right answer -- how do you capture most of the 2.5-3% agent commission when you buy a home?

One of the things that's just about set in stone when buying a home in the United States is the significant overhead of agent commissions in the transaction. This usually amounts to 3% of the transaction amount to the seller's agent and another 3% to the buyers agent. While this is paid out by the seller, this effectively comes from the buyer's pocket as it's rolled into the price they pay. This is not a trivial sum of money in high property value areas like the Pacific Northwest - a $1 million dollar home sale would incur something in the range of $60,000 in just agent commissions.

It does not make a difference if you're buying a newly constructed home from a builder or an older home. You may think of all sorts of ways to avoid this but this overhead is usually difficult to overcome if you're unaware of a little nugget of information shared further below.

Some agents do offer some portion of the commission back, which may be significant but may still take non-insignificant sums away from the buyer that may not be rationally be considered "defensible" for the services rendered.

Is there a solution here?

Let me get the two obvious ways that rarely apply to anybody out of the way:

  • It's a fully private transaction on a property that was never listed, no agents were involved and the participants were known to each other. This is usually detrimental to one of the parties involved (usually the seller).
  • You are an agent yourself or you have an agent amongst friends or in the family willing to help out for free.

For everyone else, the solution necessarily involves using an agent that gives cash back. But who actually gives the most cash-back without compromising on service?

I had this question myself when I started looking for a new construction a few years back. I felt the real estate market was unfairly set up for my use case. I estimated that an agent may need to set aside somewhere between 4-8 hours end to end for me. In the most charitable case, this meant the agent was raking in excess of $4,000/hr or far more. There was no way that was the kind of value being created for me especially when a home purchase stretches you financially anyway. Brain-surgeons and rocket scientists make a fraction of that. (Yes, I'm aware it covers 'deadbeat' clients also, but I wasn't interested in subsidizing a broken business model with my hard-earned money).

Given how consequential this was, I asked around a lot - while there were some amounts of cash back on offer, I was very frustrated by the model which felt borderline abusive. Thankfully, one of my friends brought up ShopProp as something one of their friends in turn used and were very happy with. And thus I got the number of Rob Luecke, the CEO of ShopProp, by word of mouth.

ShopProp and my experience buying with it

I first contacted Rob over a short text message. The first piece of advice he gave me was this: "Make sure you declare your agent right at the first time you get in contact with a new construction builder or their agent." I'll explain why this was important further below.

I’ve never actually met Rob in person (questions/advice was all over phone/text/e-mail), and all my visits to Quadrant Homes (the builder I ended up with) were by myself, but on my very first visit I made sure to registered Rob as my agent.

In due course, I completed the transaction with Quadrant with Rob and got the full 2.5% on offer from them back (less $2,995). Like with other agents, I knew that if I ended up not buying anything, ShopProp would get nothing too for services rendered. (This is generally against my principles but that's what ShopProp offers)

For $2995, ShopProp wrote 2 offers to a house I ‘underbid’ on with Burnstead Homes (and lost after I negotiated hard against advice) and the one winning offer with Quadrant (got air conditioning and blinds included in the price on Rob’s advice). Rob sent one of his people over for the inspection (included) and recommended the inspection company (Sound Home Advisors - excellent). I used ARAG Legal for legal paperwork review ($0) but it’s all boilerplate so it was just a sanity check.

Buying a new-construction home

A common misconception first-time home buyers may have (and I did too) was that you could negotiate better with the builder or their agent by not having an agent represent you. And possibly capture the full buyer's agent commission and take it out of the sales price. Seems logical right? Unfortunately it doesn't work that way.

The builder is incentivized to not budge an inch from their asking price because the final transaction price affects the valuation of homes they may have still not sold. And it also affects the valuation of home already sold, creating the impression that the builder is overpricing their homes, and further undercutting their position.

Now you may think, why not shop around myself and once I'm ready to make an offer on something I like, find an agent and bring them into the picture to get some cash back?

Here's the most insidious thing about this - the builder is extremely unlikely to entertain you if you hadn't registered your agent the first time you visited them. The question you may get asked when you first provide them your details as you visit their model home, "Do you have an agent? If so, what are their details?", is a loaded question.

If you fail to provide those details, what usually happens is that the builder/agent may silently assume the position of your agent and absorb the buyer's agent commission with no benefit to you. In a seller's market, they may not even budge if you threaten to walk away from the deal.

As an FYI, what builders usually are amenable to include in the deal are usually things like a central air conditioning, lawn irrigation system, window dressing, fencing, etc. For homes that have not 'released to production' yet, you'd have more options around fit and finish.

Buying an older home

Buying an older home is generally more anxiety inducing - I do not have direct experience with this but I know the laundry list of worries associated with it: will my agent point out pitfalls with any home I'm considering? Will they help me make a competitive offer without wasting money? Am I overlooking anything along the way that someone will point out to me?

Knowing Rob and ShopProp, I'd not expect anything less than the best service in this case too.

Is ShopProp right for you as a buyer?

If you're buying a new construction home, it's absolutely a straightforward choice to use them. As shared previously, the only reasons you may not would be if you were an agent yourself or had an agent in the family who's willing to give you 100% of the agent commission.

For older homes, where competitive bidding is very much the norm these days for anything but decrepit homes (and even then, maybe not), a higher agent cash-back will allow you to put in higher offers with that knowledge. While my own purchase wasn't for an older home, I struggle to think of a good reasons to go with any other agent. Since ShopProp lists out scare tactics that predatory agents may use to convince you to use them instead, I'll just let that page speak for itself.

If you want to be mollycoddled all through the process with no research or effort on your part, you don't mind leaving to chance whether you get something that's best for you and money is no object (this applies to very few people, and none of them are likely to even come to this page), then maybe one of those agents will be right for you.

Agents who are used to capturing most or all the commission on offer will do their best to convince you they are better (it's a clear conflict of interest). It's up to you to evaluate for yourself and ensure you're not taken for a ride if you give them an ear. You should give them an ear though to make informed decisions. If you hear of any compelling reason to not use ShopProp, please do share with me so I can be better informed myself.

How about as a seller?

While this post is mostly geared towards buyers, I do want to call out that you'd benefit immensely from lower overhead going with ShopProp as a seller too. But you may want to look around if you want bespoke services all from one source - notably if you want the home to be staged with furniture.

You are very likely to still come out much ahead if you arrange for that yourself. It's purely a question of the overall value of your time vs. savings achieved. And that's an equation that varies from person to person and situation to situation.

If you've used ShopProp as a seller, please do share your perspectives with me.

No Conflict of Interest

To be absolutely clear, I do not benefit in any way from sharing this information, or from having people use ShopProp. I do not know Rob or have any relationship with ShopProp outside of my experience as a client. It's simply to inform people that they have options to not leave large sums of money on the table when buying a home.

I intend to use this as a quick link whenever this question comes up to me, and if this helps anyone else in the process, I'm more than glad.

Many Microsoft employees have used Rob and he regularly gets recommended on internal social threads around home buying and selling.

As with everything on this site, the advice here is provided in solemn good faith but with no legal warranties attached.

Learn more about ShopProp here.

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