Hiring a Buyer Agent
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Helpful Links
- National Association of Exclusive Buyer Agents | NAEBA
The National Association of Exclusive Buyer Agents exists to support and promote EBAs as the optimal representation for consumers who want to buy homes for sale. - Exclusive Buyer Agents
Directory of Exclusive Buyers Agents for Home and Real Estate Buyers - NAR: National Association of Realtors
Realtor.org has the real estate resources that home buyers and sellers need for the latest home sales statistics, getting the best mortgage, negotiating in the real estate business and more. - REBAC Home Page
Real Estate Buyer's Agent Council - Finding the Best Match When Shopping for a Buyer Agent
House Talk - This Real Estate Journal column provides real estate advice on all aspects of home buying, home selling and home improvement, including information on home loans, home insurance, real estate agents and foreclosure properties. - Massachusetts Association of Buyer Agents
The internet is providing home buyers with access to property listings but it can be tricky to navigate the real estate process when it comes time to purchase. The best way to safeguard your investment and ensure that your best interests are protected is to hire a buyer agent.
Nearly 90% of homeowners use a seller agent but that number drops significantly when it comes to buyers - only about 60% hire an agent to represent them. The discrepancy is due to the fact that many consumers aren’t aware of how they are represented in a real estate transaction.
Walk into an open house and you’ll likely be greeted by a pleasant salesperson who attentively answers your questions. This doesn’t mean they are working for you and most state laws require them to disclose that they are a representative of the seller.
Up until the 1990s, brokers and their agents represented sellers only. However, the past decade or so has given rise to more regulation concerning buyer’s rights to fair representation as well as an increase in agents who work with buyers, some exclusively.
Understanding Agency
The general definition of an agent is a person authorized to act on behalf of another. In real estate, there are three types of agents: seller agent, dual agent or buyer agent.
Seller or listing agents are legally obligated to represent the seller’s interests including securing the highest price, creating the best terms, maintaining confidentiality and disclosing information about buyers. Their loyalty is with the seller.
Dual agency is when an agent or broker represents both the seller and the buyer. The intrinsic nature of dual agency means neither party is fully represented. A dual agent is more a mediator for the transaction providing limited representation to both buyer and seller.
Dual agency requires full disclosure to the buyer and seller but a dual agent must respect the confidentiality of both. The seller and buyer both lose some advantage in a dual agency negotiation. The potential for conflict of interest has led some states, like Florida and Colorado, to eliminate dual agency.
A buyer agent represents the buyer’s interests only. Their duty is to locate the right property, maintain the buyer’s confidentiality, disclose information about the seller, research each property and negotiate on behalf of the buyer. Hiring a buyer agent secures a client relationship which means the agent owes fiduciary duties and responsibility solely to the buyer.
Advantages of Hiring a Buyer Agent
A dual agent can show property to a buyer, provide property information, explain forms and oversee the closing. In addition to those tasks, a buyer agent will evaluate your specific needs and help you locate properties throughout the market. Buyer agents will identify any property problems or issues, prepare property value studies and help you make informed decisions.
A buyer agent will preview properties for you, arrange and accompany you on showings. When a property becomes a potential purchase, a buyer agent will advise you how to structure purchase offers, present the offer on your behalf and negotiate the best price and terms for you.
If desired, a buyer agent can also provide anonymity, assist in securing financing and offer references to other services like movers, attorneys and home improvement contractors. These services are especially helpful to out-of-town buyers who may not be familiar with the area.
A study by the National Association of Realtors revealed that home buyers who used a buyer agent examined three more properties and found a home one week faster than unrepresented buyers.
In a 1992 study, a long distance phone company surveyed relocated workers and found that those who used exclusive buyer brokers paid 5% less of the property asking price than those who worked seller brokers.
These kinds of statistics are why consumer groups like the Consumer Federation of America and AARP recommend that buyers hire exclusive buyer brokers, brokers who don’t list properties and only represent buyers.
These professionals make up only a small portion of the licensed realtors in the U.S but their numbers are growing. Another option is to find an agent who work mostly with buyers or one that has a professional Accredited Buyer Representative (ABR) designation.
The Buyer Agency Agreement
If you choose to hire a buyer agent then you should clarify this relationship in a written legal contract, a buyer agency agreement. This sets the terms of the relationship between you and your buyer agent outlining the purpose of the relationship, the services offered, the specifications for property, the terms of compensation and the duration of the contract commitment.
If your broker or agent works with both buyers and sellers, the buyer agency agreement should address the potential situation of dual agency. You have the right to demand single agency meaning you will not be shown properties listed by your buyer agent’s broker.
It is also important to understand if the contract itself is exclusive or non-exclusive. An exclusive buyer agent agreement means you may not work with other agents. A non-exclusive agreement allows you to hire multiple agents which can be useful if you are searching in a large geographic area.
Before you sign a buyer agency agreement, find out if the agent will release you from the contract if you are not satisfied with the service. A good buyer agent will consider this a reasonable request. If they refuse it’s a red flag that you should hire a different agent.
Considerations When Hiring a Buyer Agent
The time frame set by exclusive buyer agent agreements are usually between three months to one year. This can be a disadvantage if you and your agent are a mismatch personality-wise (i.e. you’d rather not spend hours in the car with them for one reason or another).
You should only sign a buyer agency agreement if you are comfortable with the terms, including the duration. You can agree to a shorter time commitment and renew the contract at intervals.
If you’ve signed an agreement for representation and a buyer agent fails to meet your expectations it can become an uncomfortable situation. This can be avoided by making your expectations clear from the start.
In addition to your property criteria, talk to your agent about logistics. Will they pick you up for showings? How often do you expect updates? What form of communication (email, work phone, cell phone, etc.) works best for you? What is your time frame for finding a home? One month? One year?
Another consideration when working with a buyer agent is the commission. In most instances, properties listed with a seller agent offer a “co-op” commission meaning the seller pays the buyer agent commission.
However, not all listings offer a buyer broker fee, some FSBO for example. In this instance you, the buyer, owe the agent commission as agreed upon in the buyer agent agreement.
Get the Best Buyer Agent
A diligent buyer agent can save you money and time by looking out for your interests. They should have strong negotiation skills, be attentive to your needs and take time to answer any questions you may have.
Ask your friends and family for recommendations and include these among several potential agents that you interview for the job. Ask about their history as a buyer representative, their company’s policies towards dual agency and what kind of properties they typically sell. Find out if the agent has special training or professional designation that makes them especially useful to buyers.
Even if the agent was recommended by someone you trust, ask for references and follow up. Consider that your relationship with your buyer agent may span quite a bit of time as you look for just the right property so don’t rush in hiring an agent. Take time to find a top notch agent with whom you feel comfortable.
When you do hire an agent, let them represent you. Let your agent search for properties, arrange showings and inquire with listing agents. Ask your agent to give you several business cards so that you may present them as your point of contact and sign in to open houses with your agent’s name and contact information.
Loyalty works both ways and it’s important that you and your agent work as a team – this ensures that you’ll get the service you deserve. It is your agent’s job to protect you and it’s your job to enable their effectiveness as your representative. If you feel your agent is not meeting your expectations, tell them. If they fail to step up, it’s time to find someone else.
*Note: The information in this article is general advice and not meant as a substitute for personal guidance from a financial advisor, real estate professional, home improvement contractor or legal counsel. Although the author is a licensed realtor, the advice given in this article does not constitute any client contract or agreement between the author and the user. The author is not responsible for any losses, damages or claims that may result from your decisions.
