Should You Hire a Buyer's Agent? What do They Do?
- Adam Garrett
- Jan 18, 2024
- 17 min read
Updated: Jun 8
Do Most Real Estate Buyers Use a Buyer's Agent?
While many first-time buyers are aware that most sellers use a listing agent. Many are unaware of the role of the buyer's agent. “86% of buyers purchased their home through a real estate agent or broker.”
Agent Quality Varies Substantially
Agents vary greatly in style, expertise, and resources. Which agent you choose can have a dramatic impact on your purchase.
Related:
When Does Hiring a Buyer's Agent Matter the Least? ____________
Here are some factors that reduce the need for a buyer's agent, ranked in order of the top reasons not to hire one, even though in most cases if only 1 below is true, it would still be better to hire a great buyer's agent, while the higher the number of true statements below, the lower the reasons for hiring a buyer's agent.
You were previously a real estate agent or broker for 10 or more years (especially a longer career in the same state where you're purchasing), & were more knowledgeable than most during at least the latter part of your career, so while some laws have changed by now, you are already familiar with a lot.
You have acquired a real estate license at least once in your lifetime, even if for a short period of time and in a different state. You've also spent at least 150 hours in highly pertinent informal or formal education about various topics regarding a real estate purchase regarding the specific real estate that you're buying, i.e. a lot of time in my house buyer's guide if you're buying a house.
You are a class A contractor, and even though you don't have a real estate license, you've spent at least 250 hours in highly pertinent informal education about various topics related to the home buying process & how to find the best areas for you, i.e. a lot of time in my house buyer's guide if you're buying a house.
You're buying new construction in a new construction community, and have spent at least 100 hours in highly pertinent formal or informal education about various topics regarding the home buying process.
Below are some cases where it's typically not sufficient reason in isolation for not using a buyer's agent, but can be sufficient in some cases when multiple factors below are in play:
You've also spent at least 400 hours in informal education about various topics, i.e. a lot of time in my house buyer's guide if you're buying a house.
You're a class B or C contractor
You're an experienced engineer (especially civil, architectural, or structural)
You are very familiar with the area and are located in the area
Related:
Here are the top reasons to hire a great buyer's agent:
1 of the Biggest Decisions of Your Life
A real estate purchase is often 1 of the biggest decisions of a buyer's life, with the potential for a significant positive or negative impact on their lives. It's very easy for buyers to make a bad decision if they don't have independent representation who is fantastic at what they do and has the buyer's best interests at heart. Conversely, a home purchase will have a much more positive impact on your life if it's the right home at the right time. Buying isn't best for all, & without an honest agent who takes your best interests at heart, you could buy when you shouldn't, even if you are in a position to do so.
Related:
Reduce Risk of Buyer's Remorse
By hiring a buyer's agent who is independent of the listing agent, especially an unusually honest, hard-working, unusually resource-rich (1), and unusually knowledgeable agent whose publications share that knowledge (2), with excellent buyer feedback, you can drastically reduce the likelihood of buyer's remorse.
Gadget/Tool List of Adam Garrett
Adam Garrett's Digital Tool Belt
Inspectors & Appraisers Alone are Inadequate Guidance
Often solo buyers feel that they are protected sufficiently if they get a home inspection & appraisal. That's not the case.
2 of the top reasons why it's important to not exclusively rely on home inspectors and appraisers is that they each cost you out of pocket money and time. While you're under contract on a home, it means that you're not in a great position to walk out of that contract immediately and make an offer on superior alternatives.
A home inspection goes over a narrow scope of criteria & buyers often have buyers remorse due to factors not present in the home inspection. Often inspectors will have a list of that which is about the house that goes beyond the scope of their inspection, like paint defects & other "cosmetic" defects. It's not the inspector's job to check for things like flood zones (present or projected), positive elements of the home that contribute to value, certain negative elements of the home that go beyond the scope of the home inspection that diminish value like busy streets, point out encroachment, etc. It's not the inspector's job to help you with extensive area considerations like providing resources to help you determine crime of areas or helping you with Commute Factor Considerations. A home inspector won't be able to guide you in how to make an offer on a home to beat out 5 or 10 others on the same hot property. Once you receive a home inspection, you typically shouldn't ask for everything on the inspection, and again, the home inspector may not be very helpful.
Related:
3 different appraisers are likely to come up with 3 different values on a home that hasn't been listed. At the same time, for properties under contract, the appraiser typically knows exactly the amount that the property is under contract for. Often appraisers are biased for the appraisal to meet or exceed that number to not ruffle any feathers. You're more likely to overpay for a property if you don't get an evaluation prior to making an offer, and your agent can do exactly that for you. After that evaluation, you may no longer want to make an offer at all if it's grossly overpriced.
Related:
Typically No Out-of-Pocket Costs for Buyers
While there are some exceptions, and buyer brokerage agreements typically include minimum commission amounts (which vary by agents and brokerages), the seller typically pays for the costs of both the buyer's agent and the seller's listing agent. Also, even if you buy unrepresented, the listing agent may be still entitled to both commissions. It's not uncommon for listing agreements in Virginia to not specify what happens with the 2 commissions in the event of no buyer's agent.
Sometimes listing agents will act as a dual agent, which is illegal in some states due to all the problems with it, and prohibited at some brokerages even where legal without management approval, as is the case at Garrett Realty Partners. The agent may seek the full commission for both sides or may seek a slightly reduced commission (i.e. 5% instead of 6% if the total commission was 6%).
If I am representing a seller, I won't do dual agency, but while some agents will still want the full commission for buyer and seller if receiving an offer from an unrepresented party, I & some agents will sometimes come down in total commission for an unrepresented buyer but still charge 1% to the seller for the extra duties I will need to incur because of working with an unrepresented buyer on the other end.
Too Many Variables to Consider Alone for Such an Important Decision
There are too many potential pitfalls (i.e. dozens of items mentioned in this spreadsheet I’ve created) to be avoided & positives to look out for on one of the biggest decisions of your life as an owner-occupant (& making sure that the profit margin is solid is important as well for investors), and one of the biggest jobs of the buyer's agent is to guide you through the process of what the problems of homes are & what positive elements to look for.
A buyer couple whom I worked with, who were both medical doctors, who understand better than most the importance of extensive education & expertise to complete certain tasks, expressed after working with me for a while how baffled they were that some buyers do it without an agent. They saw the extensive knowledge and resources that I brought to the table, saw that what I did was very different & more thorough than typical agents (i.e. that spreadsheet) and had a hard time believing that practically any buyer would be better off going through it alone without the representation of a great buyer's agent.
Listing Agent "Puffing" & Disclosure Requirements
Did you know that what a listing agent is legally required to disclose to buyers is much more narrow than what a buyer's agent is legally required to disclose to buyers if they know about it? I have seen where a listing agent said things like a home being a bargain, being the nicest home in town, not lasting long, etc. (all on the same home) when that wasn't the case at all.
I’ve also seen a listing agent say that property was worth a certain amount, when that was a clearly false statement. Generally, an agent will do things more by the book in front of the public in writing than they will in person, where agents tend to take more liberties. Using a buyer’s agent helps you to navigate that, but some buyer’s agents take their fiduciary duty to watch out for the client’s best interest at all times a lot more seriously than others, highlighting the importance of choosing the right agent.
As a buyer, you also won't be nearly as familiar with the law if the agent does happen to break it. A listing agent may try things on you that they wouldn't try on a buyer who is represented if they think that they can get away with it.
Related:
Discounts for Not Using One Aren't Guaranteed, Buyer's Agent can Sometimes Save You More than They Make Themselves, & Risks Drastically Increase vs a Great Buyer's Agent
When making big decisions, a cost-benefit analysis is important.
Here are some examples of what I've done as a buyer's agent:
I've helped buyers to win multiple scenarios (as high as 8 that I'm aware of) without using cash & without overpaying
I've helped buyers avoid a bidding war with other buyers who were ready to make stronger offers than my buyers but who were too late to see it and too late to make an offer.
I've shared a program to reduce home cost and lender with a buyer that will save him over 5% of the purchase price of their home as long as he keeps the house & the loan for 5 years, more than double the commission that I and my firm received from the same sale.
A cost-benefit analysis is the reason why I don't manage my own rental property despite being a real estate agent, hiring out someone else to do the job who specializes in it, while I play a more active role than most landlords who hire out property management. I actually declined a discount also when offered one; I didn't want them to think that they could provide a "discounted" level of service. Many in my position would, but property management can be time consuming, and my father recommended that I not manage it myself. Because I don't manage it myself, it lowers the probability of me making costly mistakes, lowers the probability of me breaking the law, breaking the contract, and drastically reduces the amount of learning I need to do before being an effective property manager.
Similarly, I wouldn't recommend that members of my family who aren't real estate agents purchase a home without a real estate agent in the vast majority of circumstances, even if there are some circumstances where they could get a slight discount (& others where they wouldn't) by not using an agent. The risks are too high and the potential rewards are too few. When buyers purchase a home, closing costs/prepaids that buyers pay often exceeds any costs that a buyer's agent & their firm will receive (i.e. mortgage purchases under $400k, where the closing costs and prepaids are typically in excess of 3% of the purchase price). Even if you don't factor into the equation buying costs, selling costs are often more along the lines of 10%. 13% in buying/selling costs are substantial, so neglecting an agent, and then reselling your home, could be very costly.
Helping Buyers Win on the Home They Want Without Overpaying
Even in a multiple offer situation, there's a lot more to an offer than who has the highest price. I've helped my buyer clients win in at least as high as an 8 offer scenario. On another occasion, my buyers placed 2nd in a 10 offer scenario, only beaten out by an offer that had less contingencies and that paid in cash rather than a mortgage like my buyer. Using Escalation Clauses, my buyers are typically able to win without overpaying. At the time of this writing, I closed in the past week with a buyer who I encouraged to offer less but to include an escalation clause. She saved $10k doing that & still won in a multiple offer scenario.
Related:
Helping Buyers Save Money
I've been able to successfully close on homes for as much as $49k below asking price. Even after contract ratification, I've helped buyers successfully get as much as around $30k in additional concessions based on inspections. I've also helped buyers save drastically via programs to reduce home cost. One buyer I helped inform regarding loans purchased a home with a 38 year loan and 1% interest with no money down, significantly boosting their affordability & saving 10s of thousands of dollars on interest.
In some cases, homes can be very overpriced, even if the Zestimate or tax assessment doesn't show it. I've helped a buyer acquire a home before where the Zestimate was around 50% above the price my buyer paid. An appraiser is also often biased by the contract price, and they often don't want to ruffle any feathers.
Related:
Using an Agent is Recommended by the US Department of Housing and Urban Development
Per the the US Department of Housing and Urban Development:
"Should I use a real estate broker? How do I find one?
Answer: Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier... When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will... guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. "
What Does a Buyer's Agent Do?
Legal Duties
See my article on the subject here:
Help You Be Able To Buy (Some Agents)
While there is a high level of disparity of agents in this area, and some agents won't do it at all, one way that many agents will help buyers is to qualify for a mortgage if they aren't paying in $.
With new construction in a new construction community, I remember an occasion where a buyer was ready to drop 1 lender and move with the new construction community’s lender, but took my recommendation on keeping both options on the table. Interest rates were increasing rapidly, and because of different dates that the 2 lenders locked rates, the buyer was able to save around $10,000 by going with the lender who wasn’t the new construction affiliated business lender. They wouldn’t have done that without my recommendation.
Here are some examples:
Help You Find Properties
A significant part of the buyer's agent's role is to help you find properties. Via the right Multiple Listing Service (MLS), the agent, if they are a good one, can put together a search that wouldn't be possible for you to do on your own, & provide information that wouldn't be available apart from MLS (i.e. photo captions) in part due to search features present in MLS that aren't present on public websites, & in some cases due to search templates that they may have spent hours (even dozens of hours in my case) creating. Many buyers think that once they find the right property, the agent's role doesn't matter that much, but that's far from the truth, with some buyers telling me they didn't even want me to send them homes, but instead to focus on other elements of being a buyer's agent while they searched on their own.
Related:
Help You to Navigate Properties You Like Online Before Showing or Ruling Out
Part of the buyer’s agent’s responsibilities should include checking for potential problems with a listing prior to showings so that neither you nor they waste their time on a property that you as a buyer would rule out anyways. A buyer’s agent should have a checklist of items to look for prior to a showing, which should include things that are not readily apparent in the listing including but not limited to the agent remarks section, which is not visible to the public & can include disclosures such as the property being listed as is or having significant material defects or other problems (i.e. “cash only” in agent remarks is pretty important if you plan to use a mortgage, and a listing agent might not disclose that if a buyer calls them up because listing agents use listings to acquire buyer clients even if they are wasting the buyer’s time in a way like that). Some of these items can be readily researched, while other items require that they ask the listing agent. Different questions are pertinent depending on different circumstances. For instance, if a buyer is considering short sales or properties in flood zones, I have a set of questions for each for the listing agent depending on the information provided in the listing.
For instance, I remember saving both a buyer and I a few hours on a showing to a distant property because I asked the listing agent if the property had a history of flooding. The agent already disclosed the flood insurance the seller was paying in the listing itself, but made no mention of flood history. What they told me was that the property had experienced a significant flood loss which resulted in $40k in renovation/repairs because the house flooded. We ruled out a property that multiple buyers had active offers before ever driving a mile toward it simply because I asked the question prior to arranging a showing.
Related:
Show You Properties
When I go through a house, the 2 primary things that I like to help buyers through is weighing the positives and negatives of the property. I use my physical gadgets/tools & digital tools to explore many areas that buyer's agents neglect, like crawlspaces, scuttle access attics, water heater/HVAC years, etc. I've even been told that my showings are like a cross between a home inspector and a real estate agent, despite not being certified as a home inspector and not having the knowledge base of a home inspector. Sometimes that above & beyond exploration can mean the difference between an offer and ruling a property out. When some buyer's agents are unavailable, they won't arrange for another agent, or may pair you with a brand new agent. When I'm unavailable, I can often get experienced Agent Fill-Ins.
Related:
Helping You with: A. Offer Negotiations, B. Inspection Guidance C. Concession Negotiations
The buyer's agent also will help you through the process of negotiations, often meaning thousands of dollars, sometimes even encouraging you to be more aggressive in negotiations than you thought would work. I love it when I do that and my clients are pleasantly surprised about all the things that the other party is willing to do that the buyer would not have thought to include into the concessions, especially with items like home inspections. At the same time, being too aggressive can completely turn some sellers offer and striking the right balance is key. I heard about one seller being so offended by a buyer's offer that they asked that the buyer not send them another offer. A good buyer's agent will help guide you into exactly what to ask for.
I've been able to close for as much as $49k below asking price and get as much as 4.5% in closing cost assistance when representing a buyer, and been able to win in as many as an 8 offer scenario.
There are many "tricks of the trade". Here are just a few examples:
1. If using a VAR offer, and a conventional loan, if you don't add a special provision, you could be on the hook for paying for an uncapped amount between the contract price and an appraisal below the contract price.
2. With a typical Hampton Roads offer, an appraisal guarantee can sometimes mean the difference between a winning offer or not.
3. Likewise, an escalation clause is often a solid option when purchasing so that you don't overbid in a multiple offer scenario.
In most cases, not every item wrong with the house on the home inspection should be asked for, with the most common exception being some new construction, but even then the seller might not agree to everything. I've successfully negotiated when representing a buyer to get as much as 10% off a home from the original contract based on the home inspection.
Also, a good buyer's agent can help to guide you through any inspections that you should get, who you should have inspecting the property, etc. Keep in mind that some agents may be unwilling to recommend inspectors to avoid liability, and others like myself require an affiliated business disclosure to be signed prior to recommendations that covers referrals of those unaffiliated to their company due to liability.
Related:
Prepare for Closing
There are numerous tasks that are important for buyers prior to closing, i.e.:
Insurance Acquisition
Scheduling final walk through inspection
Related:
Walk Through Inspection
A buyer's agent should guide you in the process of a walk through inspection, which may occur with or without a home inspector in some cases. In some cases, a quality walk through inspection can save a buyer thousands of dollars vs not doing one, rushing through one, or not doing one with a great agent.
Related:
Closing Disclosure Review
The closing disclosure is a form where the more eyes on it, the better. I & my clients both have caught errors in them before, even though typically no errors are found. Once you receive it, carefully look it over to make sure that everything looks good to you, comparing it with the contract, any addendums, etc. to make sure that everything lines up and is accounted for. If you have any questions about it, the closing company is going to be the best source to reach out to for answers, although it's sometimes helpful to copy me on any email communication with them with questions, especially if asking on a weekend and you need the information quickly.
It's important for buyers and their agents to review closing documents, not relying exclusively on the accuracy of the closing company. I've seen as high as a $10k closing company mistake get caught, that could have fallen through the cracks if the buyer's closing company alone had written things up without others checking behind them.
Closing (Some Agents)
While not every agent will be there for closing, and those that are typically there aren't always there, especially for remote closings, it's not uncommon for buyer's agents to be present with you at the finish line of closing, & helping you prepare to get there as well.
Post Closing
While all agents are different, a good agent's job isn't done after closing. A good agent is ready to advise with next steps, and available when you seek them out for advice on things in the future for your home.
Related:
Related:
Comments