Ready to house hunt? It’s a jungle out there: Prepare for a flurry of paperwork, stampedes of buyers competing for the same digs, and other challenges before you get your hands on those house keys.
We won’t lie: The process can be complex and stressful—especially if you are a first-time buyer. Having a real estate pro by your side can make all the difference.
You might have heard of buyer’s agents, selling agents, listing agents, and so on. You’re a buyer, so what is a buyer’s agent?
True to their name, buyer’s agents are ethically obligated to work in a buyer’s best interest. They help real estate buyers navigate the real estate market and can also save you tons of time on the road to your new home.
Recently, the National Association of REALTORS® reached a settlement that goes into effect on Aug. 17. The settlement includes several changes between the agent and buyer relationship that benefit homebuyers.
Read on to learn how a real estate buyer’s agent can help you in your home search, and how to find the right one for you.
Benefits of using a buyer’s agent when buying real estate
“A buyer’s agent will guide you through the homebuying transaction and be at your disposal for any questions or concerns,” says Shane Wilcox, a real estate professional with Partners Trust. Here are some of the things a buyer’s agent can do:
- Find the right property. After determining what the clients are looking for and what they can afford, the agent will schedule appointments to tour homes that fit the bill. The agent can also explain the pros and cons of various properties and neighborhoods to help buyers decide which home is right for them.
- Negotiate the offer. The buyer’s agent will advise clients on an appropriate price to offer and present it to the seller’s agent. “Then they will negotiate on your behalf and write up the contracts for you,” says Matt Laricy, a real estate professional with Americorp Real Estate in Chicago. The agent’s experience in negotiating deals can save you money and help you avoid pitfalls like a fixer-upper that’s more trouble than it’s worth.
- Recommend other professionals. A buyer’s agent should also be able to refer you to reliable mortgage brokers, real estate attorneys, home inspectors, movers, and other real estate professionals. This can also help expedite each step of the process and move you to a successful real estate sale all the faster.
- Help overcome setbacks. If the home inspector’s report or appraisal uncovers new issues, a buyer’s agent can advise you on how to proceed with the transaction and act as a buffer between you and the sellers or their broker. If negotiations become heated or hostile, it’s extremely helpful to have an experienced professional keep calm and offer productive solutions.
Buyer’s agent vs. listing agent: What’s the difference?
Buyer’s agents are legally bound to help buyers, whereas listing agents—the real estate agent representing the home listing—have a fiduciary duty to the home seller.
“That’s why it’s in your best interest as a buyer to get an agent who is there to represent you,” explains Alex Cortez, a real estate professional with Wailea Village Properties in Kihei, HI. “Think about it this way: If you were getting sued, would you hire the same attorney as the person suing you? Of course not. You need someone who will diligently fight for your interests and rights.”
Let’s say, for instance, you walked up to the listing agent at an open house. You might gush about how you love the home and want to buy it. You may then unwittingly add that you will need to move soon—because you’re expecting your second child and need to decorate the nursery pronto or because the lease on your rental is up in a couple of months.
A seller’s agent could then use this information against you by informing the sellers that your clock is ticking, so they shouldn’t budge too much on their asking price—if at all.
Yet make this same confession to the buyer’s agent you’re working with. This professional would know to keep this information private from sellers (and their agents) so it can’t be used in negotiations.
Some states, recognizing this problem, required a disclosure of dual agency when a broker represents both sides of a real estate transaction. In some states, dual agency is illegal.
However, you may still not be comfortable after signing an agreement saying you know someone is a dual agent. You might want to hire an agent who is not representing the owner, and who is looking out for your best interests.
How to find a buyer’s agent
A good buyer’s agent can ease the path to homeownership, while a bad one can result in a bumpy ride.
You should not just take the first buyer’s agent you meet (as two-thirds of homebuyers do), or blindly accept the recommendation of a friend (more than half do this). Instead, it’s best to interview at least three agents and ask them a few questions, including the following:
- What neighborhoods do you specialize in? Real estate requires local expertise, so you should find an agent who’s extremely familiar with the areas you’re interested in.
- What’s your schedule and availability? Committed part-time real estate agents can do a fine job, but if the house of your dreams pops up or you encounter last-minute closing snafus, you want an agent who is readily reachable.
- How long have you been a real estate agent? You ideally want someone with a couple of years of experience and a proven track record of selling homes.
The agent/buyer contract
Once you agree to work with someone, you will have to sign a contract before touring a home in person or virtually, outlining the agent’s services and compensation (more on that next). However, you do not need a written agreement if you are simply interviewing an agent or talking at an open house.
This contract also means that this person will be your sole representative and that you won’t work with other buyer’s agents.
In general, the contract should outline the negotiated terms, detailing the services provided and their cost.
According to the settlement for the NAR, the contract should also include these four things before you sign it.
- A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined.
- Compensation that is objective (e.g., $0, X flat fee, X percent, X hourly rate)—and not open-ended (e.g., cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”).
- A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer.
- A conspicuous statement that broker fees and commissions are fully negotiable and not set by law.
Who covers the buyer’s agent commission?
In the past, sellers generally covered both buyer and seller’s agent fees. As of Aug. 17, buyers will be responsible for paying their agents a fee. Remember, your agent’s compensation is fully negotiable.
While the seller may agree to compensate your agent, this offer cannot be shared on a multiple listing service (MLS)—local marketplaces used by both buyer brokers and listing brokers to share property information.
As a buyer, you can still accept concessions from the seller, such as offers to cover your closing costs. When choosing a real estate agent, ask about their services and compensation to ensure you fully understand the process.
This post was originally published on www.realtor.com
