I will preface this article by saying: This is NOT a personal plug so that you might hire me. This is the honest truth. Before I was a Realtor, I might have read this headline and been skeptical, too. But, I promise that everything I will say here is so you can be fully informed and protect yourself when you are ready to buy a home.
Purchasing a home is a major life decision. It is also a major legal and financial transaction. That’s why there are so many full-time real estate agents in every market. Homebuyers and sellers recognize that they should not try to do it alone. Here are the most important reasons you should hire your own real estate agent to help you through the process:
#1 – You are not a professional negotiator
When you are trying to buy a home without a professional real estate agent representing you, you are basically pretending to be an expert in an industry you don’t work in.
You will have to negotiate against the seller’s agent, who is a licensed real estate agent and who is trained to be a professional negotiator. While they might be helpful and kind to you, that agent is legally obligated to work only in the best interest of the seller.
Real estate agents know the sales contracts like the backs of our hands. We eat, sleep, and breathe contracts. We know every possible way to shape a strong offer, how to present a compelling counteroffer, and how to know when the other side is getting ready to give in. This is even more important when there are multiple offers on a property, as we are seeing all the time in today’s “seller’s market”.
Even if negotiating is a major part of your own profession, you should think twice before going up against a full-time, full-service real estate agent, especially when it’s for something as important as your own home.
#2 – You don’t know the true market value of a property
When a homebuyer is getting ready to make an offer on a property, their agent performs what is called a Comparative Market Analysis, or CMA. That is how real estate professionals determine the true value of a property. They use the CMA as a starting point to recommend how much money their client should offer.
If you are not using a real estate agent, you will have to figure out how to analyze the value of the property by yourself. You might be able to get in the right ballpark, if you know how to find comparable properties. But, without the training and experience of an agent, you won’t know for sure. (Note: a Zestimate is not a CMA.)
In addition to making a reasonable offer, using a CMA when you are deciding on your offer price also helps you protect yourself during the appraisal period. If you offer too much money for a property, and of course the seller accepts your offer, you are not out of the woods yet: The mortgage lender’s appraisal could come in lower than the purchase amount, and they could refuse to give you the loan.
#3 – Your agent is the one who keeps the deal from falling apart
Honestly, as soon as an offer is accepted, it’s the buyer’s agent who does most of the work. The role of the seller’s agent (known as the listing agent) is primarily to market the property and attract qualified buyers – so their job is mostly done by the time the seller accepts an offer.
When I say “most of the work”, I’m talking about getting through all of the contingencies between when the offer is accepted and the closing date. To paint a picture of what that means, here are some of the responsibilities of the buyer’s agent during that period:
Identifying the ways the buyer can get out of the sales contract, without losing their deposit (thousands of dollars), if they have a change of heart
Making sure the home inspection is completed before the deadline, which could be just a few days after the offer is accepted
Negotiating solutions when there are problems revealed during the home inspection, like plumbing issues or electrical problems
Getting answers during the condo/HOA document review period, if questions come up about the condo/HOA board financial statements, assessments, rules, etc.
Negotiating with the sellers to lower the purchase price from the original amount, if the appraisal comes in too low and the mortgage lender refuses to give the loan
Coordinating with the listing agent and title company if the title search reveals liens or judgments against the property, and making sure the buyer will not be responsible for paying those off
Making sure repairs are made if there is damage to the property during the “under contract” period, after the home inspection period is over
The list goes on! That’s why being a real estate agent is a full-time job. Imagine trying to handle even one of these items, while you (the home buyer) also have your own work/family responsibilities all day.
#4 – Hiring your own agent does NOT cost you money
The biggest misconception that homebuyers have about hiring a real estate agent is that it will cost you money.
In standard real estate transactions, the seller pays the commission for both their own agent (the listing agent) and the buyer’s agent.
This is important. The buyer does not pay their own agent out-of-pocket.
But, that raises another question: If a homebuyer does not have an agent representing them, can they get a discount on the purchase price? For example, can they buy the property for 3% less?
The answer is: Probably not!
Here’s why. When someone wants to sell their home, the first thing they do is hire their listing agent. The total amount of commission (for example, 6%) is written into the contract they have with their agent. That commission will be shared between the listing agent and the buyer’s agent when the sale closes.
As you can see, that contract assumes there will be an agent representing the future buyer (because there usually is). If there is no buyer’s agent, and therefore no one to share the commission with, then the whole commission typically goes to the listing agent.
Sometimes there are exceptions, called a variable commission. For instance, the listing agent can offer the seller a discount on commission in the event there is no buyer’s agent. (I do this with my seller clients.) If that’s the case, the seller might actually consider selling their home to an unrepresented buyer for a slightly lower price.
However: you, as the buyer, have no idea what’s in the contract between the seller and their agent. It’s not a public document.
So, you should assume it’s written the typical way: If you buy a home without your own agent, you will not get a “discount.” That’s because the seller still has to pay the full commission… and the listing agent will get twice the commission they would otherwise.
There’s a reason that real estate agents have training, testing, and continuing education requirements for the rest of their careers – it’s complicated stuff!
One more thing. Remember that your agent’s job is to put your needs first, and do everything in their power to help you (as long as it’s legal!). They put your best interests above the seller’s, above their boss’, and even above their own interests. The technical word for it is “fiduciary”. Just like an attorney or a financial advisor, your agent is legally obligated to protect your best interests during the whole time you are working together, and to keep your information confidential forever. They are on your team!
Thanks for reading,