After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what's known in real estate as a buyer's agent – which many experts say is a mistake.
For years, house-hunters have had the option to work with a real estate agent who shows them properties and may ultimately negotiate the price – a counterbalance to the agent who almost invariably represents the seller. But now fewer buyers are taking it. Of the buyers who purchased a property through a real estate agent, just 57% had buyer representation, according to a 2010 report by the National Association of Realtors. That's down from 62% in 2009 and 64% in 2006, before the housing bust. Also, fewer buyers are first learning about the home they purchase from real estate agents: just 37% are reporting real estate agents as their first source of information on the home they purchased, down from 50% a decade ago, according to NAR.
Many experts think this is a bad move – worse, for example, than trying to sell a house without an agent. For one thing, in most cases, a buyer doesn't pay an agent; the buyer's agent splits the commission with the seller's agent, so the services are essentially free to the buyer. Also, a buyer's agent can access historical sales price data for home sales in the area (not found on the consumer based websites), which means he/she can recommend a bidding strategy that targets comparable properties that sold for less money in order to get a better deal for the buyer. John Vogel, adjunct professor of real estate at the Tuck School of Business at Dartmouth College, calls going through this process alone "a mistake."
There are lots of reasons buyers may choose to represent themselves. The real estate listings and detailed information that was once only available to real estate agents -- like median sales prices in a neighborhood, the amount of days a home has been on the market, and how many price cuts it has endured – are now online. However, much of the information provided on such consumer based websites is often faulty or misleading in an effort to get prospective buyers to contact the website administrators directly.
On the other hand, some house-hunters may think they are working with a buyer's agent, when in reality, they're actually dealing with a seller's agent. Many buyers contact the agent listed with the property or walk into an open house thinking the agent is working in their favor. However, in these cases the agents are contractually obligated to represent the seller’s best interests only.
There are several more reasons why buyers may be at a further advantage when they work with a buyer's agent – at least compared to relying on a seller's agent for advice or guidance. Remember, a seller's agent is contractually obligated to help make the sale happen in the seller's favor, often as close to the asking price as possible. And buyers' agents are contractually obligated to only represent the best interests of the buyer. Buyers agents can also suggest home inspectors, lenders, plumbers, etc. that they've worked with before.
When searching for a buyer's agent, experts recommend looking for a full-time experienced broker. Such an agent will be further involved in the market by previewing new listings on the weekly caravan, they might drive around a neighborhood looking for signs of properties that are for sale by owners or mail letters to existing homeowners alerting them to a buyer who's interested in a similar property to theirs. And by the time a buyer enters into a contract, that buyer’s agent will be there to look for red flags in order to prevent challenges from arising through the escrow process and beyond.
Overall the experts agree that it’s vital for home buyers to obtain the services of an experienced buyer’s agent to help them navigate through the home buying process. On average, the buyer will get a better deal and they will avoid many of the pitfalls that going it alone can result in.
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