credit: freedigitalphotos.net by suphakit73
So if you’ve been following my blog, I’ve mentioned that we are looking to buy a place (a co-op). We’ve gone to a couple of open houses and gone to see a few other places. I generally use Redfin to look for available co-ops as I like the website’s interface. Zillow also is a pretty useful website.
The few places that I’ve seen which were not open houses, I just called the listing agent. The blogger at Savvy Latina posted recently asking whether a realtor was worth it as the realtor “is doing nothing more than showing [them] houses?” I was thinking along the same line. Years ago before Redfin, Zillow and other websites, I can see the value in real estate agents. They could access historical price data for home sales in the area, median sales prices in a neighborhood, the amount of days a home has been on the market, and how many price cuts it has endured. But all that information can be found online nowadays.
I am a first time home buyer so I’m not sure of the advantages of having a buyer’s agent. However, these are the most popular arguments for having one.
It is free
The seller pays the commission. Generally the commission is 6%, and the listing agent and the buyer’s agent split the commission. The buyer does not have to pay the buyer’s agent. But I wonder if not having a buyer’s agent can help during negotiations? Maybe the seller and seller’s agent might be more willing to lower the purchase price because the seller’s agent won’t have to split the commission if you’re not working with a buyer’s agent.
Listings found for you
I don’t need them to find me listings. I’d rather look for myself as I know exactly I’m looking for and the internet is a great resource.
Someone to explain the process to you and to handle the paperwork
I don’t want to oversimplify the house buying process, but what exactly needs to be explained to me. The agent shows me the house and faxes over the offer. Sure, there will be paperwork to take care of, but you will hire a real estate attorney to represent your interests when you’re up to the stage of the process when you’re signing the contract. Especially in my situation, I think that purchasing a co-op is less complicated than purchasing a house.
The listing agent represents the seller
This is a valid point. If a buyer does not come with an agent, the listing agent will often serve as a “dual agent,” but this seems like a conflict of interest. It might be helpful to have a buyer’s agent to act as a buffer between you and the seller’s agent during negotiations. However, I wonder if the buyer’s agent really wants a lower sale price as that cuts into his/her commission also. It would not seem that the buyer’s agent has an incentive to reduce the price.
Familiarity with the neighborhood
If I were buying in an area that I’m not that familiar with, this may be a valid reason. However, I’ve lived in the neighborhood where I plan on buying for the last 4 years so I am very familiar with the neighborhood.
Recommendation of services
I don’t think that it’s essential to use the referral of the realtor to find a financing companies and home inspectors. I think you can find one pretty easily on your own. Actually I’d prefer to find my own. I would think that the realtor just refers those who they are friendly with and not necessarily someone who will give you the best mortgage rate or perform the best home inspections.
One compromise I might consider is to use a Redfin agent or a Redfin partner agent. According to their website, the Redfin agent or partner agent will refund up to 15% of their commission back to you.
So if you’ve purchased a home before, did you use a buyer’s agent? Do you think it is a good idea to get one? Has anyone used a Redfin agent? If so, how was the experience?
We’re currently using a buyer’s agent on our home search, mainly because she can get us in to see the homes we want to see. She also pulls comparable solds in neighborhoods we’re interested in so that we can research pricing.
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But can you get in to see the homes without the agent? I think pulling comparable sales in a good thing to do, but I think the info may be available online.
You can schedule a showing with the selling agent if you want to see a home. However, I don’t mind using a buyer’s agent to do that.
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I 100% agree with this article! I listed my home for sale by myself, because like you, I actually prefer to do all the “work” myself such as showing my own home instead of getting strangers to show my home to buyers. And lets get real here, the hardest part Of selling a home is the constant cleaning!! YOU do the cleaning, not the agents! I of course also wanted to save $20,000 on commission fees.
Buyers also benefit by not working with a buyers agent. I sold my house today for $10,000 less to a buyer without an agent because I would have just lost that $10,000 in agent fees anyways. So the buyer wins big time as well! And yes I sold my house for fair maket value based on what other houses are selling for in the area.
Wow, Tina…good for you! No doubt it is a lot of work, but hey $20,000! A big savings. If you know what you’re doing and have some time…definitely worth a try.
Interesting. I’ve been thinking about purchasing a home and getting a buyer’s agent seemed unnecessary but you bring up great points. I would be a first time buyer as well and I’d like to have someone walk me through the process.
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Those points are the ones that some people bring up, but I’m not sure how valid they are. I’m not sure if Redfin is available in your area because they refund a portion of the commission which I think is great. But then I’ve also considered not using a buyer’s agent and trying to get the seller to accept a lower price. I don’t know…we’ll see.
For this house we are going to use our agent. But my husband wants to get his realtor’s license in the next year. This will help since we are planning to buy rental properties.
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That sounds like a great idea. I’ve thought about getting my license as well one point int time. I wish I could get into rental properties, but it is so expensive here in NYC.
We worked with a buyer’s agent and it came down to convenience. Sure, you can do all the things you listed above, but why not hang out with your family during those many hours instead?
It costs you nothing and these people fall all over themselves to help you since there are so many agents that they’ll take any business they can get.
The most legitimate (mabye only) reason not to use a buyer’s agent is that you MIGHT be able to negotiate better with the seller if their agent will drop their commission 1-2% and therefore they can reduce the price to you. If this is a competitive environment then they aren’t going to go through the trouble though unless you’re someone walking in with all cash that they want to go to contract with as quickly as possible. If it’s a slow market then you might have some negotiating power.
I really don’t particularly love real estate agents, but in this case my opinion is to just find one you like and have them do the legwork for you.
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Yea I was wondering if I could be able to negotiate a better deal without the use of a buyer’s agent. But as you said, that MIGHT happen and is no guarantee.
I’ve never purchased a home before, but my parents did use an agent when they were looking to move down south. I don’t think it was 100% necessary – after all, they found him just by looking at listings they were interested in online. They were looking in a certain community and he was on all the listings. I am not sure if they would have been able to make an appointment without him, but in any case they were willing to pay $100k cash so that helped them greatly with negotiations. There was no back and forth, and it was actually a pretty simple process. Good luck on the search!
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Thanks! I definitely think using an agent was in your parents’ best interest since they were moving to a location they were not as familiar with. Plus since the guy was on all the listings…he probably is someone who knows that community really well.
I would totally use one just to have the extra help and advice!!
Yea, it’s definitely good to have some extra help from some familiar with the process.
I think the benefits outweigh the drawbacks. As you noted, you are not paying your buyer’s agent. It’s possible that they have a slight conflict in that by reducing the home price via negotiation, they are lowering their commission. But what is the alternative: the seller’s agent has at least the same conflict (though as you noted, it’s potentially mitigated by the fact that he or she gets to keep the whole 6%).
I think the best benefit is the effort they save you via their own work: they can let you into the home, will visit homes ahead of time to see their quality, can pull market information and comps…
There are workarounds, certainly, if you wanted to go the DIY route. But for that to be worth your time, you’d need to be confident you could negotiate a better deal without a realtor than with one, and you’d have to have a third party pull the paperwork for a cost small enough to fit within that delta.
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After reading your post on negotiating, I was feeling pretty confident about negotiating a great deal without a realtor! =)
I think the main benefit in my mind is being able to negotiate with the fact that I didn’t have a buyer’s agent and the listing agent wouldn’t have to split the commission, but as others have mentioned…that may not necessarily work so why not have the assistance of your own agent.
Andrew,
There is a myth that the commission is paid for by the seller. It’s paid for by you. Example is on a $300,000 home the seller nets $282,000 and the $18,000 goes to agents. If you didn’t have agents involved the owner would sell to you a $285,000 netting him additional money and saving you thousands. Instead that avenue is eliminated with agents.
When we bought our house we had our agent rebate us 1% of the purchase price. On my rental property I represented myself and asked for 2% of the purchase price to go for closing costs. Look for a discount broker who is willing to give you 1% back. They’re called Help U Sell here, see if you have branches there. Or find an agent with a few years experience and negotiate for some type of rebate with the understanding that they will get all of your business in the future.
The 6% commission is a guideline and not a requirement. Moving forward any purchase I make requires my agent to give me a rebate.
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I was thinking the same thing as you, but I have never tried it and do not have experience with it. Thanks for sharing your knowledge. I don’t think we have Help U Sell here, but Redfin services this area and they give a rebate from the commission they earn so that is a possible route I may choose.
I would argue that the seller is going to sell the home at fair market value, independent of both realtor’s commission. I think that in your example most sellers are still going to try and get the 300k if that is fair market value.
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Fair market value is determine but what someone is willing to pay and what price the seller is willing to sell at. I think the seller will try to the get the best price…I’m not in the industry but it would seem like the seller’s agent has an incentive to sell to someone who doesn’t have a buyer’s agent and might in turn take a lesser commission. Not sure how often this happens…and it just might not happen that often. I will probably end up with a buyer’s agent, but I still don’t see too much value in having one.
I would not pretend to know anything about the topic but if there is one thing I can say, I honestly did not know that buying a house could entail so much concerns. I appreciate having come across this post because I learned how others view the same situation and how they would handle it.
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I think buying a house is a pretty big transaction so it does come with many concerns. But I think if I were buying a house, I’d probably get an agent. But in NYC, where many can only afford co-ops, I think there is slightly less concerns. There’s less risk of structural problems and even if that were a problem, you don’t really get to inspect or check for those things. You technically only own shares in the cooperative apartment.
In Romania, everybody stays away from agents because they try to get the biggest possible price because of the commission and they tend to hide the downsides of the property and only highlight the pros just to have you buy. Therefore, especially now when you can get all the information online, I would strongly suggest not getting an agent. You know the area, you know what you want to buy… in this case, it really makes no sense to add a third man into the equation.
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Interesting to hear about how it works in Romania. If everybody stays away from agents, maybe they need to change their reputation otherwise they will soon be out of business!
I would always use a buyer’s agent, just be sure it’s a good one. Many are out only for their own pocketbooks and will use different tactics to convince you to buy a house that’s not a good deal for you.
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Good advice Laurie.
I recommend them, but only because someone near and dear to my heart is one. 😉 I can honestly say that he’s a valuable resource to his clients, not only to the ones out of town so he can go take pictures of the place and give his assessment, but also the ones here since he does all the calling to other realtors to plan the most efficient way to see 5-6 houses in a day. He also keeps on the lookout for clients that are looking at a certain price range, as well as handles all the negotiating and logistics process. However, it also sounds like you’re more of a DIY’er, so I can see why in your case, it might be less needed. 🙂
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I’m sure there are plenty of realtor’s agents out there that provide a valuable resource. I do think that it probably is worth it to have one. The only benefit that I could see in not having one is maybe in negotiations, but even that may not be true. So might as well have someone to help you with the process and to help in negotiations.
I have not purchased a house yet but I think it would be a great idea o use one because you need someone who understands how the process works. So it is convenient especially if you are really busy.
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I guess I’ll see how it goes with the home buying process…I do think they can help out with comps and determining value in the neighborhood though.
Very impressive site, gives valuable information. It may be helpful for me in the future.
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thanks!
Am I missing something here..why would you ever NOT use a buyer’s agent? It is not going to cost you a cent and they have the expertise to guide you through the process. What benefit would it be to not have one?
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Well the only benefit is if you are able to get a better deal since the seller’s agent won’t have to split the commission. Maybe in this case, they’ll encourage the seller to take a lower price or maybe take a smaller commission than the one negotiated. I’m not sure if this would happen though…but it’s a thought.
Never purchased a home, but the thinking here is interesting. You make an especially good point about the incentives of the buyer’s agent not necessarily being aligned with your own. I do think having some help with the process, especially if it’s your first time, could be a benefit, but I think it’s prudent to not automatically assume so. Have you sought out the opinions from others with experience going without a buyer’s agent to see if they though it was a net positive or negative?
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Most people I’ve spoken to just go with a buyer’s agent since that is what most do. Actually, today my co-worker told me that he was working with a buyer’s agent who showed him a place where he was also the listing agent. Because of this, he told my co-worker that he’d throw in a washer and dryer if he ended up buying the place, explaining that he’d be getting the full commission and wouldn’t have to split it with another agent.
We had a buyer’s agent when we purchased our condo. We actually met her at an open house we attended and she asked us about what we were looking for. We told her and she took us out “looking” the next weekend. She helped us negotiate and explained everything that was going on (this was our first purchase so that was important to us).
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Yea I think it me also being a first time buyer, it might be worth it to have a buyer’s agent.
Since we were buying our first home a little over a year ago, I found it important to use a realtor who was knowledgeable about the process and various neighborhoods we were looking into. They were a couple who we knew through church so it was a ton of fun working with them. They were patient, too, as we went back to our current house three times before finally putting in an offer!
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It definitely is good to use someone that you know. It’s probably in their job description to be patient! It is a tough job in that respect.
I think that it is important to have an unbiased representative working on your side of the transaction thus having a buyers agent is a good thing. There are a couple of situations where I do not think you necessarily need a buyer’s agent:
1. FSBO – When a seller is offering his home “for sale by owner” the seller will not typically pay for the Realtor’s commission if the buyer wants to use an agent. What has worked for me in the past is I consulted with an agent and told them I was considering a FSBO but, if and when I wanted to sell the property, I would strongly consider listing it with that agent. Based on this they conducted a comparative market analysis (CMA) and helped me with the paperwork and closing on the property.
2. Short sales and foreclosures – I was trying to buy a short sale or foreclosure and kept “just missing them”. I learned that with a short sale the agent does not have to present the highest priced offer to the bank but the offer that they think has the highest likelihood to close. Based on this I decided to use the listing agent to submit my offer for short sale property so they could double end the deal and earn a higher commission. Coincidentally or not, I was instructed what price to offer (well below asking price, by the way) and was the offer that was submitted and accepted by the bank.
Of course, with any investment or purchase be sure to seek professional help and make sure you have all of your questions answers before entering into a legally binding contract.
Thanks for the great article!
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Hi Brent, thank you for that detailed and informative explanation. What you said definitely makes sense.
I purchased four homes ; first 3 was w a husband who knew real estate well. The last one was all by myself w scared the hell outa me. I found that a ‘buyer agent’ for me was a total waste of time and energy! I became so frustrated that I really focused on learning how the home market works. I’m not that smart people — it’s really pretty easy once you give it a shot! I learned that … I can look everything up, I can work an excel grid … I can use the comparables to estimate value/condition and competitive costs per square feet. Over a period of three years, I used two seller agents and went to open houses speaking with several different seller agents. I learned a lot, and I learned that no one was really going to look out for ME. Remember … THE BUYER AGENT WANTS YOU TO BUY A HOUSE, TOO!!! THEY GET PAID BASED ON WHAT YOU PAY, SO THEY’RE NOT IN IT TO GET YOU TOO AGGRESSIVE OF A DEAL w too many contingencies! There are only a handfull of agents seller/buyer that I know word hard for their money …. many others wont, nor are they necessarily a big help. What DO you need? A computer with internet access … One good real estate attorney (which will also do Title search for closign), one good mortgage broker (NOT an in-house at a realty co), and one contractor that also does inspections to help you out. If you dont know one, ask friends, neighbors for referrals … someone you trust. Interview 2 or 3 of each before you decide. THEN, each of these professionals, of which you’ll need at some point in the process, will be working ONLY for YOU. Most attornies will let you pay them at closing. What makes you happy? You’ll learn for yourself exactly what a house is worth (or not worth), what it will or wont need to come up to your standards, repairs/renovations and how much it will cost, whether or not you’d have to spend more than the comps will bear if you ever need to resell. You’ll feel GREAT about understanding the process! You can make informed decisions! The ways you can become a sexier buyer 1) everyone is going to save 3% to a buyer agent, 2) the seller agent will place your value ahead of one w an agent that he/she must share with, 3) if you prequalify and have all your docs to a mortgage co (they can direct you for all the paperwork) … you’re much more attractive to seller, and if you dont have a house to sell yet … may be able to close quickly. make sure you ask for ALL inspections! Dont let an engineer report or “subdivide possible” fool you into a false sense of future potential — the attorney can help you with that — plus INSPECT EVERYTHING … it’s worth it. Ask if the seller has had any prior inspections. You’re entitled to have a copy 🙂 go get ’em! It’s easy … just try it out!
Thank you for that detailed and informative comment Cheryl. You definitely have a lot of experience. I guess for a new homebuyer it might be worth it if you need the hand-holding. Though I’d still use a discounted broker like Redfin. You’re right…all you really need is a computer with internet access. There is so much information accessible today on Zillow, Redfin, Trulia, etc. I also agree that even though the buyer’s agent is supposedly going to work in your interest, their main interest is to get the deal done. You mentioned saving 3% without a buyer’s agent…have you found that the seller’s agent is willing to forego that 3% or do most just pocket the full 6%. In that case, I might as well use a broker which will refund me a portion of the commission like Redfin.
We moved to Colorado to be close to family and just bought a home. We did not know any real estate agents but we did not need or want a buyers agent. We drove around to see what areas we liked and viewed homes online and did other related research online. We contacted the listing agent directly when we wanted to view a home. We did not tell anyone what we really wanted in a home or area because we did not want to give out any information that would weaken our negotiating position. For example, we really wanted a home near a particular school but no one knew that but us. When we came to make an offer on a home we provided the listing agent with our offer and the reasons for it. It was accepted by the sellers. The listing agents we dealt with were fine, with only one exception and we walked away from him.
That’s great that you were able to do everything by yourself, and I guess you had a good experience. I’d be a little hesitant to do that if I was moving to a different state or neighborhood that I’m not familiar with though. But nowadays with the internet and the resources available, it makes it much easier.
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It is an informative post for everyone. Just comment wow!
“I don’t want to oversimplify the house buying process, but what exactly needs to be explained to me. ” is an absurdly naive statement.
It’s almost as enjoyable as having someone without children say “I’d do things better than that.”
Don’t kid yourself, unless it’s to make people who have had the experience giggle to themselves for days on end.