Real Estate School: The Buyer's Agent
Watching Out for You, the Buyer
Sunday, November 11, 2007
If you're thinking of buying a home, one of your first decisions is whether to work with a buyer's agent.
As the name suggests, a buyer's agent is a real estate agent who represents the buyer in a home sale, as opposed to the listing agent who represents the seller.
It's important to understand that just because an agent shows you a house doesn't mean she works on your behalf. To establish true buyer's agency, you must sign a formal buyer's agency agreement, which spells out your obligations to each other. Basically, the agent is promising to represent only your interests, and you're promising not to make offers that cut her out of deals -- and ultimately, her paycheck.
"You're signing a legal document," said Ilyce R. Glink, author of "100 Questions Every First-Time Home Buyer Should Ask" and other real estate guides. "Make sure you know what you're agreeing to."
Andi Fleming, a real estate agent with Long & Foster's Brookland office, asks her buyers to sign the agreement after the first visit. "I'm not trying to lock people in," she said, "but I do want to feel like I can commit 100 percent to them."
Another common point of confusion is how buyer's agents are paid. Buyers "think they have to pay for representation, but they actually get it for free," Fleming said.
Well, not really for free, since the cost of sales commissions is reflected in sales prices. If the property you want is for sale by owner, deciding who pays your agent could even become a sticky point of negotiation.
Getting a service that someone else pays for may sound like a great deal. Buyers should keep in mind, however, that because the agent receives a commission only when the deal is done, there is an incentive to close a sale -- possibly at a higher price to earn a bigger commission -- even when it might not be in the buyer's best interest. To get around this conflict, some buyer's agents work for a flat fee.
Most buyers use a buyer's agent, and the practice is growing, said Stephanie Singer, a spokeswoman for the association.
Some people just don't like working with agents. Other buyers go without them thinking they can negotiate a better deal on their own by working directly through the listing agent. Often they think that by working on their own, they are entitled to a discount on the sales price equal to what the buyer's agent would have received as commission. But the payment structure doesn't work that way. In that situation, the seller's agent just keeps the whole commission.
Finding a buyer's agent isn't difficult. A common route is to ask friends, family and co-workers for referrals. That's how Rick Pearson, a real estate investor, found his agent. Mary Buckley Richeimer, a buyer's agent who works in Frederick and Montgomery counties, brings her pets to Pearson's wife, a vet.
Another way to find a buyer's agent is to visit open houses. You may not want that particular house, but you will be able to size up the agent who is hosting, and who is likely to specialize in that neighborhood.