Why Buyers Should Always Hire A Buyer’s Agent
You may have heard the latest legal news that the National Association Of Realtors (NAR) lost a class action lawsuit in Missouri. This is going to be a good thing for the real estate industry going forward because it will encourage home buyers to “hire” a professional real estate agent to represent the buyer’s best interests the same way a listing agent is hired to represent the seller.
First things first. I am a Licensed Professional REALTOR in Florida. I own and manage multiple brokerages. I was encouraged to write a post that buyers would find informative or helpful. I have always been surprised that so many home buyers and especially home sellers are so confused about how real estate is actually sold in America.
We will be focusing on the home buyer misconceptions here but the home seller is often filled with even larger misunderstandings. For so long, big box brokerages lead sellers to believe that if they list with a big brokerage with a large number of agents that their company would be most likely to bring a buyer. The big brokerage firm teaches agents to compete for listings by telling sellers that there’s a great likelihood that one of the listing broker’s agents will somehow have more incentive to sell the homes listed by the big broker. That’s simply not true. There is no larger incentive for a Buyer’s Agent in a big brokerage to try to steer buyers towards the big brokerage’s listings. Steering is very illegal. So there’s that. Every Buyer’s Agent working for a buyer discovers in detail what their buyer-client is looking for and helps them locate and view the best properties that match their client’s needs.
It is a fact that over 90% of real estate buyers begin their home search online using the Internet. Therefore, the listing brokerage that does the best job marketing homes where the most prospective buyers will see the homes for sale is likely to create the most buyer traffic. Buyers are most often seeing homes with a buyer’s agent. That licensed buyer’s agent could be working for any brokerage and has the same opportunity to find prospective home buyers as any brokerage. Big or small. It is very unlikely that the Seller’s Listing Agent also represents the buyer that will purchase their listing.
Seller’s Agents work for the Seller. In the wake of the NAR lawsuit, this information is written for Home Buyers to help them understand why now more than ever it is important to work with a Buyer-Broker that can represent the home buyer’s best interests.
Before you start thinking I am saying this for my benefit, I must tell you that I am no longer in direct competition with other agents. Now, I train agents in our companies to focus on working for home sellers because that is what I did the best during my productive career. Our agents focus on listing, marketing and attracting buyers and their Buyer’s Agents to come see our listings for sale.
I also have experience representing buyers very well as a buyer’s agent. But it just made more sense for me to concentrate on what I did the best which is represent sellers and work to obtain the best possible price and terms in the shortest amount of time for my clients.
So how do you go about choosing a Buyer’s Agent?
THE FIRST RUMOR TO DISPEL
There is a nasty rumor that buyers should go to the Seller’s Listing Agent or to the Builder’s Rep if they want to get a better deal. This is ABSOLUTELY NOT true! I don’t know why this myth still exists or how it got started.
Just hear me out on WHY it is NOT a good idea for buyers to go to the Sellers Listing Agent or a to a New Home Builder’s Rep thinking they will get a better deal:
- The Seller’s Listing Agent or New Home Builder’s Rep works for the seller or the builder/developer to help the seller the highest price possible.
- The Buyer’s Agent works for the buyer to help the buyer achieve the lowest price and terms possible.
Do you see the difference?
If you are buying a home, you need a Buyer’s Agent to represent you!
Sure, the listing agent may be friendly, helpful, etc etc…
But make no mistake. The listing agent has a pre-existing relationship with the seller and has legal and fiduciary obligations to the seller when working as a single agent to the seller. On the rare occasion the listing agent may also find a buyer and can transition to become a transaction broker. But this is a rare situation. Therefore, I STRONGLY recommend ALL home buyers hire an experienced Buyer’s Agent.
Remember, I said I did NOT normally represent or work with buyers. During most of my career I preferred to represent sellers as a Listing Agent and I am telling you:
Many Buyer’s Agents close more real estate transactions in one year than most people will in a lifetime. There is something to be said for the experience and knowledge that a Buyer’s Agent brings to the table.
My suggestion is to ask friends, family and coworkers for their suggestions. Interview several buyers agents and do not go with the first one. Do NOT select a Buyer’s Agent because they are your friend, family member or you went to school with them. Rather, find a Buyer’s Agent that you feel comfortable with and has the experience and knowledge you need. A good Buyer’s Agent does much more than open doors or find you homes to look at.
Here is a comprehensive description of what a Buyer’s Agent does for their clients. It is the stuff that comes AFTER you find the home of your dreams that makes the REAL value of a Buyer’s Agent crystal clear.
For example…MAKING AN OFFER TO BUY A HOME
If you have found a home that fits your budget, in the right location and has what you need, then do not hesitate to make an offer. Because if you like this home, odds are there is another buyer right now looking for the same thing.
When you are working with a Buyer’s Agent, you can feel confident in making an offer. Remember the Buyer’s Agent is representing you and working to get you the best home at the best price and terms for you! But how much should you offer?
A Buyer’s Agent Will Help You Understand:
- How long has the home been on the market
- What’s the current market like?
- Are home prices going up or down?
- Are there any other offers on the property?
- If there are other offers, how can you make your offer more attractive
- What does the comparable market analysis say?
“Comps” is short for comparable sales. Comparable sales are recently sold homes that are very similar to the home you are considering. You may also want to look again at the active listings to compare their prices to the home you are considering.
Offering Too Little
If you make an offer that is too low, you run the risk of making the seller mad. This will only make negotiating much harder. Some sellers will not even counter an offer if it is too low and that’s a difficult hole to dig out of from a buyer’s perspective. With this in mind, your Buyer’s Agent will help you decide on a price that is realistic. Your offer should be based on what recently sold comparable homes have sold for.
Offering Too Much
Without a Buyer’s Agent, it is also possible that you will offer too much for a property. An experienced Buyer’s Agent will know the local real estate market like the back of their hand. They can prevent you from paying too much!
Offering Almost Fair Market Value
Maybe your initial offer is close but not exactly what the seller was wanting. If the seller counters your offer, you and your Buyer’s Agent will need to negotiate the counter offer. Once again, the value of a Buyer’s Agent will become crystal clear.
Price is only part of your offer. You cannot forget the terms of the offer. You cannot overlook the contingencies. Exactly how this works varies from state to state and from one transaction to the next. Again, an experienced Buyer’s Agent is worth their weight in gold when it comes time to make an offer. Your Buyer’s Agent will know how to write up the offer to include contingencies for inspections, the appraisal and financing and anything else that will protect you and help to ensure you are getting a good price and a fair deal. In fact one of the biggest hurdles in a real estate transaction is the home home inspection. An outstanding Buyer’s Agent will help you. Sometimes home inspection discussions can become contentious especially when the buyer and seller don’t see eye to eye on what should be fixed and what is a petty request. A good Buyer’s Agent in your corner will help you sift through what requests are reasonable or not.
THE COMMISSION IS NOT REDUCED…
Some buyers think that if they give up their right to have an experienced and knowledgeable Buyer’s Agent in their corner, that the commission will be reduced. Actually, this is NOT true in most cases. I do not know where or why this idea came about. The listing company has a contract with the Seller to
represent them and then may agree to split that commission with another broker if they bring the buyer. Or, the seller may choose to offer a buyer incentive and let the buyer use the money for closing costs (that can include paying their buyer agent). Normally there is no mention of the commission being reduced if a Buyer wants to buy a home without professional representation. We always want the buyer to have professional representation.
INFORMATION VERSUS KNOWLEDGE AND EXPERIENCE
The changes that technology and the internet have brought to real estate have been substantial. Many thought that the same thing that happened to travel agents would happen to real estate agents. There have been many attempts to accomplish this but technology cannot match the consumer’s need for the knowledge and experience of a licensed real estate professional. Many buyers think that since they can find listings online without an agent, they do not need a buyer’s agent. Adding to this problem are the websites that produce home values which cause buyers to believe they do not need a buyers agent.
Many real estate websites have a problem with accuracy. Many listings that show up on these websites show listings that are no longer for sale. Unfortunately, some of these websites show random price valuations that are 5% to 15% higher or lower than the true fair market value that a real estate professional can show you based on comp sales.
These websites are NOT licensed with real estate professionals. This means they are not accountable and can pretty much do whatever they want. Which means buyers find homes on these websites that are NOT for sale or sold many months ago.
There is no doubt that buyers can find a plethora of real estate information online. And buyers can browse thousands of listings from the comfort of their couch. The problem is some of the information you find online is not true. Especially home values. If a website has home values that are off by 5%, that doesn’t sound too bad until you do the math. A 5% error on the price of a $300,000 home is a $15,000 difference. Not sure about you, but I wouldn’t mind an extra $15,000 in my pocket…A BIGGER problem for buyers is all the information in the world means nothing if you do not have the knowledge and experience to use this information correctly. You have to know what information is true, what is helpful or accurate and what to toss out. An experienced buyers agent will know the local real estate market like the back of their hands. One of a top agents greatest assets is being able to determine the market value of a home for you.
An experienced Buyer’s Agent will have seen almost every situation imaginable. A Buyer’s Agent knows how to write contracts to protect the buyer. A Buyer’s Agent is an expert in negotiations. Can you honestly say this about yourself?
So while buyers can find plenty of information online, it is NOT a substitute for the knowledge and experience of what a great agent can do for you!
THE BUYER’S AGENT SUMMARY:
When you are buying a home, you are dealing with what is probably the largest financial decision of your life.
- You need someone on your side that knows what they are doing.
- That person is called a Buyer’s Agent.
- Not having a Buyer’s Agent does not get a home buyer a better deal.
- Not having a Buyer’s Agent does not mean the commission is reduced.
- Do not select a Buyer’s Agent because they are your friend, family member or someone you went to school with.
Find a Buyer’s Agent that you are comfortable with and has in depth knowledge in the area you are interested in buying a home. A good real estate agent will point out mistakes you could be making. After all the best Buyer’s Agents are thinking about their fiduciary responsibility to you and not when they will be cashing their commission check!
There is a difference between information and having knowledge and experience when it comes to real estate. If a Seller’s Listing Agent is telling you to get a Buyer’s Agent to help you to buy a home, isn’t this something you should consider?
Hopefully, you have figured out that it really makes sense to have a Buyers Agent when purchasing real estate! See our online Buyer’s Guide for more information.
Happy house hunting!
Forward: We owe a debt of gratitude to Darryl Davis and Darryl Davis Seminars, Inc., a good friend and trusted name in real estate sales training. Some of the graphics provided in this publication are the intellectual property of Darryl Davis Seminars, Inc. These materials have been generously shared with us for educational and informational purposes only. We are honored to acknowledge the invaluable contribution of Darryl Davis Seminars, Inc. in shaping this content. It is important to note that these materials are intended solely for your benefit, to equip you with the knowledge and strategies necessary to prepare your home for sale effectively. Any commercial use, reproduction, distribution, or modification of these materials without the express written consent is strictly prohibited.
