Should You Tell Your Buyer's Agent the Highest Price You Will Pay?

The Case for Not Sharing the Amount With Your Agent

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You might be tempted to tell your real estate agent everything, including the highest price you will pay for a home. After all, your buyer's agent is supposed to be on your side and keep your information confidential, right?

The fact is, once you share any secret with another person, it may no longer be a secret. It isn't that the agent would intentionally reveal what you've told them, but an agent can't reveal what they don't know.

Key Takeaways

  • The best reason for not telling your buyer’s agent the highest price you’ll pay for a home is that they can’t reveal information they don’t know.
  • The seller’s response to your offer will depend on a few factors, including the housing market, competition for the home, and the seller's motivation.
  • In a cold real estate market, sellers are often willing to negotiate, meaning that they may accept less than list price and pay some closing costs.
  • In a hot real estate market, there are more buyers than houses available to buy and sellers are less likely to be willing to negotiate.

Why You Should Not Tell Your Agent Your Top Price

Right after writing an offer, it's common for first-time homebuyers to play through scenarios in their heads. They can drive themselves crazy with this process, but can't seem to help it. Here are some of their thoughts:

  • What will we do if the seller outright rejects our offer?
  • Should we tell the seller we will consider a counteroffer?
  • If the seller accepts our offer, maybe we offered too much.
  • Maybe the seller will be insulted because we offered too little.
  • If the seller counters at full price, should we accept that price or should we make a counteroffer?
  • If the seller writes a counter for $10,000 more than our offer, should we split the difference and increase the sales price by $5,000?

All of this may result in an urge to tell your buyer's agent exactly how much you will pay. That's understandable. As a buyer, you want and need strategic advice.

Know What You're Dealing With

Deal with a known quantity. Apart from the examples above, there are dozens of ways a seller can react to an offer. Much depends on factors such as the temperature of the marketplace, competition for the home, available financing and the seller's motivation. A highly motivated seller may be more willing to negotiate if they want to close on a sale quickly. Offers should be structured from the beginning with those conditions in mind.

When there are more homes available for sale than buyers to purchase them, those buyers are enjoying a cold market. Buyers have more homes to choose from, which increases the odds that a buyer will find their perfect home. When they find that perfect home, they'll have less competition for it, which could help them avoid a bidding war.

In a cold real estate market, serious sellers are often willing to negotiate. This means you can probably buy a home for less than list price, and the seller might be willing to pay some or all of your closing costs. It's an easier and more relaxed experience for buyers.

In a hot real estate market, meanwhile, there are more buyers than houses available to buy.

The best outcome, of course, is the seller will accept the buyers' offer upon presentation. And that, believe it or not, happens all the time.

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