Not using a buyer's agent in this market

[Eug]

With that said, why don't we be honest. From my experiences they put pressure on you to raise your offer price

At times they have advised me to raise my offer price... and those homes eventually sold for prices more than I was willing to offer.

However, for the homes I and my GF actually bought, our agents actually suggested offering lower than we originally were thinking.

they generally have little to no understanding of macro economics so in times like this where real estate is almost certainly going to drop in value over the coming years, you will hear something along the lines of "real estate will always go up"

Hmmm... Not really. Usually more like, "If you're in for the long term, prices will go up." And that's a fair statement.

"interest rates are low, now is the best time to buy." People who listened to this in 2007 got their clocks cleaned in the US. Many are being drowned in negative equity. Families ruined.

Personally, I think it's a reasonable time to buy, as long as it's your primary residence, you have a significant down payment, and you don't have to amortize for 35 years. I wouldn't fault a real estate agent for saying the same. I wouldn't necessarily recommend buying for rental though.

In addition, their motivation is not your happiness or getting you a good deal, it's just getting you a deal. Any deal they can collect their commission from. The interests of a buyer and a Realtor are not aligned and in fact are almost completely conflicting. It's for that reason I think a buyers agent isn't necessary if you've got even a modest understanding of real estate.

My main beef with buyers' agents is IMO they're overpaid for people who actually buy homes, and underpaid for those that don't. I'd be happier paying for a real estate agent's time to represent me, whether I end up buying or not.

 

[Bentley]

Well maybe it's my approach to real estate that makes them a poor choice for someone like me.

I'm in the camp that believes the purchase of a home is generally the largest investment most people will make in their lives. And for that reason, you must treat it like an investment. Pay only what it's worth, or less. Do not buy at the cusp of a potential collapse. Sure it will go up over time. That's what people in 1929 thought about the stock market. It took 25 years just to break even with the market levels before the collapse.

Look at it like this. Interest rates today are at historic lows. Prices have barely come down. I attribute that to the aggressive lowering of interest rates over the past year to "ease the fall". Problem is, interest rates will not stay this low. And when they go up, prices will come down.

So, you're a happy new family buying your first home, planning to live in it for years. You have 40,000 saved up for a down payment and plan to buy a 300,000 dollar home. With the help of your buyers agent you find the right place.

You buy that home. Get a great deal on the mortgage and are feeling happy. But then interest rates start rising. You're comfy now because you did the safe move and locked in. 5 years pass and it's time to refinance. You're shocked to see that interest rates have gone from 3 or 4% to 8 or 9%. Not only that, the assessed value of your home has dropped dramatically. It's only worth 225,000 today. You're in negative equity, and your salaries are not enough to handle the significantly higher cost to service your mortgage. You default on the home, lose all of your savings and file for bankruptcy. Happy family is torn apart due to the stress of the financial situation.

Now, that is a worst case scenario, but it can happen. So is it still responsible and acceptable for a buyers agent to feed this family the "if you plan to live in the home for a while prices will go up" line? I don't think so.

We've obviously gotten off topic a little, but you see my point.

 

[Eug]

You're basically making two separate arguments:

1) You don't need a buyer's agent.
2) You shouldn't buy now and a buyer's agent should tell you that.

1) My view is that a buyer's agent can be optional for some people, but they can greatly help others... for a price.
2) However, what you and other buyers must realize is that the buyer's agent's job is not to analyze your financial situation. S/he doesn't have access to your financial records anyway. The job of a buyer's agent is to find you the most appropriate property that meets your selection criteria, and help you through the nitty gritty of the purchase process once the property has been chosen. One shouldn't be looking to a buyer's agent for financial planning advice. Hell, I wouldn't even necessarily advise going to a local bank rep for financial planning advice, so I certainly wouldn't recommend going to a real estate agent for financial planning advice.

 

[Epi]

Well maybe it's my approach to real estate that makes them a poor choice for someone like me.

I'm in the camp that believes the purchase of a home is generally the largest investment most people will make in their lives. And for that reason, you must treat it like an investment. Pay only what it's worth, or less. Do not buy at the cusp of a potential collapse. Sure it will go up over time. That's what people in 1929 thought about the stock market. It took 25 years just to break even with the market levels before the collapse.

Look at it like this. Interest rates today are at historic lows. Prices have barely come down. I attribute that to the aggressive lowering of interest rates over the past year to "ease the fall". Problem is, interest rates will not stay this low. And when they go up, prices will come down.

So, you're a happy new family buying your first home, planning to live in it for years. You have 40,000 saved up for a down payment and plan to buy a 300,000 dollar home. With the help of your buyers agent you find the right place.

You buy that home. Get a great deal on the mortgage and are feeling happy. But then interest rates start rising. You're comfy now because you did the safe move and locked in. 5 years pass and it's time to refinance. You're shocked to see that interest rates have gone from 3 or 4% to 8 or 9%. Not only that, the assessed value of your home has dropped dramatically. It's only worth 225,000 today. You're in negative equity, and your salaries are not enough to handle the significantly higher cost to service your mortgage. You default on the home, lose all of your savings and file for bankruptcy. Happy family is torn apart due to the stress of the financial situation.

Now, that is a worst case scenario, but it can happen. So is it still responsible and acceptable for a buyers agent to feed this family the "if you plan to live in the home for a while prices will go up" line? I don't think so.

We've obviously gotten off topic a little, but you see my point.

That's not an extreme example at all. That's EXACTLY what's happened in the USA over the past decade:

1) House prices going up like mad
2) Subprime and $0 down mortgages making people who aren't supposed to be buying homes able to afford way beyond their price range.
3) Subprime mortgages expiring after a few years requiring refinancing at much higher rates.
4) People defaulting on mortgages.
5) Prices of homes fall with increasing defaults.

 

[general surfer]

i dont have an buyer agent and planning to use the seller agent to represent me, i think in this way, the selling price has a better negotation space, what i am concern is where to find a good lawyer, and the rest of the procedure, will it be the seller agent help me with that too!

Advise please!

 

[movieguy]

i dont have an buyer agent and planning to use the seller agent to represent me, i think in this way, the selling price has a better negotation space, what i am concern is where to find a good lawyer, and the rest of the procedure, will it be the seller agent help me with that too!

Advise please!

I've worked with real estate agents and been behind the scenes of sales centres to know it is highly recommend you get your own agent, not the seller's agent. Please read this article that goes into it in great detail. It's about preconstruction, but the rules apply to resale as well.

Some agents are overpaid, but what the general public understands of the economics behind it, is very misleading. It's sort of like how when you see something on sale for $1 off, but don't take into account it'll cost you $2 in gas to get to the store with the sale.

Also, a lawyer is there to let you know if your purchase, within the confines of the law, is legal, not to prevent you from getting ripped off. It is much like companies who get ISO certification: I can build a balloon made out of lead, but get ISO certification if the method by which I make the lead balloon, is sound. The ISO certification doesn't mean the practicalality of the product is any good. Likewise, a real estate lawyer won't tell you if what you are buying is any good or right for you.

Admittedly, too many agents are stupid and think only about the money, but a good agent looks out for your best interest.

I like to use this analogy: my car needs fixing. I take it to a shop I've never been to before. Am I going to trust the mechanic who tells me I need $5k in repairs? Wouldn't it help if I had a close friend who is a mechanic (or knows a lot about cars) to advise me if I really need the $5k or if the guy is ripping me off?

Of course, there's the comparison to lawyers: if you're being sued, are you going to trust the lawyer of the guy suing you? You would want your own lawyer right? hehe.

 

[KIKI11]

I am currently working with listing agent to buy a house, I am confused by the agent.

I found a house I like and contacted the listing agent. Initially she stated that she will represent both sides in my case and we would get benefit without an agent. But when I started to do the calculation for my offer, basically deduct the 2.5% from the regular offer prices and stated that there is a room of a few thousands dollars for her work representing use, really just draft an offer, she said that's not how it works, I should not take commission into consideration when making an offer, just think what the house worth for me. The commission is paid by the seller, they will discuss and I don't need to know anything about it. I am confused:

1. From legal perspective, shouldn't the 3 parties (buyer, seller and agent) sign an agreement that specify the situation that this is a multiple representative situation? So everything is clear and everybody is acknowledged?
2. shouldn't the commission payment schedule be written on paper, we, as buyers have the right to know how the commission is paid?
3. what's the correct process to work on this transaction? Shouldn't I, when making an offer, attach a separate schedule indicating that our offering price is lower by $$$$ because the savings on the BA's commission, and get the seller sign back with acknowledgement?
4. When should the lawyer be involved?

Is this listing agent following the policy or is she/he trying to hide things from buyer/seller?

 

[Ric]

I found a house I like and contacted the listing agent. Initially she stated that she will represent both sides in my case and we would get benefit without an agent. But when I started to do the calculation for my offer, basically deduct the 2.5% from the regular offer prices and stated that there is a room of a few thousands dollars for her work representing use, really just draft an offer, she said that's not how it works, I should not take commission into consideration when making an offer, just think what the house worth for me. The commission is paid by the seller, they will discuss and I don't need to know anything about it. I am confused:

1. From legal perspective, shouldn't the 3 parties (buyer, seller and agent) sign an agreement that specify the situation that this is a multiple representative situation? So everything is clear and everybody is acknowledged?
2. shouldn't the commission payment schedule be written on paper, we, as buyers have the right to know how the commission is paid?
3. what's the correct process to work on this transaction? Shouldn't I, when making an offer, attach a separate schedule indicating that our offering price is lower by $$$$ because the savings on the BA's commission, and get the seller sign back with acknowledgement?
4. When should the lawyer be involved?

Is this listing agent following the policy or is she/he trying to hide things from buyer/seller?

Wouldn't you be in a better negotiating position if you just went ahead and got yourself a Buyer's Agent. It's obvious that the Sellers agent is not entertaining the thought of discounting the property by 2.5%. Also, I know it's legal for the agent to represent both parties but do you really think it will be in your best interest. It may well end up costing you more than the 2.5% you are trying to save. What if the property is overpriced? Has he/she disclosed to you what the true market value is? I would suggest getting a good Buyers Agent and have them do the work on your behalf (including negotiating a price that would save you more than the 2.5%). I'm of the belief that it is extremely difficult to act equally in the best interest of both buyer and seller during multiple representation. I know it's the norm in this market, where everything sells close to asking; but I personally would avoid it.

 

[KIKI11]

Wouldn't you be in a better negotiating position if you just went ahead and got yourself a Buyer's Agent. It's obvious that the Sellers agent is not entertaining the thought of discounting the property by 2.5%. Also, I know it's legal for the agent to represent both parties but do you really think it will be in your best interest. It may well end up costing you more than the 2.5% you are trying to save. What if the property is overpriced? Has he/she disclosed to you what the true market value is? I would suggest getting a good Buyers Agent and have them do the work on your behalf (including negotiating a price that would save you more than the 2.5%). I'm of the belief that it is extremely difficult to act equally in the best interest of both buyer and seller during multiple representation. I know it's the norm in this market, where everything sells close to asking; but I personally would avoid it.

Your suggestion is typical but not reality, there may be some good agents out there, 1 out of 1000? I won't be that lucky to see one. All they do is push you for higher budget. Their suggested price is always higher than the result from my own homework. They don't care about my interests, just their commission.

 

[Ric]

Your suggestion is typical but not reality, there may be some good agents out there, 1 out of 1000? I won't be that lucky to see one. All they do is push you for higher budget. Their suggested price is always higher than the result from my own homework. They don't care about my interests, just their commission.

I'm offended by your broad generalization; but I'll still try and help you:

1. Have you signed a Buyers Representation Agreement (BRA) with the Seller's Agent or are you just a Customer? If you did then the BRA would/will disclose what the commission is to represent you.
2. When you place an offer, you will have to acknowledge a "Confirmation of Cooperation” which not only discloses that the representation is "Multiple" but will also disclose the commission being paid. If the agent does not allow you to see this then he/she is breaking the rules.
3. You don’t need to have a separate schedule on paper explaining that your offer price is discounted because you’re subtracting the 2.5%. Just place an offer close to what you think is market value less the 2.5%. In the end, it’s up to the Seller to decide whether he/she is willing to accept your offer.
4. Please also note that the Selling Agent is not obligated to accept only the 2.5% (as this is multiple representation). He/she may insist on getting full commission (3.5-5%) from the transaction. In that case, the Seller may not accept your offer with the 2.5% discounted.

Hope this helps and good Luck!

 

[KIKI11]

Your answer is very helpful, thank you.

I'm offended by your broad generalization; but I'll still try and help you:

1. Have you signed a Buyers Representation Agreement (BRA) with the Seller's Agent or are you just a Customer? If you did then the BRA would/will disclose what the commission is to represent you.
2. When you place an offer, you will have to acknowledge a "Confirmation of Cooperation†which not only discloses that the representation is "Multiple" but will also disclose the commission being paid. If the agent does not allow you to see this then he/she is breaking the rules.
3. You don’t need to have a separate schedule on paper explaining that your offer price is discounted because you’re subtracting the 2.5%. Just place an offer close to what you think is market value less the 2.5%. In the end, it’s up to the Seller to decide whether he/she is willing to accept your offer.
4. Please also note that the Selling Agent is not obligated to accept only the 2.5% (as this is multiple representation). He/she may insist on getting full commission (3.5-5%) from the transaction. In that case, the Seller may not accept your offer with the 2.5% discounted.

Hope this helps and good Luck!

I didn't sign any agreement with the listing agent yet, as she doesn't accept my discounted offer, she push me to offer the market value wihtout deducting 2% or 2.5%, I wouldn't provide this offer, otherwise why don't I hire a buyer agent?

 

[Wooba]

I've been given discounts in the past for not using a buying agent. With the internet and if you've got the time to do your own research, getting a buyers agent seems pointless.

 

[KIKI11]

And I forgot to say sorry, I don't want to offend anybody here. And thank you again.

I'm offended by your broad generalization; but I'll still try and help you:

1. Have you signed a Buyers Representation Agreement (BRA) with the Seller's Agent or are you just a Customer? If you did then the BRA would/will disclose what the commission is to represent you.
2. When you place an offer, you will have to acknowledge a "Confirmation of Cooperation†which not only discloses that the representation is "Multiple" but will also disclose the commission being paid. If the agent does not allow you to see this then he/she is breaking the rules.
3. You don’t need to have a separate schedule on paper explaining that your offer price is discounted because you’re subtracting the 2.5%. Just place an offer close to what you think is market value less the 2.5%. In the end, it’s up to the Seller to decide whether he/she is willing to accept your offer.
4. Please also note that the Selling Agent is not obligated to accept only the 2.5% (as this is multiple representation). He/she may insist on getting full commission (3.5-5%) from the transaction. In that case, the Seller may not accept your offer with the 2.5% discounted.

Hope this helps and good Luck!

Just having unhappy experience with the agents I am dealing with.

 

[drewp]

That is the problem KIKI. You have painted all real estate agents with the same brush, and now you are in a position where you can't close the deal. I understand that you don't want to use a buyers agent because you feel like you can get a better deal on your own. Remember the selling agent is representing the sellers side and interest, and for them to give you objective feedback might be breach of their contract with the seller. If you really don't respect using an agent in the buyers side, try to find one that will give you a cash back at least. All the best in your search.

 

[Ric]

Kiki, it's fine; I understand you've not had good experiences and I just wanted to make the point that not all agents are bad. I think drewp made a good point in that you could always use a buyer's agent willing to give you a sizable cash back on this purchase.