Question: “ Do I need a Buyer’s Agent”? Answer: It depends.
To Explain: Even though most unbiased expert opinion, from notable sources such as AARP, Humes Financial, Money Magazine, and Ralph Nader seem overwhelmingly in favor of enlisting a Buyer's Agent (see quotes below), there are times when it might be better to go it alone.
According to the Texas Real Estate Commission:
"A Real Estate Broker’s duties depend upon who that broker rerpresents."
Now that sounds simple but it is widely misunderstood. So much so that Texas Law requires that all real estate agents inform all prospective sellers (owners), landlords (owners), tenants, and buyers of the following (paraphrased):
- If you are a prospective Buyer you should know that the broker who lists the property For Sale is the Seller’s agent and owes allegiance and certain Fiduciary duties exclusively to the Seller.
- A broker who acts as a Sub-Agent represents the Seller also (in cooperation with the Listing Broker) and is also bound to the same allegiance and duties to the Seller as the Listing Broker even though that agent may work in a different agency.
- Only a broker who has been enlisted soley as a Buyer’s Agent will owe his allegiance and Fiduciary Duties exclusively to the Buyer.
IF THE BROKER REPRESENTS THE SELLER
The broker becomes the Seller’s agent by entering into a written listing agreement or by acting as a Sub-Agent to the Listing Agent. A Listing Broker or his sub-agent can assist a Buyer on a very restricted basis by helping them with such things as locating a property, preparing a contract, and obtaining financing. But it’s important to note that these agents do not represent the buyer, and in the presentation of the properties virtues (or lack of virtues), and any possible negotiations that might arise, they must place the interests of the seller first; even if it is at the expense of the Buyer. So a Buyer should be on guard not to tell the Seller’s agents anything he would not want the Seller to know because it is their contractual duty to disclose that information to the owner.
IF THE BROKER REPRESENTS THE BUYER
A broker becomes the Buyer’s Agent by entering into an agreement to represent the Buyer, usually through a written Buyer Representation Agreement. And in stark contrast to the Listing Broker or his Sub-Agent, a Buyer’s Agent does not represent the Seller and therefore can always do what is in the best interests of the Buyer in all all phases of the home buying process.
And in practice, the type of representation you choose can make a big difference in the outcome; sometimes measured in the thousands of dollars.
So How Do You Choose?
If you are well-schooled and experienced in property condition issues, in real estate law, and know the local market values and resale trends, you may choose to deal directly with the Seller's Agent or their Sub-Agents with the hope that you can secure a better deal by effectively representing yourself in the transaction and asking the Listing Broker for a split of the commission he will be paid by the Owner. Just remeber that they do not work for you, they work for the seller!
If you are not knowledgeable in property condition issues and real estate law, and do not know about local market values and resale trends, (and especially if you are a First-Time-Buyer) you will be better served by enlisting your own Buyer’s Agent to guide you through the home buying process and to protect your interest. Because mistakes caused by inexperience can be much more expensive than any savings gained by a portion of the sales commission.
Another important consideration is that because of the advent of the Multiple Listing Service and commission splits offered by the Listing agent, the services of a Buyer’s Agent are in most cases free to a buyer.
So it's Up To You, But Here's What The Experts Say:
A study by U.S. Sprint found that their relocating employees who hired buyer's brokers paid an average of 91% of a home's list price while those who used traditional agents typically pay about 96%. On a house originally priced at $150,000, that's a difference of $7,500.
And From Money Magazine
Question: Do I need a Buyer's Broker to help me when I’m buying?
Answer: That depends on how informed and assertive a buyer you are. Unlike the traditional agent who looks out for the seller, a Buyer's Broker acts as your advocate, helping you find the home you want and then helping you to negotiate the lowest possible price.
And From Ralph Nader, head of the Center for Responsive Law, who has gone on record to herald one recent real estate industry development: the Buyers' Broker....says Nader "the industry needs more buyer brokers, who represent consumers negotiating real estate deals and help them get the lowest possible price... you’ve got to have someone representing you who only represents you"
from NADER RAPS THE REAL ESTATE INDUSTRY by Robert W. Trott of The Associated Press
And From Woman's Day Magazine
"Get a broker on your side."
In most states, real-estate agents work for the seller, not the buyer. This means that the agent wants to get the seller the best price possible. So for a Buyer, using a Buyer's Broker or Agent, who has your best interest in mind, may help you shave thousands off a home's purchase price, mortgage or various other costs...
from "Cutting Your Expenses" by Karen J. Bannan was featured in the January 2nd edition
And From AARP
A recent consumer brochure developed by the American Association of Retired Persons (AARP) and the Consumer Federation of America (CFA) recommends that home buyers use a Buyer's Broker. According to the brochure, "Home buyers must select their agents with just as much care as sellers do. The first decision they should make is whether to work with a Buyer's Broker. Buyer Brokers will better represent the interests of buyers than will Listing Agents or Sub-Agents. They are more likely, for example, to negotiate a lower sale price on a home."
To get a copy of AARP/CFA brochure, send a stamped, self-addressed envelope to: AARP Box Home, 601 E. St. N.W. Washington, DC 20004
And From Hume Publishing
Warning! "Don't ever buy a property directly from the listing broker. Because having your own agent will help you get the best price and terms, and it won't increase your costs, because your agent shares the commission with the listing broker" from SUCCESSFUL REAL ESTATE INVESTING
*Hume's advisory board includes such notable experts as William E. Simon, Louis Rukeyser and Dr. Morton Shulman