The real estate market continues to be very active, with more people looking for homes, than there are homes for sale. In addition to this continued seller’s market atmosphere, the industry is undergoing changes designed to help consumers better understand the home buying (and selling) process.
So, do you need your own broker when you’re looking to buy a home? What does a buyer’s broker do? What’s changing and why? Here is the first of two blogs that aim to provide some answers.
Do you need a buyer’s broker when purchasing real estate?
If you’re looking to buy a home, you may think you can find one on your own. You already are looking online, maybe at Zillow or other sites, browsing houses and photos online. You may drive around to open houses. It is possible that you will find the perfect home this way, but if you do, it could take a long time. And if you do find one, then what? How do you move forward and purchase the home – through the listing broker? Some buyers think they’ll get a discount on the price if they go through the listing broker (unlikely), or they simply don’t know what their options are.
Your best bet is to have your own buyer’s broker, who is looking out for your interests, is helping you be prepared to be a successful buyer, is watching the housing market for you and is connecting you to all of the many professionals that are part of the home buying process.
And just like a seller has a written agreement with a listing broker to sell their home, a buyer should have a buyer’s agency agreement with a buyer’s broker, that spells out the role that the broker has, and also the options available for how the broker is compensated for their work.
What a buyer’s broker does
If it’s been a while since you’ve bought or sold property, the concept of a buyer’s broker might be new – they didn’t even exist a few decades ago. And unless you or someone you’re close to is in the industry, it’s likely you don’t know how real estate brokers get paid for their work.
So let’s take a deep dive into the world of the buyer’s broker.
While the real estate market has cooled slightly over the past year, the number of days that a property is actively for sale is just a couple of weeks, and in some cases, just a day or two. This means that by the time the consumer sees it pop up on third party websites, an offer for the property is likely already being negotiated. By the time you get to an open house, it may already be under contract.
A buyer’s broker is a member of the multiple listing service and sees the listings the moment they are active, possibly hours or even a day before they show up on consumer-facing websites like Zillow. Buyer’s brokers are the ones getting their clients into the properties the first day or two that they are listed.
When they pick a home to make an offer on, buyer’s brokers help their clients navigate the process, and help choose the best forms and contingencies to protect their buyers. Whatever the situation is – for instance, buyers may need a loan, or need a certain timeline to close on the deal, or they have their own house to sell – the buyer’s broker can offer options for making a strong offer, while still getting the best deal for their buyer.
If you walk into an open house and decide to make an offer through the listing broker, here’s what is actually happening: The listing broker has a duty to be truthful about the property, but they are bound to protect the seller. The buyer in this instance has no representation, no one making suggestions about offer price or conditions. The listing broker is either solely representing the seller, or becomes a dual agent (if you sign a buyer’s agency agreement with them), which turns them into a non-agent, providing NO advice to buyer or seller. Why would you do that?
In addition to getting you access to homes in a timely manner, your buyer’s broker is making sure you are connected with a lender (or helps you know how to show ‘proof of funds’ if you’re not getting a loan); they are connecting you with other industry professionals, such as inspectors, contractors, title and escrow officers, who will help you move forward with your purchase. When you complete your purchase, only then is your buyer’s broker paid.
Next up: Changes to state agency law about the broker-client relationship
Questions? I enjoy talking about real estate, so please reach out with any questions! melissa.schapiro@exprealty.com
