Buyer’s Agent, or no Buyer’s Agent?
The percentage of buyers using a buyer’s agent has increased dramatically in the past 20 years, from 69% to the current 89%*. The lawsuit settlement won’t change that, because as has always been the case, the purchase prices of almost all listed homes will continue to include commission for the buyer’s agent. The paperwork will just be different.
However, for the small percentage of cases where the buyer’s agent commission isn’t built into the purchase price, the situation for buyers is now dramatically better, because lending laws have been changed allowing buyer’s agent commission to be rolled into the mortgage, which wasn’t possible before.
Why DO 89% of buyers use a buyer’s agent?
- If a buyer doesn’t have an agent, the only agent involved will be representing the SELLER. The listing agent knows a LOT that an unrepresented buyer doesn’t know (about the property AND about real estate transactions), and is legally obligated to use that knowledge to get their seller an advantage at the buyers expense.
- In almost all cases, the seller will have set aside money to pay commission to the agent who brings the buyer, but if you do not have an agent, the listing agent will keep most or all of that commission because… they will earn it by being responsible for handling your side of the transaction, which they will have to do because you will have a lot of questions, and will need lots of management and communication.
- If you do not have a Buyer’s Agent, you will have a much lower probability of successfully purchasing the home you want because (1) sellers and listing agents are wary of buyers without agents because their past experience is that most buyers without agents think they know more than they do and can become difficult to work with, and because of that will accept the offer only if you pay more than a buyer with an agent would have paid (maybe more than you would have paid your agent to help you), and (2) you may not have the experience to know what you should offer. Should you offer more or less than list price? How much due diligence? What dates and other terms might be most attractive to the seller? What are acceptable ways to protect yourself against appraisal issues (do you get your DD back if it doesn’t appraise, for example)? The truth is, that in a competition against other buyers with agents, an unrepresented buyer doesn’t stand a chance.
- If something goes wrong, you may not understand the details of the contract law and your options to deal with it before it turns very expensive and time consuming.
- You may not know the right questions to ask about the property before making an offer, so you might miss a very important point and could cost far more than what you would have paid a buyer’s agent.
- Not having a buyer’s agent will cost you a lot of time. You’ll need to make all the appointments for all the homes you want to see, you’ll need to learn the contracts (and get them from the other agent since they aren’t available publicly), learn all about everything that comes up on the inspection report, find your own lender, inspector, surveyor, etc).
So why do 11% of buyers NOT use a buyer’s agent? In almost every case, these were buyers who simply didn’t think of it, or it was too late when they did. Examples:
- buyers who didn’t register their agent when they first visited a new construction neighborhood, or
- buyers who called a listing agent on a “For Sale” sign and that agent (representing the seller) just sold them the home, or
- neighbors who did a deal together, or
- an investor who has bought dozens of homes, truly knows what they are doing, and has time to handle everything on their own.
How Buyer Agency works
Previously only sellers had agents. Most of the rest of the world still uses this model. In the US, buyer agency was invented so buyers would have representation.
A Buyer’s Agent legally represents YOU, and has the ethical and legal obligations to (a) keep your goals and priorities confidential, (b) disclose anything about a property that might influence your decision to purchase it, and (c) keep you well-informed and protected through the transaction process.
FURTHER READING… You might be interested in one of these posts:
A Better Way To Be A Top Producing Agent
The TRUTH About Building Your Own Real Estate Team