Buyer's agent?

December 14, 2015 2:20 PM

We are looking for a house. Can we use a buyer's agent? Should we? And if so, how?

Some specific questions:

• If we've already been shown a house by a listing agent, is it inappropriate to use a buyer's agent to represent our interests during the negotiation? Would some other class of professional, like a lawyer, be better?
• Is it worthwhile to use a buyer's agent to find houses we don't know about yet?
• If there is value in a buyer's agent, how do we find one?

Possibly relevant: we are looking at very inexpensive houses in a depressed area surrounded by less-depressed areas with expensive houses, so we are probably not going to be a priority for most realtors.

posted by enn to Work & Money (17 answers total)

It depends a bit on where you are, so if you can give your location you will probably have better luck getting advice from someone who knows your market. In my area, it makes no sense NOT to have a buyer's agent, because the seller pays fees to both buyer's and seller's agents.
posted by rabbitrabbit at 2:28 PM on December 14, 2015

One other question: if the buyer's agent gets paid a percentage of the selling price, it seems like their interests are in fact aligned with the seller's, not the buyer's. Is a buyer's agent really any less likely to steer us toward more expensive properties than a regular listing agent?

On preview: this is in the Hudson Valley of New York.
posted by enn at 2:30 PM on December 14, 2015

A good buyer's agent will work with the parameters you set, including price. They are aware that their livelihood rests on good referrals and you're not going to recommend them if they pressure you into spending more than you want to. They also, if they're any good, know that people buy more than one house in a lifetime and they'll want your repeat business.
posted by rabbitrabbit at 2:33 PM on December 14, 2015

They're not necessarily going to steer you cheaper but they have no interest in your buying any particular property. So if a house is crappy in ways you don't know enough to notice, they'll point it out and take you to another house. They get a commission no matter which you buy.

Also, studies of listing agents show that they sell their own homes for more than they sell their clients' homes. What does that mean? It means that even though they get more money the more the house sells for, it's not so much more money that it's worth their while to REALLY get the highest price possible. Better for them to just sell each house at a good-but-not-fabulous price and move on to selling the next house. I imagine that works even more in your favour with a buyers agent. It's not worth a bunch of their work to get you into a slightly more expensive house.
posted by If only I had a penguin... at 2:36 PM on December 14, 2015

A good buyer's agent first off represents buyers only. They should take pride in getting their clients a great deal, that is what brings in new biz. A good buyer's agent wants to find you the right house, as opposed to A HOUSE. Our BA was awesome and helped of navigate a serious problem that came up right after we signed the P&S.
posted by vrakatar at 2:59 PM on December 14, 2015

I wouldn't do this alone. There's no down-side to your getting an agent, the buyer pays the fees. Ask around among your friends to see if they have a recommendation. That would be someone they've done business with, not a relative!
posted by Ruthless Bunny at 3:03 PM on December 14, 2015

One addition.

Real Estate commissions are typically 6% of the sale, 3% to each realtor, to then be shared with the broker they work under. So it's more important for them to do right by you and get you a fantastic house at a fantastic price, because they live on referrals, not .05% of $200,000
posted by Ruthless Bunny at 3:04 PM on December 14, 2015

I think Ruthless Bunny meant to say there is no down-side to you as a buyer getting an agent since "the seller pays the fees". This is a somewhat controversial way of looking at it; the other perspective is that since the buyer is the only one bringing cash money into the transaction, they are paying for both commissions (e.g. both the buying and selling agent's cuts). These commission costs just end up getting incorporated into the pricing. If you were to represent yourself instead of having a buyer's agent, it would be reasonable for you to negotiate the sale price down by some significant amount of the typical buyer's agent commission (say 2.5%) since the seller won't have to pay that out after they get the money (from you).
posted by kanuck at 4:34 PM on December 14, 2015

Yes, you want a buyer's agent. Preferably you wanted a buyer's agent before you looked at the house because of the way the contracts work. The person who represents you when you look at a particular house is entitled to the commission on it, but that agent isn't entitled to the commission on a house a different agent shows you. Example: I'm represented by Alice when I look at a house on Adams St. After shopping I decide I don't like Alice, so I shop around for another agent and find Bob. Bob shows me a house on Baker St. Generally Alice will still be entitled to the commission for the house on Adams St. if I decide to buy it, even though I'm working with Bob now, because she was the one who showed it to me. The exclusivity basically extends to any property that agent shows to you, but doesn't extend to properties other agents showed you.

If you go into an open house without an agent, and then you decide to buy that house, the listing agency may still be entitled your commission (depending on local rules). If so, they'll just have another agent within the agency represent you through the purchase to avoid a conflict of interest, and then their two agents will split the commission.

I wouldn't try to buy a house without an agent. As was explained above, the buyer's agent's commission is paid for by the seller, and it's actually going to be pretty unlikely that you'd be able to negotiate that commission out. Depending on the market and the cost of the house you might be able to negotiate a rebate of part of the commission with your own agent, but if I had to guess I'd say that's unlikely on an inexpensive house in a depressed area (which may even have a flat fee commission instead of a percentage).

Also: in the time I spent working with a real estate franchise operator, it became very clear that the agents who make the most money are, in fact, the ones who'll work with anybody and not the ones who cherry-pick the people only shopping for luxury estates. This was consistent across franchises. Get an agent. If they seem like they're not working for you, get a new agent. The good ones are out there, and they will work with you no matter what your budget is.
posted by fedward at 4:49 PM on December 14, 2015

Agreed. You definitely want an agent representing you and your interests in shopping for a house. As the son of a realtor and an extremely recent home-buyer, I can tell you that the real value and interest-protecting comes not so much when selecting the house, but in the negotiations and the aftermath of a successful offer.

By aftermath, I mean helping you work out the particulars of financing (especially if you're not already working with a lender), working with you and representing your interests in navigating the whole escrow and closing process. Having someone on your side during these parts of the experience is HUGELY beneficial and clearly outweighs the theoretical conflict of interest that they make more money the more you pay for a house. As others have pointed out upthread, they make no money if you don't buy a house, and the the extra $300 they stand to make if you pay an extra $10,000 for the house simply isn't worth the risk of an unhappy client who won't do business with them again.
posted by bluejayway at 5:03 PM on December 14, 2015

Husband and I bought a place this year. Several friends recommended an agent who we felt good about. He didn't show us the place that we ended up buying but he held our hands through the process. We got an agent because we were first time buyers and, after touring a place that we liked, we realized that we didn't know what to do next. Our market is competitive, especially at our price point, so we wanted someone who knew what was up. Our sale went really smoothly but I was expecting to go through multiple contracts. We actually met this agent four years earlier when I was first thinking of buying a place.

If it turns out that your interests would be better served by a real estate lawyer, odds are that your agent has one she works with. Our agent had all sorts of professionals he worked with so when we needed an inspection ASAP, it wasn't an ordeal. Our agent works with buyers who are looking to spend more than twice our budget and we didn't feel like we didn't receive adequate attention from him, though like I said, our sale went really smoothly.
posted by kat518 at 5:24 PM on December 14, 2015

If you were to represent yourself instead of having a buyer's agent, it would be reasonable for you to negotiate the sale price down by some significant amount of the typical buyer's agent commission (say 2.5%) since the seller won't have to pay that out after they get the money (from you).

This is not the case everywhere. In Toronto (I don't know if this is an Ontario system or Canada system) the seller's real estate agent charges the seller a commission (say 5%). If there's no buyer's agent, the seller's agent keeps the whole commission. If there's a buyer's agent, the seller's agent doles out some portion (generally half) of the commission to the buyer's agent. If you have the realtor's view of the MLS web site (not the general public view), you see for each listing how much the selling agent will well with the buyer's agent. The fact that this is listed, suggest that the amount varies from seller's agent to seller's agent.

Under that system, the commission is going to be 5% of the selling cost no matter what. It's just a matter of who gets the commision.
posted by If only I had a penguin... at 5:44 PM on December 14, 2015

The thing to be aware of is not that the agent is going to try to talk you into a more expensive house, as others have pointed out it’s just not worth that much to them. They do want you to buy something now, as soon as possible. This is not a big problem with a good agent, they want you to be happy, just something to to keep in mind as to their perspective. Time is money. They get paid the same if they show you one house or one hundred.
posted by bongo_x at 7:17 PM on December 14, 2015

I don't know how it works in New York but here in NC agency depends....here you have to sign a contract with an agent for them to be a buyers agent (there is a verbal contract you can do but before you write an offer it must convert to written contract.

I have shown a listing or two of mine (well, my boss's listing, but I am acting agent on it so pretty much same thing) to people who had buyers agents, and I simply did it as a convenience to the buyers-most of the time tho selling agents would rather you let the buyers agent show.

There is also something here called dual agency-in other words, if I list a house, you come and see it, like it, and let me write your offer, I am in the position where I am not really representing either of you. There's a lot of detail I am leaving out, but at least here in NC there is absolutely no downside to having a buyer agent whose job is to represent YOU.

And I say that as someone who right now exclusively works with the seller.
posted by St. Alia of the Bunnies at 9:50 PM on December 14, 2015

Oh, and by the way, it is drilled into us repeatedly in real estate school that commissions are always negotiable. In practice it seems that people pretty much have negotiated the same thing, but you can never say that because then you can get in BIG trouble for price fixing. But please remember that many times agents have to split their, ok for example three percent, with their real estate company. Splits vary, some are fifty fifty, some are worse, some are better, but nobody is out here getting money for nothing. I worked all day and part of the evening today, and I wasn't even showing houses.
posted by St. Alia of the Bunnies at 9:55 PM on December 14, 2015

We had a great experience using a buyer's agent; it's good to have someone working specifically for your interests in such a big transaction. We had spent months poring over MLS listings ourselves, but it was our agent who found the place we wound up buying.

The only thing that caught us off-guard was that our agent had a mortgage broker and closing attorney who they preferred to work with, and they (our buyer's agent) were a little bit annoyed when they found out we were already working with a different mortgage broker... it worked out in the end but we felt like we'd committed a breach of etiquette. I don't know if using the buyer's agent's preferred team is industry standard practice or if that was particular to our situation.
posted by Funeral march of an old jawbone at 6:27 AM on December 15, 2015

I'm going to buck the trend here. The one professional you NEED is a lawyer for your transaction. Ask around, do some internet research and find a good property lawyer.
Ask them if they think you need a buyer's agent. You've already found the place by yourself- so all that's left is the negotiating. Your lawyer should be able to get you a template offer to purchase (or whatever the local document is called).
As mentioned, almost everything in this transaction can be negotiated- you DON'T need an agent on your behalf- and you don't have to pay the buyer's agent portion of the purchase price if you don't have one- make it clear in your offer to purchase that there is no buyer's agent.
It's a bit more work for you, but it can save you thousands of dollars.
posted by birdsquared at 6:45 AM on December 15, 2015