What is a Buyer's Agent and How They Save You Thousands
What is a buyers agent and why do you need one?
This is probably the one major piece of real estate advice that most first-time homebuyers don't know about. Most first-time homebuyers simply head out looking at property, get roped into whatever agent they happen to run into, and end up using the listing agent of the home they want to buy rather than having their own representation.
Let me be clear… All buyers need their own buyer's agent!
What is a buyers agent?
A buyer's agent is exactly that; an agent for the buyer. This agent represents a home buyer, not the seller of any one particular property. This agent is designed to look out for the best interests, needs, and budget of the buyer first and foremost.
Can the listing agent be a buyers agent?
Most real estate agents or Realtors® are licensed to sell and buy real estate. The same agent can list the property for sale as well as represent a buyer. If the same agent represents both the buyer and the seller for the same property is called dual agency. This is where you start getting into the gray zone. Who does the agent represent first? Typically, the agent represents the seller first as that's who probably hired the agent first. That listing agent then in turn found a buyer. The same agent can represent both sides but not unbiased sleep. This is why it is crucial to have your own agent when buying property.
Who pays the agent?
This is probably one of the most common questions and it should be. Buyers are already spending thousands of dollars to purchase a home, the last thing they want to do is to pay even more money for the use of an agent.
Here's the best part… Buyers pay nothing for the use of a buyers agent!
Here's how the commission works: a homeowner decides to sell their properties so they enlist the help of a real estate agent. The agent and the seller determine and negotiate on the commission for the sale of the property, typically around 6%. That 6% of the sale price (not list price) will get split, typically in half, between the agent that brought the buyer and the agent listing the property.
You can easily see why it's very attractive for the same agent to be both the buyer's agent and the listing agent as they receive the full 6% commission. But again, that may not be ethical in all situations. Agents need to be upfront about the dual agency and make sure that the clients understand the situation.
If there is no dual agency and the buyer has brought their own agent, the agent will receive half the commission from the sale of the property by facilitating the transaction. Because the agent typically gets 3% of the transaction, there is no hidden agenda to sell a particular property on the buyer's agent side. The buyer's agent simply wants their buyer to have the best property at the best price.
If the buyer's agent receives a commission percentage on the sale of the property, wouldn't the buyer's agent want to sell that property for more money?
This is also a common question and it makes sense, however, the difference in the commission-based on several thousands of dollars, is pretty insignificant, so the agent is really there to look after the buyer, not just get the house for the highest price. The difference between $10,000 on an asking price may only be $100 or so in the commission, so it's not worth the buyer's agent's ethics or morals to try to get the highest price for the home. Again, buyers agents must look out for their buyer first and foremost.
Can a buyers agent actually save the buyer money?
Yes! And here's how that works. Because the buyer and their agent have confidentiality when it comes to finances and negotiations, this leaves all of the cards in the buyer's hand. Let's take a scenario and see how a buyers agent could actually save the buyer thousands of dollars.
Buyer A finds a home they love but it's been on the market for a couple of months and the buyer's agent feels that it may be overpriced. The home is listed at $500,000. The buyer is well-qualified for a home loan of over $500,000 but this is information that the buyer and their agent need not share with the listing agent or seller. The buyer would like to offer $470,000 and with the advice of their real estate agent, writes up an offer and includes a preapproval letter stating that the buyer is approved for $470,000.
The offer is submitted and reviewed by the seller and the listing agent. The listing agent has no idea if the buyer truly loves the property and is willing to go higher or if they are even financially approved for more than $470,000. If the listing agent was also the buying agent, the listing agent would know that the buyer could afford more and therefore may push for a higher offer. But because the seller and their agent have no idea the position of the buyer, the left more in the dark on deciding to approve the offer or not.
The sellers decide to counteroffer at $495,000. Again, this is a big risk on the listing agent and sellers apart because they don't know if the buyer will simply reject the counter offer. The buyer and their agent have decided to counter offer again at $475,000. It's at this point that the buyer's agent can speak to the listing agent about the seller's motivation. A lot of verbal communication can help a buyer decide what to offer and how to offer. The buyer may not be trying to lowball the seller, but if the home has set on the market for a while, sellers might be a little leery asking for too much more.
With the seller not wanting to risk losing out on an offer, they agreed to the $475,000. Again, the buyer was well-qualified for over asking price, but with the help and advice of a buyers agent, was able to save $25,000 on the purchase of the home.
This is a very simple and straightforward transaction but you get the idea that a buyers agent truly looks out for the benefit and well-being of the buyer. Buyers agents ask tough questions and protect their buyers at all costs. So yes, buyers agents can definitely save buyers thousands of dollars, and that's just in the initial offer. Buyers agents offer advice, suggestions, tips on inspections, and advice on a home's construction. Remember, buyers agents, with years of experience so it's important to utilize that and take advantage of it anytime you can.
Ready to get started? Contact me below. I would love to be your Portland or Vancouver buyers agent and we are not just limited to the Portland metro area. As far south as Salem as well as Southwest Washington, let the Matin Real Estate Group work for you.