5 Questions for Your Buyer Agent

by staff on November 10, 2010

In Virginia real estate, a Realtor in a transaction may represent the seller…. or represent the buyer… or represent both, or neither.  (It is known as ‘agency’).  Buyers have a right to choose the representation they desire.  The single biggest favor that prospective buyers can do for themselves, is to choose a compatible knowledgable agent who will make the search more effective, make the negotiating a winning proposition, and who will truly represent the buyer’s own expectations during the entire transaction.  Some agents represent only buyers (they do not accept listings).   We have so much to say on this topic that you’ll see other articles about it too, but in this case we’ve decided to narrow the criteria down to:

5 QUESTIONS TO ASK WHEN CHOOSING A BUYER’S AGENT

 

(1)   WHAT BUYER SERVICES WILL YOU PROVIDE FOR ME IF I WANT TO BUY ONE OF YOUR OWN PERSONAL LISTINGS?

The time to ask questions is right away when you first talk with a Realtor.  Very often buyers contact the agent who is listing the property and whose name is on the sign.   Generally buyers cite 2 reasons for doing so… first, they believe the listing agent can give them the most information about the property,… and second, they believe that the listing agent will be able to negotiate the best price for them.  There is potential truth in both assumptions, but buyers must realize that the seller already has a signed agreement with the listing agent which says that the listing agent will represent the SELLER’S interests.  That includes getting the highest price in the shortest amount of time without revealing unnecessary details about the seller’s personal situation.

If the buyer has conversations with the seller’s agent, the listing agent is required to share the information about the buyer with the represented sellers.  This may not seem like a problem until the buyer has spent time looking at the home with that agent (maybe looked at other homes as well)… and has shared the buyer’s personal budget/timeframe/preferences or family issues.  That buyer may have just given away a lot of negotiating power by providing information to the seller.  One large source of misunderstanding in real estate transactions is….. buyers who mistakenly believe the seller’s agent has agreed to look out for the buyer’s interests.   Additional answers that buyers may want:  Will you tell me if there are other offers on the property?  Will you recommend other professionals such as inspectors who will represent my own interests and not the seller’s?

**** Bear in mind…. in Virginia the Buyer’s Agent fees are offered by the sellers, with no additional costs to the buyer, and those fees are already included in the prices of every property the buyer sees on the MLS.

(2)  HOW WILL YOU ACCOMMODATE MY PROPERTY SEARCH?

Will you provide me with information about all other similar properties that may interest me, or do you only feature your own listings or your office’s listings?  Will you send me online market updates of properties with my criteria?  Will you send me information about similar properties so that I can determine the value of properties that gain my serious interest?  Are you available every day (or evening?)

(3)  WILL I NEED TO SIGN ANY SORT OF AGREEMENT TO WORK WITH YOU?

This answer is dependent upon how each agent conducts his/her own business.  There is a standard Virginia form which protects both the buyer and the buyer’s agent.  Buyer and Agent may agree in advance what services are offered by the agent, how the agent will accommodate any buyer time restrictions, how fees might be handled if the buyer wants representation for buying a for-sale-by-owner or other non-traditional transactions.  This agreement prevents future disappointments and surprises.  The buyer may choose how long to enter into the agreement (weeks? months?).  This agreement is not mandatory while searching for Virginia real estate, and parties are free to work with a loose verbal agreement if they choose…. but verbal agreements do not hold up in the event of a dispute.  We believe in preventing disputes in the first place, by making sure both sides understand what is expected and agreed.  A proposed Virginia law if enacted will require a written agreement to be in place at least prior to submitting an offer on Virginia real estate.

(4)  WILL I SAVE MONEY IF I WORK DIRECTLY WITH THE SELLER’S OWN AGENT?

The logical answer to this is… generally, no.  When you think about it, why would the seller’s agent drive a hard bargain with his own client?  In another scenario, if a buyer is interested in new construction… as in, buy a lot and hire a builder… the builder may compromise on a few items but ultimately the builder is the source of the price for what can or cannot be built.  Most builders offer to pay a fee to the buyer’s agent so that the buyer can have his/her own agent, and it’s helpful for most buyers to have their own advocate during the planning and construction process.  If the buyer is interested in a new home that is already built… most builders will not compromise very much on the price, because to do so would mean that they’re setting a precedent for lower prices for their next homes.

For purchases of land or existing residential properties, a good buyer agent will be able to use market knowledge and negotiating skills to achieve better terms for their buyer than the buyer can do on his own.  Buyer agents are not emotionally involved in their dealings with the seller’s agent and they know not to divulge details that may come back to disadvantage their buyers (even something as simple as “when do you intend to move?” can be used for leverage in negotiations).  A buyer may have the experience of purchasing 1-6 homes in his past (perhaps in states where real estate law is very different than in VA), but a Virginia buyer agent handles hundreds of transactions and has professional relationships with others in the area who can help the buyer.  The agent knows the inventory and what a fair offer might be. 

According to Money Magazine Joseph Eamon Cummings, a study done by US Sprint found that over 200 of their employees who relocated using buyer’s brokers paid on average 91% of the listing price on their homes.  Buyers who use a traditional real estate agent normally pay around 96% of the listed price…. a 5% savings for utilizing Buyer Agent services.  Our experience shows that those savings are compiled throughout the transaction, …during price negotiation, …to selecting the mortgage… to negotiating closing costs… to insurances… to possible repairs… to ‘extras’ negotiated in the offer… and on such issues as bonuses and referral fees.  And do you know that your full-service buyer agent is not paid until the successful closing of your intended property?

(5)   WHAT PERCENTAGE OF YOUR BUSINESS IS CONDUCTED WITH PROPERTIES OF MY TYPE, MY PRICE RANGE, AND MY AREA?

Often a prospective buyer tries to hire an agent based on the agent’s good reputation, without inquiring if the agent is appropriate for his own needs.  A good buyer’s agent should be able to offer knowledgable advice.  For instance, a “residential” agent has more to offer a prospective homeowner than an agent who primarily handles commercial property or businesses.  Farms, land, and estates are all sub-specialties of residential buyer agents.  Agents who handle mostly in-town condos or other urban property may be familiar with the impact of airline flight patterns over different neighborhoods, but may not routinely handle the timing and paperwork required to research rural issues such as crop/livestock accommodations, easements or division rights.  Find out upfront about your agent’s experience in the segments of the market where you are interested.

One big difference in the way the buyers are able search online for properties which interest them (vs. having their buyer agents search online for properties that meet their buyer’s criteria)…. is that the buyer sees only a portion of available properties online, while the buyer agent has complete information for every property that is on the market….. so that the buyer doesn’t miss anything appropriate.

Ultimately it’s the buyer’s choice of how he wants to work with an agent, and WE WANT BUYERS TO KNOW THAT AGENTS WILL WORK WITH YOU REGARDLESS OF HOW YOU WANT TO STRUCTURE THE RELATIONSHIP …. but an agent cannot lawfully advocate on your behalf without your consent.

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