Do I need a buyer's agent?
June 1, 2007 10:34 AM Subscribe
Please help me figure out if I need a buyer's agent.
I've been looking for a condo in Chicago for the last 2 years. Now it's come to the time where I need to fish or cut bait. Taxes killed me since I'm renting and I no longer like the management company at my building.
I want to move. I want to move soon. But I don't want to rush into anything.
I have been doing the search thus far on my own. I signed up for free MLS access and I search Craigslist. I'm preapproved for financing and I have a significant ($80,000+) down payment. I'm a lawyer and one of my law school classmates and friends is going to do the closing for me.
Up to this point I haven't thought I needed a buyer's agent. However, the fact that I've been looking for two years (admittedly on and off) and that I haven't fallen in love with a place is starting to concern me.
What benefits does a buyer's agent offer someone like me?
I know I don't pay a buyer's agent (though I'm sure I end up paying them in the long run), but I have heard that new construction condos will discount their prices if you DON'T use a buyer's agent. How much could this end up costing me (either directly or indirectly)?
How does it work if *I* find a property and I arrange to see it on my own, do all the work on my own? Does the agent still get paid?
I guess what I'm asking is for anecdotes and professional information on how a buyer's agent works. Anything you can offer is appreciated.
And if you know of someone who is trying to sell a 1BR+ condo with w/d in River North, Streeterville, or Gold Coast for under $375,000, that's even more appreciated. ;)
I've been looking for a condo in Chicago for the last 2 years. Now it's come to the time where I need to fish or cut bait. Taxes killed me since I'm renting and I no longer like the management company at my building.
I want to move. I want to move soon. But I don't want to rush into anything.
I have been doing the search thus far on my own. I signed up for free MLS access and I search Craigslist. I'm preapproved for financing and I have a significant ($80,000+) down payment. I'm a lawyer and one of my law school classmates and friends is going to do the closing for me.
Up to this point I haven't thought I needed a buyer's agent. However, the fact that I've been looking for two years (admittedly on and off) and that I haven't fallen in love with a place is starting to concern me.
What benefits does a buyer's agent offer someone like me?
I know I don't pay a buyer's agent (though I'm sure I end up paying them in the long run), but I have heard that new construction condos will discount their prices if you DON'T use a buyer's agent. How much could this end up costing me (either directly or indirectly)?
How does it work if *I* find a property and I arrange to see it on my own, do all the work on my own? Does the agent still get paid?
I guess what I'm asking is for anecdotes and professional information on how a buyer's agent works. Anything you can offer is appreciated.
And if you know of someone who is trying to sell a 1BR+ condo with w/d in River North, Streeterville, or Gold Coast for under $375,000, that's even more appreciated. ;)
Yes, yes, yes!
The buyer's agent legally works for you and is legally required to watch out for your best interest. A listing agent works for the seller, period. A dual agent (which would be if the listing agent sold you the house) would have to walk a legal tightrope. They do it all the time, but are happy not to have to, even tho it means the commission gets split.
YOU don't pay for the buyer's agent. They split commission with the seller's agent/listing agent.
An agent will likely know which builders/homeowners are desperate to sell, who out there is trying to rip you off and who out there is giving you a good deal. A good agent is a great negotiator. Sure, you know how to cruise the MLS but you don't have the real estate connections to know what homes are ABOUT to come on the market, etc etc.
Find someone who has been in the biz for awhile but not necessarily a "top seller" who won't have as much time for you.
posted by konolia at 11:50 AM on June 1, 2007
The buyer's agent legally works for you and is legally required to watch out for your best interest. A listing agent works for the seller, period. A dual agent (which would be if the listing agent sold you the house) would have to walk a legal tightrope. They do it all the time, but are happy not to have to, even tho it means the commission gets split.
YOU don't pay for the buyer's agent. They split commission with the seller's agent/listing agent.
An agent will likely know which builders/homeowners are desperate to sell, who out there is trying to rip you off and who out there is giving you a good deal. A good agent is a great negotiator. Sure, you know how to cruise the MLS but you don't have the real estate connections to know what homes are ABOUT to come on the market, etc etc.
Find someone who has been in the biz for awhile but not necessarily a "top seller" who won't have as much time for you.
posted by konolia at 11:50 AM on June 1, 2007
The buyer's agent can also keep negotiations moving along smoothly. Ours was invaluable in this regard, particularly in keeping a bunch of prickly personalities on the seller's end in line.
posted by desuetude at 11:55 AM on June 1, 2007
posted by desuetude at 11:55 AM on June 1, 2007
You may have seen this already, but I asked a question about buyer's agents that got some informative answers.
posted by jayder at 11:58 AM on June 1, 2007
posted by jayder at 11:58 AM on June 1, 2007
If you're barred in Illinois, you can take the real estate exam and become an agent after passing it, without doing much of anything else. I have not bothered, but I know several lawyers who have simply to get 2.5% of their purchase price back as they can then avoid paying the full 5-6%. Or something like that, you should be able to figure out the details.
Some comments, mostly solely my opinions:
As a buyer, you don't pay directly for the involvement of real estate agents, but you are of course paying a higher price because of them. In my experience, real estate agents take their professional obligations about one tenth as seriously as they take their wardrobes. It's not exactly an industry with a high intellectual barrier to entry, either.
Real estate agents generally care about getting the deal closed and getting their commissions, and not much else.
posted by jcwagner at 12:08 PM on June 1, 2007 [1 favorite]
Some comments, mostly solely my opinions:
As a buyer, you don't pay directly for the involvement of real estate agents, but you are of course paying a higher price because of them. In my experience, real estate agents take their professional obligations about one tenth as seriously as they take their wardrobes. It's not exactly an industry with a high intellectual barrier to entry, either.
Real estate agents generally care about getting the deal closed and getting their commissions, and not much else.
posted by jcwagner at 12:08 PM on June 1, 2007 [1 favorite]
I second desuetude's comment - my buyer's agent (we closed last week) was invaluable with negotiations, all the way to the settlement day. (There was a underground gas leak to a patio grille that the seller neglected to check out and was missed by the inspection, which the gas company 'red-tagged' only the night before closing!) I'm not the strongest at negotiation but I sure was glad I had a person who really stood up for what I/we wanted.
Also since you are doing so much of the work (although a good buyer's agent could find you a place that is before it is listed, also could point you to places that you may have overlooked), look for a buyer's agent that is willing to rebate you a percentage of their commission.
It works this way - say the commission is a straight 5%, 2.5% to the seller's agent, 2.5% to the buyer's agent, and 1% is rebated back to you at closing. ZipRealty and others will rebate you a fraction of 1%, that is an option, but I found a buyers agent who will even willing to go higher to 1.25%!
We ended up at 1% due to some shenanigans with the seller's agent, that actually lowered the selling price putting even more than 0.25% of the sales price into our pocket - so I believe that our new place was a steal. Leaving the settlement office with a check for several thousand dollars is a great feeling. (The rebate was a credit in the settlement.)
Remember as a lawyer-in-training: everything is negotiable, and for a $350K+ purchase you can save a lot.
And a good agent is hard to find but once you find one it makes the process so much easier. (This is the third house I've purchased, and by far the best agent of all three.)
Now that I re-read your original post I see you are buying new - which is a different scenario since you are dealing with the builder directly. Less options here, as the seller has a lot more sway regarding both the transaction and the financing (through the contract you sign). But it might be worth buying a new property purchased on-spec by a desperate seller/investor who is only trying to flip a new condo; in this case all the above applies, especially in this market.
posted by scooterdog at 2:39 AM on June 3, 2007
Also since you are doing so much of the work (although a good buyer's agent could find you a place that is before it is listed, also could point you to places that you may have overlooked), look for a buyer's agent that is willing to rebate you a percentage of their commission.
It works this way - say the commission is a straight 5%, 2.5% to the seller's agent, 2.5% to the buyer's agent, and 1% is rebated back to you at closing. ZipRealty and others will rebate you a fraction of 1%, that is an option, but I found a buyers agent who will even willing to go higher to 1.25%!
We ended up at 1% due to some shenanigans with the seller's agent, that actually lowered the selling price putting even more than 0.25% of the sales price into our pocket - so I believe that our new place was a steal. Leaving the settlement office with a check for several thousand dollars is a great feeling. (The rebate was a credit in the settlement.)
Remember as a lawyer-in-training: everything is negotiable, and for a $350K+ purchase you can save a lot.
And a good agent is hard to find but once you find one it makes the process so much easier. (This is the third house I've purchased, and by far the best agent of all three.)
Now that I re-read your original post I see you are buying new - which is a different scenario since you are dealing with the builder directly. Less options here, as the seller has a lot more sway regarding both the transaction and the financing (through the contract you sign). But it might be worth buying a new property purchased on-spec by a desperate seller/investor who is only trying to flip a new condo; in this case all the above applies, especially in this market.
posted by scooterdog at 2:39 AM on June 3, 2007
Response by poster: jcwagner, I did some research and I need sponsorship from an existing realtor in order to take the exam, plus 40 hours of classes. Too much work for this transaction, though - but thanks for the advice!
Scooterdog, to clarify, I am already a lawyer (finished that "training" part), and have been for a few years.
I am also not necessarily buying new, I was asking about that particular situation.
Thanks to all for the advice. I'm going to sleep on it and make a decision tomorrow.
posted by MeetMegan at 8:24 AM on June 3, 2007
Scooterdog, to clarify, I am already a lawyer (finished that "training" part), and have been for a few years.
I am also not necessarily buying new, I was asking about that particular situation.
Thanks to all for the advice. I'm going to sleep on it and make a decision tomorrow.
posted by MeetMegan at 8:24 AM on June 3, 2007
Megan, you don't need any classes to become a broker as an Illinois lawyer. You need only apply and pass the exam. See http://www.idfpr.com/FAQ/BRE/toggleBRERealEstateFaq.asp :
"An individual who wants to obtain an Illinois real estate license must complete the required pre-license education (subject to the few exemptions below), pass a test, and file an application with the required fee....An individual who wants to obtain an Illinois real estate license must complete the required pre-license education (subject to the few exemptions below), pass a test, and file an application with the required fee."
You're right about sponsorship, but I don't think that it is a big deal.
posted by jcwagner at 8:53 AM on June 5, 2007
"An individual who wants to obtain an Illinois real estate license must complete the required pre-license education (subject to the few exemptions below), pass a test, and file an application with the required fee....An individual who wants to obtain an Illinois real estate license must complete the required pre-license education (subject to the few exemptions below), pass a test, and file an application with the required fee."
You're right about sponsorship, but I don't think that it is a big deal.
posted by jcwagner at 8:53 AM on June 5, 2007
This thread is closed to new comments.
In your case, I don't think a buyer's agent necessarily offers a lot of benefit. You already know how to look at places. You've evidently got a clear idea of what you want and don't want. As a lawyer, I'm guessing you've got the paperwork angle covered.
What an agent can offer you (ideally--this is not true of all agents) is some savvy about the quality of the building you're looking at, whether it's worth what is being asked, whether it has serious mechanical/structural problems that might not be obvious to a novice.
Any good agent should round up a lot of places for you to consider, so they should save you some time sorting through the MLS, and depending on how you value your time, might earn their commission that way.
If you do get an agent, look for one who seems to be knowledgeable about construction and the like. You should definitely interview several, to get a sense of how you get along, of their competence, and of how hard they'll work for you. Ask friends for recommendations.
posted by adamrice at 11:00 AM on June 1, 2007