Commission is typically 6%, which is split 4 ways to the buying agent, their agency, the selling agent and their agency. So your agent personally takes home 1.5% of the selling price -- on a $300,000 sale, they are making $4,500.
The difference between selling your house for $300,000 and $310,000 after commission is $9,400 in your pocket -- and a paltry $150 for the agent. Are they going to take the risk of leaving it on the market for an extra week (and spending more time showing it, etc) hoping to make an extra $150? Of course not. (Spoiler alert for the book: unless it's their own home, in which case they leave it on the market for an extra 10 days and sell for an extra 3% on average).
Another incentive problem exists on the buy-side: your agent gets paid more money the more you pay for the house. It's literally working against their interest to negotiate a lower price, other than when it's above your absolute maximum.
Traditionally, the commission paid was 5% (split 4 ways), but some markets that got as high as 7%. I once had an agent explain to me (who was bad at math) that this was due to inflation.
The financial services industry has been skimming gajillions of dollars off the whole economy. Might as well pay at least some of it back to folks doing honest work.
Even if the amount more they'll be making is trivial, it ends up being the same as the seller's agent problem in reverse. At best their incentives are to not care how much you pay, but want you to buy a house already without them showing you more. At worst, they actually want you to pay more.
This isn't universally true. In some US states, the frequent problem is that the agent who is showing you homes (and who you tend to think of as "your agent") is not actually your agent (with fiduciary duty to you), but a subagent of the seller (with fiduciary duty to them). Here's an excerpt from recent report on this:
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For many years, a large majority of home buyers and sellers have worked with real estate agents. Most consumers believe that these agents always or almost always are required to represent the interests of the home buyer or seller with whom they are working. ... Yet, real estate agents often are not required by law to represent the interests of the buyer or seller with whom they are working, and many do not.
In reality, there are a number of different types of relationships allowed in most states between real estate agents and their clients.
• Single agent: The agent works solely for the client
and has fiduciary responsibility. A fiduciary agent
is “obligated to procure the greatest advantage to
his client.”
• Designated agent: The agent is recruited by the
listing agent to work with a buyer and has fiduciary
responsibility to that buyer.
• Subagent: The agent works with the buyer but has
fiduciary responsibility to the seller.
• Dual agent: The agent somehow is expected to represent the
interests of both the seller and buyer in a home purchase.
• Transactional agent: The agent works with both buyer and
seller to facilitate a sale but has no fiduciary
responsibility to either party.
---
So while it's possible that you live in a state where you are correct, where subagency and dual-agency are forbidden, in the absence of a signed contract for the services of a buyers agent, others should not follow your advice until they are certain the same is true for them.
Subagency was common up until the 90s but is exceedingly rare in today's market (and outright illegal in many states). In 2019, it is not at all a "frequent" problem.
Real estate agents fiduciary responsibility is held to a reasonable care standard for matters relating to real estate. That means they need to be competent. Many of the things that buyers seek advice from agents are answered like "In my experience, blah blah blah". Those are usually legal questions, which agents are not able to answer. Often when people get in trouble, its because they don't understand what they are asking and mistake salesy fluff for an answer.
End of the day, 99% of what a "buyers" real estate agent does is bullshit that makes you feel better. "Sellers" real estate agents get listings, period. Buyers agents exist because people good at getting listings have a disincentive to talk to buyers. The buyers agent's primary task is getting ahold of keys quickly and pushing sellers to accept offers. Shitty agents who are incompetent or dishonest may slow-roll things to get you to accept offers quickly.
They may help you identify the type of home you want, but that isn't a fiduciary duty.
When the first offers are underpriced, a lot of agents will pressure you into selling, because their income is tighly coupled with the number of transactions per year.
There’s a couple of studies from the US that concluded that most sellers close the deals way too early, and that rationally they should have waited for more offers.
Actually, that's the poster child for a conflict of interest.
Lawyers would get disbarred it they operated similarly.
You can and I did negotiate the BPP and then tell the seller that you will be paying the closing costs yourself and deducting them from the BPP. Then you avoid paying sales tax on the closing cost service and paying property tax on the closing cost service.
Oh, and don't even get me started on the financial services industry scam of mortgage interest deductions.
Been through that. Still angry.