Learn the Pros and Cons of a Buyer's Agent

A buyer's agent protects the buyer's interests during the crucial negotiating and closing process.
TS-86498301_for-sale-sign_s4x3

TS-86498301_for-sale-sign_s4x3

For sale sign by house exterior

Photo by: Jupiterimages

Jupiterimages

By: Tammy Stoner

Nine out of 10 homebuyers use a real estate agent in the search process, the National Association of Realtors estimates. While some buyers may complain about their experiences with aggressive listing agents, they should not be confused with buyer's agents.

Both agents can set up house tours, but unlike the listing agent who represents the seller, a buyer's agent protects the buyer's interests during the crucial negotiating and closing process. The agent bargains with the seller on the selling price, facilitates the home inspection, negotiates contingencies and assists the buyer through the closing paperwork. Shopping without a buyer’s agent is a little like grilling tenderloin without a meat thermometer; you might not know there’s a problem until you’re sitting at the table.

Exclusive vs. Dual

An agent can be both a listing agent and a buyer's agent. But during the past 15 years, many agents have started specializing, dividing themselves more clearly into one of these two camps. This has given rise to the "exclusive buyer’s agent," who doesn’t list properties at all. This agent solely represents you and avoids potential conflicts of interest with sellers.

You can, of course, choose an agent who represents both sellers and buyers. But proceed with caution if your "dual agent" shows you a house he or she is listing for a seller. The agent will need to balance your interests with the seller's, whereas an exclusive agent would only be concerned about you. A dual agent may knock a few percentage points off the house price to get the deal done, but it might cost you loyalty and protection.

Who Pays?

So what’s the "con" of going with a "pro"? Money. You may have heard that the seller pays the buyer’s agent commission (commonly 2.25 percent to 3.5 percent), but the fact is that the commission is often wrapped into the house price. In other words, sellers factor in the cost of commissions when they price their homes. Typically, the listing agent and the buyer's agent split the commission from the transaction.

“The funds come off the seller’s side, creating the illusion that the seller pays,” says Jay Reifert of the Excel Exclusive Buyer’s Agency in Madison, Wis. “But you are the only one bringing money to the closing table.”

How to Find One

If you decide to use a buyer’s agent, ask your friends and family for recommendations. Remember, real estate agents make their living on their reputations!

If you are new to the area or don’t have any referrals, turn to your constant, glowing friend: the Internet. You can read an agent’s philosophy plus a list of local and professional affiliations on the agent's website. E-mail a few. Set up a meeting with any you like.

At the meeting come prepared with these questions:

  • Do you live in the area? If so, for how long? You want an agent who is quite familiar with the area. Ideally, you want someone with “insider” knowledge of commercial trends, local schools and development plans.
  • How many people have you (not your firm) helped buy a home in the past three years?
  • Can you refer me to several mortgage brokers? Recommending ethical mortgage brokers, especially after the recent mortgage crisis, is critical.
  • Do you prefer vanilla or chocolate? See how they respond to curveballs. A sense of humor is a great asset during stressful situations!

Once you find the agent you like, you may be asked to sign a Buyer’s Broker Agreement committing you to a set amount of time with your agent (usually 3 to 6 months). As with all paperwork, read the fine print. Make sure that if you become dissatisfied, you can break the agreement without notice and/or opt-out penalty.

Whether you decide to go it alone or go with a pro, don’t forget to value your instincts when hunting for your first house. After all, your buyer’s agent isn’t going to live there, you are.

Keep Reading

Next Up

The Pros and Cons of Escrow Accounts

If the prospect of paying a large property tax bill twice a year is daunting, consider the up and downsides of having an escrow account.

Home Equity Loans: The Types, Pros and Cons

What you need to know before applying for a home equity loan.

Waterfront Buying: Top 10 Tips from Agents

Before purchasing that dream home, master these tips from the experts.

Managing Buyer's Remorse

I've heard it said that the last day either Buyer or Seller is truly happy with the price and terms of the transaction is the day the offer is accepted. I would say that's the last moment either side is happy. Here's how to prevent "Buyer's remorse".

A Buyer's Guide to Open House Etiquette

Master these dos and don'ts of house hunting.

Disclosure Law: Your Buyer Can Handle the Truth

If you're selling your home, it's important to fess up about its flaws. Here's why.

The Buyer's Field Guide to the Open House

Arm yourself with these expert tips and advice when braving the Sunday open house. Learn more on HGTV.com.

How to Choose a Great Listing Agent

Choosing the right listing agent just got easier with this great guide.

Luxury Home Buying Guide

From the search for the perfect luxury home to financial planning, get tips on high-end real estate.

Urban Home Buying Tips

Real estate agents weigh in on the downtown buying process.

Shop This Look

Found a living space you love in HGTV's Photo Library? Get the look in your own home with products from Wayfair.

Follow Us Everywhere

Join the party! Don't miss HGTV in your favorite social media feeds.