Should I use an agent?

Question

Steve Vaughan · Answer

Except for my first primary purchase, I've always represented myself. I state in my offers I will remain unrepresented if my offer is not countered. They are countered less often and that's a fact.  I'm also in a small pond and have a good track record.

Going solo is not common and usually not recommended (even by me:), especially if you don't have multiple transactions under your belt.

If I was newer and just pretty much just searching listed property anyway, I would definitely have an agent. No real disadvantage and a lot of potential advantages as mentioned above.  A quality agent will be worth far more than the 3% they are compensated.

A buyer's agent is not free, however. Nothing is! Econ 101, rule #1 - there ain't no such thing as a free lunch. TANSTAAFL. It applies here believe it or not.

Even if you aren't paying them directly, the seller can't further discount their price or terms that 3% if they are paying your agent.  You are giving up 3% in concessions whether you see it or not.  Something I need to clear up. I wish agents wouldn't say it costs nothing to be represented on the buyer side.

So - get a good buyer's agent.  Help your friend's wife and give her a chance if you like.  If you're both new, it will be a little more difficult the first time but probably a relationship worth the initial hiccups.

Good luck and congrats on the decision to start your journey @Mitch Turgeon!

Mindy Jensen · Answer

@Mitch Turgeon , if you are looking to be the buyer, you will save nothing and only cause possible issues by representing yourself.

Caveat, I'm an agent.

When a person goes to list their home with an agent, then agree to a commission with that agent. It depends on the area of the country you are in, but it frequently hovers around 5-6%.

The seller pays that regardless of whether the buyer has an agent or not - unless they have negotiated with their agent a different rate if the agent represents both sides. (Most do not do this.)

Essentially, the seller's agent will represent their best interests, and also your interests. Notice I did not say your best interests. I don't believe it is possible for someone to be a completely neutral party.

Also, many states do not allow dual agency, which is when one agent represents both sides. I don't know if MN allows it or not.

Your interests are best served when you are represented by your own agent. The contract to buy and sell real estate is 17 pages long in Colorado - and probably pretty close to the same length in every other state, too.

I take an 8-hour class to learn how to fill out the contract every year there is a change. There are words in the contract that mean one thing in English, and a very different, legally-binding thing in contract-ese.

I really urge you to reconsider using an agent to represent you. Perhaps you do not use your friend, but you should use someone. It is truly in your best interest - especially if you're just starting out.

Karen Margrave · Answer

The question is, how qualified are you to represent yourself in a transaction? Most homes are listed with an agent, therefore; you will be dealing directly with that agent. Because you don't have an agent, the listing agent more than likely is going to want the selling side of the commission too for dealing directly with you, so you won't actually be saving anything and probably would be better off having your own representation.

However; if you are dealing directly with the property owner, that's a little different, and there may be some financial benefit. However; make sure you understand contracts and the process of purchasing, etc. A lawsuit over something simple can easily add up to far more than you'd pay an agent.

John Thedford · Answer

THANKS FOR GIVING OUT OUR SECRET. NOW ALL THE UNLICENSED BROKERS WILL GET LICENSED!

Lydia S. · Answer

@Mitch Turgeon

As already mentioned several times, listed homes will have a commission set in advance, and the buyer's agent will get half, so it's not like you're spending extra money on the deal.

You said this person was a friend who assisted you for free previously, so maybe allowing them to assist you now and collect some commission would be a nice favor in return.

Mike Bolen · Answer

@Mitch Turgeon I agree with @Mindy Jensen the seller, if represented by a Realtor, has signed an agreement to pay typically 5-6% of the sales price to the listing agent. Considering you're not an agent the likelihood the listing agent is going to have to handle your side of the transaction along with her own side of the transaction is about 100%. The liability incurred by both the listing agent and the seller allowing a buyer to represent themselves should immediately preclude accepting an offer from a buyer representing themselves.

Additionally I feel it sends a message that the investor is unprofessional and unsophisticated. Purchasing a property for investment or flip should be economically feasible without having to resort to cutting corners to save a buck by not using professionals.

Russell Brazil · Answer

You actually place yourself at a distinct disadvantage by not using an agent. I've sold a couple hundred homes....and I've probably received close to a thousand offers on those properties. I'd say somewhere between 50 and 100 of those offers came from people without agents. You know how many of them purchased a house from me? Zero.

John Woodrich · Answer

I would recommend you use your agent to purchase the property.  This comes from a person who just sold their last house FSBO on the MLS paying a 2.7% commission to the buying agent.

The realtor can setup filters to limit your time spent searching for properties.  Myself, like you, may not consider searching for properties work however it is always easier negotiating with a middle man.  The likelihood that you will negotiate a reduced commission representing yourself is also minimal.

I am all for saving money where you can but in this instance using a professional to negotiate on your behalf may not cost you anything.

Steve Vaughan · Answer

Exactly right, Mike. Great points about the different reasons a listing agent (LA) may have taken the listing in the first place.

I don't try to influence how the LA is compensated.  If he or she earns both sides- great.  I'm happy with my offer (obviously since I submitted it) and I may gain a new ally for a future transaction.  Guess who they may call when a new similar place is about to come on the market?  It would be very short-sited to try and dictate the LAs commission in an offer.

It only works though as a known qualified buyer that won't need a bunch of hand-holding or represent a lot of risk. Interview inspectors before you go under contract so you know who you will call. Be pre-qualified with your lender. Understand and adhere to all contingency deadlines.  Don't expect or ask the LA to do a bunch of work for you - they represent the seller only and it wouldn't be right.

New folks should have their own agent.  Understand that most solo buyers are just twice the work and liability for the LA and/or they rarely close as @Russell Brazil mentions. Until you have proven differently I wouldn't have high expectations of a solo offer, either.  Gain that trust by smoothly closing some transactions with your agent!

Mike Cumbie · Answer

@Mitch Turgeon,

The move @Steve Vaughan pulls "If I am not countered i am going unrepresented" allows the seller and the agent to have some discussions. It also allows them to decide the best way for them to make compensation work. Without making the decision on how much compensation is going where. It leaves the ball in the court of those two where it should be. It also just has a total number, which allows for the most flexibility. They can work a NET out between themselves. Once you have purchased a couple houses there is nothing wrong with going that route (Obviously if you buy and sell as much as Steve does you will know more than most starting agents anyway).

I often see people say "I want the 3% buyers agent commission" or "the sellers agent is only to be compensated 2.5% or some such". A couple things wrong is nobody knows what the listing agent and owner agreed to, are there referral fees? Did the agent pay to have the back room painted? How many ads did they place? how many opens? Is this part of a deal the seller and agent came to "I'll sell this one at 1% if you buy the 2 other ones with me being the buyers agent"?

So basically many people "assume" there is 3% where in reality there may not be. I've taken a listing just because it was on a busy road and it got a sign out front. The owner knew the deal, it was all above board. There expectations they had for my work, was on par with the almost zero compensation.  But a seller trying to negotiate with 3% that doesn't exist because we already did that to get the price where it was.

Good luck and good conversation!

Should I use an agent?

Most Popular Reply