20 grand seems like a lot of money for not that much work...

December 29, 2011 7:28 PM

Do we, as unique special snowflakes, really need to use a buyer's agent? My husband and I are at a crossroads about whether to work with one or try to do without. Inside, I give a ton of personal details and you tell me who is right and who is wrong!

This question has been asked before and I've read many of the archived posts. I am asking YET AGAIN because I'd like to include many details specific to my particular situation and location - and am asking it anonymously for the same reason.

About us: We're a married couple in our early 30s with a one-year-old kid. We've been renters in California (in the bay area) for about six years, and prior to that owned a home in the midwest. We both work full-time and have an annual household income around $250K with no debt of any kind (no car payment, student loans, etc). We are looking to spend in the $700s on a single-family home and will put down 20%. We are looking to buy in the first half of 2012 but have no specific timeline forcing us out of our current rental.

We have spoken to a couple of mortgage brokers and feel comfortable that we'll be able to qualify for a mortgage. We're getting ready to ramp our search up as soon as inventory starts coming available next year, but my husband and I are at a crossroads when it comes to using a buyer's agent. He would prefer not to use one, and instead have a lawyer help us review the offer paperwork. He proposes to negotiate with the listing agent to reduce his/her commission and handle the transaction for both sides after an accepted offer - with the savings somehow being ours as the buyers.

Here's why this might not be a bad idea:
- In our previous life in the midwest we bought and sold a house that was entirely FSBO for both sides of each transaction. We used a local attorney to help review the docs and it all went very smoothly.
- We are targeting a very specific area for our househunt and previously lived there for three years. We do not need someone to help us identify good neighborhoods or chose between several options for cities.
- We are extremely realistic about our budget and what it will buy us in our targeted areas.
- My husband grew up with a general contractor as a father and a house that always had remodeling going on. When we owned our home we did a major addition where my husband took on most of the design and labor. He's very house-savvy, and while we'll get an inspection he feels very comfortable about doing a critical first-pass when we tour homes.
- We are expecting to buy a house that needs update or an addition/remodel; we don't have a problem seeing past cosmetic stuff to the bones or potential of the space.
- For at least the first stages of our search we are not considering foreclosures or short sales.

Here's why this might not be a good idea (this is where I need your help!):
- Will listing agents shy away from working with us in this type of situation - that is to say, will they prefer to work with another agent and not directly with us? I'm not sure if trying to negotiate on the commission point will be feasible.
- Will agents have some kind of lead/advance notice for new properties coming on the market that might benefit us?
- We work full-time and have a young kid, so time is an issue for us. I don't necessarily feel excited about signing up for something that will be a giant time sink to see through, but at the same time saving ~15-20K (potentially) is a big motivating factor.
- Is there something I'm missing in terms of value an agent provides to the logistical process of buying a house that we'll get burned on? Again, we would use a lawyer to review all documents and attend closing if necessary. When we did this before it seemed like it was based on a lot of standard forms - is something different in California/the bay area?
- We have yet to meet an agent that we feel very positive about or have a good connection with. Most of our experience so far is at open houses, where we've found a lot of people who are much more interested in selling their services than the house they are representing. We read listing after listing peppered with cliches and exclamation points. It leaves a bad taste and to be honest I have a hard time seeing the value to us in paying a 3% commission, especially given all the points I list above in my first section.

I'll be watching this thread and can post anonymously via the mods if more details are needed. Thanks, AskMe!

posted by anonymous to Home & Garden (24 answers total)

Count me on the side that says you should have a buyer's agent. The sellers will likely have a seller's agent, and you don't want to get taken on the deal because you didn't know some little wrinkle of real estate law. The fact that you have a kid only makes it more important; agents deal with literally reams of paperwork, most of it in small type. Most likely you won't have the resources or time to handle it all.
posted by Gilbert at 8:02 PM on December 29, 2011 [1 favorite]

Maybe I'm being naive here, but it seems like it's a lot easier to get into houses with an agent. He or she can set up appointments and get easy access so you can look at the house with the owners (or their agent) around. Will people just let you into houses without this? Or are you going to limit yourself to FSBO homes?

I've bought a house two different times now, and both times, I drove around with an agent and was able to make last minute decisions about what houses to look at because it was easy for the agent to call to get the lockbox combo to let us in.
posted by bluedaisy at 8:03 PM on December 29, 2011

Oh, and one more thought: it was pretty different buying a house in Oregon and North Carolina (in NC you close at a lawyer's office with the sellers there, but in Oregon you close at the title agent's and the seller isn't present, for one). Make sure you at least know how it might be different in California than it was in your old state.
posted by bluedaisy at 8:06 PM on December 29, 2011

Okay, another one more thing: when we were having a hard time reaching a compromise with the seller over money for repairs, our agent ended up splitting the cost of a new roof with the seller. It wasn't his whole commission, but he made the deal happen when it might have fallen apart otherwise.
posted by bluedaisy at 8:08 PM on December 29, 2011

I used redfin as my buyer's agent and it was awesome. We used their website to find for-sale homes and went to open houses and set up appointments and all that by ourselves, because we didn't feel like we needed help for that part, and when we found the place we wanted we then got in touch with an agent, he did comps and helped us make the offer, and then just dealt with all the paperwork from there. And there was A LOT of paperwork, and little things that I just wouldn't have known how to do or when to do it, and it wouldn't have gone well. And when things went wrong (our mortgage agent made an error, the seller tried to do something a little shady), he dealt with it so we didn't have to, and we got into the house exactly when we wanted to. It was all online or on the phone (we actually never met him in person, which was perfect for our lives, I could just deal with stuff during my lunch hour and whatnot). And you get half their commission back as a check with no fuss. And I had someone who could answer my questions, without having to pay by the hour or whatever you would have to do with a lawyer.
posted by brainmouse at 8:09 PM on December 29, 2011 [5 favorites]

The key to this decision is your ability to capture part of the savings from not having a buyer's agent get part of the commission. If you can save 10-15k, sure, doing all the legwork yourself is worth it. If not, it will be a time suck for nothing.
posted by JohnnyGunn at 8:11 PM on December 29, 2011 [2 favorites]

If you feel confident about the deal I think you can get away without a buyers agent. If I understand correctly..when you go directly to a sellers agent to make the offer then that makes the agent a dual agent. Which means he/she has to inform you that he is actually representing the Seller. Without the Buyers agent tagging along for the ride the Sellers agent is not going to have to split the commission.

The essence of what I am saying is that if the Sellers agent is good, they will be every bit of an agent to you in terms of getting the paperwork right, faxing crap for you to sign, etc. Why wouldn't they? They obviously want the deal to go through. So from that purely pragmatic perspective I think its fine. Assuming the agent is good and does their job efficiently.

So I think that if after checking out the market that you have a specific house in mind...and feel comfortable with the process...you would be alright going directly to the Sellers agent.
posted by ian1977 at 8:24 PM on December 29, 2011

Ugh. Having bought a house in the bay area in the last year, Ucan unequivocally say that having an agent was a huge help. Our agent already was dialed in to the vendors locally (inspectors, mortgage brokers etc) and could activate whomever was needed quickly. I think a listing agent would really prefer to work with another agent and it will save you scads of time and energy. CA really does have a very different process from a lot of other states. My mom has done two purchases in the bay area after numerous previous sales and purchases in Illinois and she's always complaining about how weird and complicated it is in CA. I know a good realtor in SF if you need one.
posted by otherwordlyglow at 8:26 PM on December 29, 2011 [1 favorite]

I was a San Francisco realtor. You can buy without an agent but it's good to have someone at the table representing your interests. California real estate transactions require a huge amount of documentation and disclosures, yes it's mostly forms but they all have to be completed. Realtors are generally privy to more information and know what's customary for a given locale.

Will listing agents shy away from working with us in this type of situation - perhaps because it means in essence they're doing the work of both sides of the deal, even if you have a lawyer

Will agents have some kind of lead/advance notice for new properties - depends on the company and agent - sometimes agents will share with their offices that a property is coming on the market and that it's being prepped for sale but this is entirely at the discretion of a particular agent

Is there something I'm missing in terms of value an agent provides to the logistical process - there are a lot of disclosures, local customs and greater access to information, experience dealing with issues/negotiations and knowledge of local experts.

Real estate transactions in the Bay Area do not involve attorneys, not like in some states where they are required.

Listings are peppered with cliches and exclamations because agents are trying to sell houses in a tough market. Tiny becomes cozy, a tear down becomes great potential, loud and busy area becomes vibrant neighborhood - that's just business 101.

Every agent has his or her own ethics. You're asking the agent to act as a dual agent but to give you the buying agent's commission, or a portion thereof, in exchange for representing you. Will this person have your best interest at heart if a difficult issue arises between you and the seller? Things can go swimmingly, until they don't.
posted by shoesietart at 8:39 PM on December 29, 2011 [1 favorite]

Seconding Redfin, we bought with their help and are very happy with their service. Though I have a friend who bought directly from a builder with the help of a real estate knowledgeable lawyer.
posted by straw at 8:41 PM on December 29, 2011

[...] actually representing the Seller. [...] if the Sellers agent is good, they will be every bit of an agent to you in terms of getting the paperwork right, faxing crap for you to sign, etc. Why wouldn't they? They obviously want the deal to go through.

The seller's agent unequivocally represents the seller and only the seller. They are absolutely not negotiating in the buyer's best interests. They want the deal to go through, yes: for the benefit of their client, the seller, who is not you.
posted by jesourie at 8:43 PM on December 29, 2011

I watched my mother almost buy some houses, wiggle her way out of contracts a few times when needed, and eventually buy a different house. She's taken to saying that there is really no such thing as a buyer's agent, even though you can engage the services of a real estate agent that will be called one. At the end of the day, the main goal of the "buyer's agent"' is to get a sale to go through so that they get their commission, not to do the thing that is best for the buyer.
posted by needs more cowbell at 8:56 PM on December 29, 2011

Will listing agents shy away from working with us in this type of situation - that is to say, will they prefer to work with another agent and not directly with us?

I had this problem--listing agents wouldn't even return my calls or emails without a buyer's agent. Heck, sometimes they still didn't even return my buyer's agent's calls once I got one. I find this bizarre--you would think in this market they would jump at any chance to show the house, I mean, do they want it sold or not?--but it was my experience.
posted by Violet Hour at 9:54 PM on December 29, 2011

Look at it this way:

$20K is equal to 1-month's salary for you guys. You're making $250K a year.

Considering in terms of time: would you rather spend 20 grand and save months of work, or pay the amount and sign yourself up for months of work?
posted by Kruger5 at 5:42 AM on December 30, 2011

Agree with all the above posters who favor a buyer's agent.

I've bought two houses in CA and two in the East Coast, and can certainly say that the commission structure is changing, albeit slowly. For our last two transactions we were in a similar situation, with a crystal clear goal of a specific location, and a realistic budget.

We located a local realtor who was willing to go down to 1% commission, and a 2.5% seller commission. (In our area a total sell/buy commission structure of 5% total is not uncommon, although some less-savvy buyers in my area will still pay 6%.)

For us we located the property, but the agent proved his worth as we had to negotiate a tricky simultaneous sell-buy situation. (We also saved 1.5% by using him as the selling agent.) It was money well spent - for such a large set of transactions (selling a $xxx house and buying another one for $300k more) the complexity of it put RedFin or HelpUSell or Save6 all out of the question. No regrets.

I'd recommend you do what we did - find two brokers to work with as your buying agent, negotiate like crazy to get their best and final offer on reducing their buyer commisssion, and go from there. Since we had a house to sell and to buy, we had very good leverage, and the adage 'everything is negotiable' saved us 10's of thousands of $$$. You can make a reasonable case that the effort to buy a $700k property isn't that terribly different for the buyer's agent than a $100k one, and that spending $7k for their service vs. $16k is money wisely spent.

Best of luck - I love the Bay Area and visit it often.
posted by scooterdog at 5:57 AM on December 30, 2011 [1 favorite]

One other thing - you can have the seller agent also serve as a buyers agent, but you give up a lot, namely impartial representation.

We did this once - and lived to regret it. Paid full commission on that transaction, too.
posted by scooterdog at 6:04 AM on December 30, 2011

Realtors (R) are supposed to have professional ethics about situations where is no buyers agent, and not pull any fast ones on unrepresented buyers. Whether this happens is another story.

The usual setup is that a buyers' agent splits the commission that the seller's agent negotiated with the seller. So it shouldn't cost you anymore to get one, unless they demand a deal where you are on the hook for the full 3% no matter what the seller's agent agreed to. (IE, the seller's agent gave his client a deal for 4% instead of the usual 6%, you'd have to pay your agent the other 1%.)

If you have a house to sell too, I'd say definitely, use your agent as a buyers agent too. But without that, I don't really see much downside to not using one, since you are pretty savvy with the house process. Just treat the seller's agent like you'd treat your own- tell them what you want out of the process, what you will pay and what you won't pay. Things like making your deposit refundable until the house passes inspection or move in dates and such.

The upside to using one is that they have an inside track on the properties that are on the market before they are openly on the market (sign in the yard, listed on the MLS, searchable on the internet). Because you have specific requirements for location, this might be a benefit to you. There are a number of homes that sell without ever being listed publicly, and employing someone with access to that data could be beneficial.
posted by gjc at 7:08 AM on December 30, 2011

Putting aside the fact that you may not be able to negotiate on the seller agent's commission (since generally that is an agreement between the seller and the agent), a few things pop out at me:

Do you have access to an MLS without an agent? I didn't, and it was impossible to rely on non-MLS sites to locate houses - the MLS has the most up-to-date info on any house including listing price and contract status. Sites like Trulia or Zillow seem to be updated maybe once a month and we wasted a lot of time looking at houses that were already under contract.

IME, the best way to find a good buyer's agent is references from a friend.

If you decide to start looking at forclosures/short sales, at that point it is almost imperative to get a knoledgeable buyer's agent. These are VERY HARD to navigate and require a lot of legwork. If i had tried to buy my semi-short sale without the help of a buyer's agent, it would probably have fallen through (she was calling 3-4 people every day about this contract - something that I simply did not have time for). She was also very knowledgeable about the process and, when snafus came up, could talk to other realtors and figure out the best way to solve them to my benefit. People say, "Oh, buyer's agents want to get the deal done," like that's obviously a bad thing, but buyers are half the deal, too. My agent always had my best interest in their mind.
posted by muddgirl at 7:27 AM on December 30, 2011

It won't cost you any more to have a buyers agent and if he or she is any good it will get you a better deal. Not to mention there are lots of things involved in a negotiation-your husband is more savvy than most BUT you still need someone on your side and your side only for the negotiation and that is what a buyers agent is for.

You can buy without an agent but it's good to have someone at the table representing your interests. California real estate transactions require a huge amount of documentation and disclosures, yes it's mostly forms but they all have to be completed. Realtors are generally privy to more information and know what's customary for a given locale.

This.
posted by St. Alia of the Bunnies at 8:32 AM on December 30, 2011

PS if your husband is wanting to talk the other agent down in commission bear in mind good agents won't usually do that. Desperate agents willing to cut corners might.
posted by St. Alia of the Bunnies at 8:33 AM on December 30, 2011

The only reason I could see for getting a buyer's agent is if you're searching a very large area. It can be convenient to have somebody watching the listing service and making arrangements to view the homes. If you have a well defined neighbourhood to watch, then I don't see the point.

A buyer's agent is mostly concerned about the deal going through and getting their commission. I wasn't entirely happy with the quality of the home inspection our agent arranged. He soft pedaled many maintenance issues that might have blocked the sale.

I can't prove it, but I think we lost out on one of our early offers because the selling agent didn't want to split the commission with our agent.

Thais was all about 15 years ago, when buyer's agents were a new thing in our area, so rules may have changed I the meantime. I feel that a seller's agent's most vital interest is in seeing the sale go through.
posted by bonobothegreat at 8:41 AM on December 30, 2011

Does realestate in CA work differently than anywhere else ?

I didn't see anyone saying otherwise, but you, the buyer, don't pay the buyers agent.

The buyer's agent commission comes out of the sale price of the house, which is what the seller pays.
posted by k5.user at 8:46 AM on December 30, 2011

k5.user - in general, the seller's agent negotiates a fee with the seller (say, 6%) and the buyer's agent is payed out of that fee. What the OP wants to do is negotiate with the seller's agent that, instead of taking a 6% fee and then giving half to the buyer's agent, the seller's agent would just take, say, a 4% fee to be a dual agent (which is illegal in some states but not California) and then sell the house for 2% less.

I don't know how well this would work - it doesn't seem like it's in the seller's best interest, for example - shouldn't he get some of that 2%?
posted by muddgirl at 9:05 AM on December 30, 2011

You sound well prepared. I'd start looking at houses, and get a feel for how seller's agents respond.

Hire a home inspector in addition to using a checklist on your own.
posted by theora55 at 12:02 PM on December 30, 2011