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I recently tried to make an offer on a home in Pennsylvania, and after reading the contract, I noticed what seem to be several massive glaring conflict of interests for the buyer's realtor.

  1. Realtors are paid mostly by percentage of final sale, so ALL realtors benefit from higher property values, which they can dictate.
  2. Realtor is legally obliged to take a bid, in secret, to the seller's realtor. This can result in a bidding war, if strategically positioned against another secret bid.

The buyer is prevented from knowing another bid, so they can't avoid a bidding war. If this "secret information" is still presented to the seller, the seller only suffers from this secrecy.

  1. Buyers can be pushed into exclusively looking at open houses, or new construction, which naturally would have the most competitors, ergo more bids, and would inflate the value of newer homes, and also mean the buyer will then have the most to lose when the house is sold again in the future.
  2. The buyer's realtor is paid by the seller. This seems like the most textbook conflict of interest, as it immediately suggests that the realtor is, in no way, beholden to the buyer.

I understand there is plenty of legislation involved in dictating how these interactions are performed, but I've also now witnessed enough secrecy that if there were any kind of price-fixing or intentional inflation of home prices, the average consumer could be none the wiser.

Given the possible conflicts I see at every turn, I find it hard to believe it wouldn't be industry standard to raise prices as high as possible for every consumer in the US.

Is there perhaps some impartial third-party privy to every back room discussion, to prevent price-fixing or cooperation? Should I be asking to be involved in these conversations? I was led to believe it's actually illegal in PA to be part of the realtor-to-realtor negotiations.

I am looking for ways to mitigate these conflicts of interest, as a buyer.

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    how do they avoid? sounds like they don't Jan 31, 2023 at 14:06
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    @erinB I suggest reframing the title and the bulk of your post to be more like the last sentence of your question. I'm very sympathetic to your plight, but the part that is potentially answerable (short of 'legislation must exist to protect you') is about what you as a buyer can do to mitigate the risks of a conflict of interest. Jan 31, 2023 at 14:14
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    @Grade'Eh'Bacon Edited, thanks! I predict that I'll have to make a second post on law SE to get the other half of this answer, yeah.
    – Erin B
    Jan 31, 2023 at 14:21
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    @DStanley: No. They still get paid only if you buy, so their motivation is to find you something you want to buy.
    – keshlam
    Jan 31, 2023 at 19:16
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    Realtors only dictate property values if you let them. There are definitely other ways you the buyer can determine property value…
    – RonJohn
    Jan 31, 2023 at 19:55

2 Answers 2

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Simplest solution: Hire a Buyer's Agent, who has an explicit fiduciary duty to work in your best interests rather than the seller's or their own.

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The buyer's realtor is paid by the seller. This seems like the most textbook conflict of interest, as it immediately suggests that the realtor is, in no way, beholden to the buyer.

They are beholden to making a sale. One could argue that since the fees are baked into the "final price", that the buyer is ultimately paying their fair share of the fees also. This is evidenced by houses being sold without an agent typically listed for slightly less, since the seller doesn't have to pay a seller's agent fees. And you can offer less if you don't have an agent, since they don't have to pay buyer's fees. If they were paid by the buyer, would that change what houses they show you? Or how strongly they negotiated?

So I don't see that as a "conflict of interest". What would be a conflict of interest is if the agent had a personal relationship with the seller and wanted to make sure that you bought that house, or if the agent got a kickback from a particular seller.

You get to make the offer - if the seller refuses and wants a counter-offer, that choice is up to you. If the price becomes more than you want to pay, then you don't buy the house and the buyer's agent gets nothing.

Plus, you're paying the buyer's agent more for their services than getting you the absolutely best price. They line up the houses to buy, set up inspections, help make sure the legal work is in order, etc.

Even if you buy a million dollar house, the difference in commission between a $1.0 million sale and a $1.1 Million sale is $3,000. If they sell at your offer, they get $30k. If they try to inflate the price to get a bit more commission, they risk getting nothing. How much risk would you take to bump your commissions from 30k to 33k?

I'm not saying that agent can't try to skew things to be in their favor, but that's what most people in sales do anyway. There are certainly cases where agents can benefit personally from one house over another, but it's still your decision on what to buy and how much to pay. If the seller refuses to buy at your offer, that's probably not the agent's fault.

So, how do you avoid this? Do some of your own research. Make sure you look at lots of properties before starting negotiations. Find houses on the market that aren't on their "list". If they only show you houses from one agency (e.g. theirs) then demand to see FSBOs or houses from other agencies. If they refuse, or you think that they're trying to steer you to houses that benefit them more, then find a different broker.

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    Data is not the plural of anecdote, but the 2 times I've bought a house, using a buyers agent, they have been a very high value added to the process. Are there bad agents out there? Of course. Ask for referrals from good friends...
    – Jon Custer
    Jan 31, 2023 at 17:39

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