Why hire a buyer agent?
Honestly, the title of this column could be, “Why not hire a buyer agent?”
That’s because the benefits of hiring a buyer agent are tremendous. The gift of buyer agency has only existed since the early 1990s. Until that point, all buyers worked through the listing agent when purchasing a home. The challenge with that scenario is that the listing agent represents and works for the seller exclusively. Therefore, they were only assisting the buyer, not representing them. This would be like hiring your spouses’s lawyer to represent you in your divorce. Doesn’t make much sense does it?
Yet I see buyers in today’s market doing exactly that: reaching out to the listing agent directly to purchase a home rather than obtaining their own representation. This rogue method could cost you tremendously in the long run. How will you know what a fair price might be for the home? What inspections are most common in our market and who can you trust as an inspector? What can I ask the seller to repair from inspections? I could go on and on.
Here are some common myths about a buyer agent:
The buyer pays the agent’s commission. False. In our market, the seller is contractually obligated to the listing agent to pay a listing commission. The listing commission is made up of the buyer agent commission and the listing agent commission. It is not always a 50/50 split, but in most cases it is. Therefore, the seller actually pays the buyer agent commission.
If I don’t have a buyer agent, I can get a better deal. False. Oftentimes, buyers might think that if they don’t have a buyer agent they can get a better price on the home because the seller is not paying a buyer agent commission. In truth, the listing commission is a prearranged agreement between the seller and the listing agent and is not negotiable by the buyer. So, in essence, an unrepresented buyer is simply giving up his or her right to representation while at the same time paying the same price for a home.
I don’t have to sign a buyer agency agreement until I find a home. False. For a Realtor to represent you and coach you through the home-buying process, he or she must have a signed buyer agency agreement. Not only does this document allow for the Realtor to provide you with the representation you seek, it also lines out the buyer’s responsibilities to the agent. For example, the buyer should not call other agents to see properties or provide personal/financial information to any other agent. Even if a buyer thinks that she is saving her agent’s time, the aforementioned scenarios can seriously affect your leverage as a buyer. In essence, a signed buyer agency agreement clearly defines what each party can expect from the other and shows loyalty to one another.
All buyer agents are the same. False. This could not be further from the truth. It astounds me that sellers often interview more than one listing agent for the job, but buyers will often hire the first nice Realtor that they meet at an open house. I am not saying that open houses aren’t a great way to meet agents, but it is only the first step. A buyer should interview all candidates to see about their track record in real estate. How many clients have they assisted in their career? How many homes have they sold in your desired area? Are they a full-time Realtor? Do they perform a detailed buyer consultation to ensure that they understand your goals and must-haves?
To me, part of the value of great buyer agents is that they are in the market every day. They know what a great value looks like and they are confident enough to tell you when it is time to make an offer on a home. A great buyer agent should also be a hunter. They don’t wait for the market to bring them your home, they proactively network with other Realtors, their clients, and their social network to see who might be thinking of selling. This is crucial in today’s low inventory market.
In most cases, buyers should be prepared to compete with other buyers when their home comes on the market. Therefore, you need a buyer agent who will alert you, not the other way around, when a great home hits the market. And then you need a bulldog who can fight to get you the home and negotiate on your behalf.