Real Estate News with Terri Taydus, GRI, CNA

Why Use A Buyer's Agent When Purchasing A Home?

January 30th, 2016 1:28 PM by Taydus Taydus



I am a licensed Realtor® in the state of Colorado.  I work with both home buyers and sellers.  I also do a lot of marketing of my services online.  Often times a potential buyer will contact me via my marketing, and make the assumption that I am the listing agent on the property they are interested in.  I always inform them if I am not, however I also let them know that as a home buyer, they really do need and deserve their own representation via a buyer’s agent.

Sometimes, a potential buyer is adamant about buying directly from the listing agent.  When this happens I always ask them “why?”  Here are some interesting beliefs that some home buyers have in regards to purchasing real estate without the use of a buyer’s agent:

BELIEF: If I go to the listing agent directly, the home seller will not have to pay the buyer’s agent’s commission and I will get the home for less.

TRUTH: If a home buyer goes directly to the listing agent, what they fail to understand is that the listing agent already has a relationship or “agency” with that home seller.  That seller is their client not you.  If any savings are realized, it is typically passed on to the seller (their client) and not you.

BELIEF:  I’ll just let the listing agent represent both the seller and me.  They still have to be honest right?

TRUTH:  Yes, they still have to be honest, however don’t you want someone advising you?  Here in Colorado we have four types of client / agent relationships (as described in the Colorado Definitions of Working Relationships Disclosure):

 

  1. Seller’s Agent: A seller’s agent (or listing agent) works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the seller. The seller’s agent must disclose to potential buyers all adverse material facts actually known by the seller’s agent about the property. A separate written listing agreement is required which sets forth the duties and obligations of the broker and the seller.

     

    Let that first line sink in for a moment “A seller’s agent (or listing agent) works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity.”  Nowhere in there does it say that the listing agent is going to represent you as the buyer.

     

  2. Buyer’s Agent: A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the buyer. The buyer’s agent must disclose to potential sellers all adverse material facts actually known by the buyer’s agent including the buyer’s financial ability to perform the terms of the transaction and, if a residential property, whether the buyer intends to occupy the property. A separate written buyer agency agreement is required which sets forth the duties and obligations of the broker and the buyer.

     

    Again, let that first line sink in: “A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity.”  This means that you have someone in YOUR corner to advise you and look out for your best interests.

     

    As your buyer’s agent I can tell you anything that I find out about the seller (say the house is listed at $550,000 but I happen to find out that they would be thrilled with $500,000.  I can tell you this all day long – as your buyer’s agent I am YOUR advocate!)  However the information does not funnel the other way because I work for you.  I am obligated to disclose any material facts – for example if you lost your job and could no longer qualify to purchase the home, I would have to tell the listing agent - but if you told me that you loved that $550,000 home and would be willing to pay $600,000, mums the word.  I work for you and I wouldn’t say a thing to that listing agent that works for the seller.

     

  3. Transaction-Broker: A transaction-broker assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction without being an agent or advocate for any of the parties. A transaction-broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about all adverse material facts actually known by the transaction-broker concerning a property or a buyer’s financial ability to perform the terms of a transaction and, if a residential property, whether the buyer intends to occupy the property. No written agreement is required.

     

    “Without being an agent or advocate for any of the parties.”  Buying a home is a huge investment, probably the biggest one you will ever make.  Don’t you want someone advocating for you vs. just handling the paperwork?

  4. Customer: A customer is a party to a real estate transaction with whom the broker has no brokerage relationship because such party has not engaged or employed the broker, either as the party’s agent or as the party’s transaction-broker.

Say you go straight to the listing agent and the listing agent and the seller have agreed that the listing agent would only work as the seller’s agent.  What this means to you as a buyer is that you would now be treated as a “customer” by that listing agent.  This means that the listing agent would still advocate for the seller and has no obligation to you whatsoever other than to be honest and ethical.  Would you be prepared to interpret the purchase contract and all of the disclosures on your own?  Would you be able to negotiate with the listing agent (who will be looking out for the seller’s best interest.)  Most Realtors® have years of experience and know the ins and outs of real estate negotiation.  They are able to anticipate many of the issues that arise as they have seen them many times before, and often have a solution or two up their sleeve…things you may have never thought of.  These solutions will be in the seller’s best interest if you are working with a seller’s agent as a customer. 

BELIEF:  I’ll just go in and offer what I think the house is worth and the seller can take it or leave it.  I don’t need a buyer’s agent to help me do that.  The listing agent will draw up the contract.

TRUTH:  How did you determine your offer amount? From an online evaluation from a public real estate site? (these are typically woefully inaccurate) Or maybe you saw how much the “house up the street sold for” and you are basing your offer price on that.  Your buyer’s agent will compare the sales prices from all of the nearby comparable properties that have recently sold, as well as look at which way the market is trending by looking at currently active properties, the number of days on the market, etc. They will also be able to factor in their experience and expertise to be able to better advise you about the current market, and help you strategize so that your offer will stand out.  All of this will be presented to you and discussed so that you can make an educated offer that is fair.  In a competitive market such as the one we are experiencing, if you come in too low you risk losing the home to another buyer.  If you come in too high you risk over paying. Your buyer’s agent can help you navigate the right offer price and provide you with enough information so you can take control and make an offer that you will feel good about.

Real estate contracts and disclosures are constantly changing.  As a Realtor® I take several continuing education classes each year to stay current.  The contracts and disclosures can vary from state to state so if you are moving to Colorado from another area, even if you have bought and sold many homes in your home state, you will probably not be familiar with not only the contracts and disclosures, but the real estate rules that apply to Colorado.  This could cost you thousands in costly mistakes simply because you didn’t know any better. 

Sure, the listing agent will be happy to draw up the contract – they will discuss with the seller and make sure the dates, terms and dollar amount works for THEM, then as a customer, you will need to review on your own and sign on the dotted line.

What will you do when it comes time for negotiations?  With no one to advise you do you know what is reasonable and not so reasonable to request on an Inspection Objection? What are your options if the seller doesn’t want to fix some items that you feel strongly about having fixed?

The bottom line is that you need representation as a buyer.  You want to have someone in your corner that is advocating for YOU. 

The bonus is that the seller typically pays the buyer’s agent’s commission!

So if you have considered going on your home buying journey alone, you may want to reconsider.  Reach out to a buyer’s agent and see what they can do for you!  You will find that they are worth having in your corner for this very important purchase.

If you are not already working with a good Realtor® give me a call!  I would love to help you either market and sell your home or buy a new one!

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Posted by Taydus Taydus on January 30th, 2016 1:28 PM

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