Having a buyer's agent - necessity or not?
May 29, 2011 3:41 PM   Subscribe

Do I really need a buyer's agent? How do I work with one if I found the house myself?

I found a house I liked via Zillow and an open house. I'm thinking of making an offer, but I've read a lot of things that recommend having a buyer's agent put in the offer for you, as well as handle a lot of other parts of the process. A friend who works in real estate told me that since I signed in at the open house, the seller's agent may not want to split the commission with someone else. So, should I go it alone, or is there some way to get representation? Is it worth it for me to pay out of my pocket for this?
This is all in New Jersey, if it makes a difference.
posted by bashos_frog to Work & Money (14 answers total) 1 user marked this as a favorite
Unless when you "signed in" you signed that you would NOT get a buyers agent , don't worry about it. Having a buyer's agent will save you a lot of time and trouble... it's a good idea unless you are either a real estate agent or lawyer and can do it yourself.

Don't pay out of pocket for this....
posted by tomswift at 3:51 PM on May 29, 2011 [1 favorite]

In my somewhat-limited experience, many buyer's agents will be happy to negotiate a lower commission for people who've already found a house but want help during the offer/closing process. As both buyers and seller's agents are paid out of the seller's profits, a lower buyer's agent commission can translate into a lower total home price.
posted by muddgirl at 3:58 PM on May 29, 2011

A buyer's agent is always a good idea because it gives you a professional at the table representing your interests and who can explain the home buying process. Buying a house can be extremely stressful. Since you've already found the house and assuming it's not a complex sell (foreclosure, short sell, 1031 exchange, etc.), the agent may give back some of the commission to help with your closing costs. It's worth asking. There is no cost to you when working with a buyer's agent. The commission is paid by the seller and split between the two agents.

Agents ask people to sign in to keep track of the number of visitors and to find new clients. Agents expect to split the commission.
posted by shoesietart at 5:35 PM on May 29, 2011 [1 favorite]

Strinctly speaking, no, you don't need a buyer agent. Years ago, there was no buyer agents; and real-estate agents only work for the seller to market the house (he is the one who will end up with the money after all). Since, it has evolved to include a buyer agent, who works for you, and get a split of the commission from the sale (from the corresponding reduction in the share of the seller agent). The reason for this evolution is that without an buyer agent, a green buyer doesn't know the process enough and may make mistakes that are costly and/or hard to fix; resulting in a less satisfactory transaction overall. A real estate transaction is quite complex, let me name a few:
1. Legal: how you hold the title, how it is transfer, what included and what is not included in the title. Disclosure about the property and its surrounding.
2. Financial: how you get financing from the bank, term and condition, assessment of the property for mortgage and insurance purpose.
3. Tax: property tax, document tax, Mello Roos, HOA..
4. Fees: fee related to financing process, legal process, and transaction process.

Of course, all of this is not hard; most transactions will not have any problem. You can complete the course work for a real-estate agent license in about 6-9 months at your local community college (real-estate broker take twice the number of credits). Yet, despite this, I'd still recommend you to at least engage a buyer agent just to look over the property, the paperwork, the appraisal and all the financing just to make sure things are on the up and up. Typical agents get 3% of the transaction price, paid by the seller (from YOUR money), if you think this is too much for too little work, you can negotiate with your agent (say for: $200/hr rate times how much time you think his service will require). Agents dislike discounting their service, but since you have done quite a lot of leg work by researching and picking a property, he/she may agree to your proposal. Frankly, here in California, where property prices above $500k to $1M, I think paying 3% ($15k) for a few week work is too much. And yes, I know that the agent has to split that $15k with his broker, but it's still overly generous, considering agents work for multiple clients concurrently.
posted by curiousZ at 6:09 PM on May 29, 2011

I've never used a buyer's agent, but from curiousZ's post, there seem to be other people who can do all those roles without costing you so much.
1. Legal. Get a lawyer or a conveyancer. It cost me about $800, but I'd much rather trust a lawyer with legal stuff than a non-lawyer.
2. Financial. Get a mortgage broker. Find one who works with a large number of banks. In Australia, at least, they are paid a commission by the bank you end up choosing, and it is illegal for the bank to pass that commission cost on to you even indirectly. I.e. even if you don't have a mortgage broker, you are paying the same amount in bank fees - it just goes into the bank's pocket instead of the broker's.
3 & 4. Tax and fees. Your lawyer and mortgage broker will advise you on these. And for generic tax breaks, you will need the advice when it comes time to do your tax return, not during purchase anyway. So having a buyer's agent is not going to help you there.

Personally I would have thought the #1 reason to have a buyer's agent would be for advice about whether the property is worth what the asking price is, and on how to negotiate. But the buyer's agent would have an incentive to cheat you on these two things anyway, since the higher the purchase price ends up being, the bigger their commission.
posted by lollusc at 6:55 PM on May 29, 2011 [1 favorite]

Get a lawyer instead of an agent, they will take care of everything for about $800 and put into the contract that the listing agent will pay you 3%. Chances are that the lawyer will be more competent than the realtor anyhow.
posted by mmdei at 8:52 PM on May 29, 2011

Also, I'm sure the seller would be interested in hearing that their agent refused to take an offer... the lister may grumble, but thems the breaks.
posted by mmdei at 8:53 PM on May 29, 2011

Stop thinking. Get a buyer's agent. The seller will pay for you to have a buyer's agent. Is there anything else worth thinking about here?

posted by Protocols of the Elders of Sockpuppetry at 9:17 PM on May 29, 2011

Follow-up: Since I'm a first time buyer, and most of my friends still rent, I don't have many recommendations to go on for a buyer's agent. What is a good way to find one to represent me?
posted by bashos_frog at 4:19 AM on May 30, 2011

I have a house under contract right now, and used a buyer's agent. I think it's worth the money, especially since the buyer's agent fee is often a cut out of the seller's agent fee; I don't think that not having a buyer's agent is going to automatically translate into a lower house price. They'll also be able to advise you about suggested offers and counter-offers, how much certain repairs tend to cost, neighborhoods, etc.

One option that might be of interest, especially since it sounds like you don't need much help during the actual house-shopping part of the process, is to go with an agent from Redfin. They still get a cut from the sale price, but they refund half of that cut back to you.

We found our buyer's agent by contacting the listing agents on a few houses to get tours, and then hooking up with the one that understood our needs the best and understood the neighborhoods the best. I would start making some phone calls and just chatting with some agents on the phone to get an idea of how they operate and get an idea of how well they understand you and what you're trying to do. Then go from there.
posted by craven_morhead at 7:42 AM on May 30, 2011

My grandfather was a higher up agent in a real estate agency. His emphatic advice to my parents - NEVER use a buyers agent. It is your job to be as knowledgeable about the houses (and hopefully moreso) than an agent. Do your due diligence, and you should be able to save some decent money. Especially now with the internet, I wouldn't do it any other way.

For example, between my sister and my parents, they purchased 4 homes in their lifetime. For each one, since the seller's agent gets double commission without a buyer's agent, the seller's agent kicked in a significant part of the 2nd commission to lower the price (1%+ of the purchase price).

For my recent house purchase, I had a decent kind of luck. In Canada, there's a strong housing boom currently going on, and the seller's agent basically telegraphed the selling price of the house to me, allowing us to win in a bidding war by $1,000. The 2nd place bidder was a house flipper. We consider ourselves very lucky. THEN, when we ran into problems on closing, the agent threw $2,000 of his own money at it to make it go away, lest he lose his double commission. (He also promised to 'get us a present' if we bought the place, which was understood to be in lieu of him chipping back some of his commission to us).

If you feel comfortable navigating the terrain, go for it - but get your housing inspections, your comparable pricing, and your lawyer to paper it all. If you don't want to do the work yourself, an agent may be worth the price. But if you want to be hands on, it could work out great for you.
posted by evadery at 9:58 AM on May 30, 2011

We didn't have a buyers agent, just a lawer. No problems to report. We didn't go about it on purpose . . . we got rid of our agent because she kept showing us places she thought we should buy in neighbourhoods she thought we should live in, ignoring everything we told her we wanted in a house and neighbourhood. We just happened to find a house we wanted before we could be arsed to get another agent.
posted by fimbulvetr at 11:08 AM on May 30, 2011

I found a great buyer's agent by asking around amongst my (older-than-me) coworkers.
posted by muddgirl at 2:59 PM on May 30, 2011

Dig around for a savvy agent who will help you, esp. as you are a first-time homebuyer. (Congratulations by the way.) Be brutally upfront about their commission - if it is structured by the seller to split 50/50 say 5% (2.5% to the selling broker, 2.5% to the buying broker), talk to the prospective buyer broker not only for their expertise, but also whether they will rebate back to you at closing a percentage of their commission.

(BTW Redfin and a few others will rebate some as part of their business model, it may be worth looking into a few of their local folks as well.)

We found a person willing to rebate back to us 1.12% of the 2.5% commission, and those extra funds came in very handy with all the miscellaneous stuff you'll inevitably will need in setting up a new household. It is a buyer's market in so many dimensions, and don't let your inexperience leave money on the table.

Do some reading up on the subject of buying a house, specific to your state if there are strange rules (such as California) and in the course of your interviewing agents learn from them as well.
posted by scooterdog at 8:35 PM on May 30, 2011

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