Home buying 2.0: use an agent? That is the question
Before the daggers come out, please remember that I am licensed as a multi-state broker and have been for over 12 years, a national sales trainer for agents for 6 years and have provided free real estate consulting services for 4 years. I know the pain of being an agent, but as I’ll discuss here, it’s not always necessary or even advisable to hire a real estate agent to represent you when you’re buying a home. The only thing you definitely need is an experienced and trained attorney (preferably local) to create the contract and execute the transaction on your behalf.
First, let’s look at why you might want to hire a real estate agent. Notice I said “hire,” not “hire.” Since you are not typically compensating the agent or broker, you are technically not hiring an agent or broker. They can (and should) ask you to sign a buying broker agreement when you hire them. That’s just limiting it to burning and beating agents. Nothing sucks more than working for days, weeks, and most months with a “customer” buyer only to get “parking lot crap.” A broker can provide you with insight into the market that, if you were doing it independently, would take you a while to compile. They also know the legal documents that are required to make a successful purchase. Maybe they are better negotiators than you. They have access to local vendors and other professionals who can make the process much easier. And lastly, they are legally liable if your transaction goes wrong and you need recourse. That is why they have an E&O (errors and omissions) insurance.
Now many people, particularly real estate agents, will be up in arms at this point in my column. They will reply with things like “we do much more than that” or “we do business in accordance with our code of ethics” or “we are professionals” or “we earned advanced designations through continuing education” and my personal favorite “we are the association of largest professional in the country.
To answer your question, yes, I have been a real estate agent for 11 out of the 12 years since I have been licensed. But hiring a real estate agent has no proven benefit compared to hiring a state-licensed real estate salesperson. Both must have the same license in the state they serve, a real estate agent is just a licensee who has joined the club of real estate agents. The state of our current economy, the state of our property market and everything associated with it, which is basically the entire economy, goes back to the market crash in 2007/8. There is also a striking and interesting point about this association. It is the only industry that never received TARP money from the federal government during this crisis. Pretty much every other major industry, including the ones that had nothing to do with the real estate market, ie US airlines got money from the feds. The National Association of Realtors or its members, the individual agents, never received a dime. That makes me wonder what the NAR’s agenda really is, since it’s pretty clear it’s not for the benefit of its members.
So now that you know what a real estate agent or agent brings to your purchase, it’s not much more than you can do yourself. Actually, what you can do for yourself is much more, including knowing that you are not losing money or overpaying for the house. I know what you are saying, “but I don’t pay the agents commission on my purchase, the seller does” true in most cases, but in reality an agent can cost you money that is not tied to the commission. They may lose terms and conditions in their contract which causes monetary loss. What if you were given biased or misleading information about the value of the house and you overpaid for it? Whether the vendors they recommended made mistakes or caused transaction delays. Or worse yet, they mismanaged their funds. Which, by the way, is the number one reason brokers get fined, shut down, and even jailed.
It sounds pretty harsh, but I can tell you that as a real estate trainer, I’ve taught thousands of agents how to play with words, use specific dialogue, make you think or feel like you can’t do it alone, and actually convince you that you can’t. you have no choice or alternative but to use them even if your maternal twin is a top-tier national runner. He just needs to do his own research in one area and then zero in on one house. He calls the listing agent, they are more than willing to give you all the details in hopes of turning you into a customer. At least this way, the information he’ll get won’t be leaked by his agent. Check out popular websites like Zillow, Google, and Trulia for independent information. Deal directly with the listing agent. They will ask you to represent them, just politely decline, but also tell them that you want part of the commission they receive credited to you at closing, since they don’t have to pay a co-broke to another brokerage. Use one of the new and up-and-coming vendor referral websites if you don’t know of contractors in the area. And lastly, be sure to find and use that experienced local attorney to create your offer contract, hold your deposit, create the HUD or closing statement, and represent you throughout the transaction.
The question is to use an agent? I think the answer is obvious. I would suggest that the only time to hire an agent is in the following circumstances. You are a celebrity or high profile person and you do not want your notoriety to influence your purchase, if you live far from home and do not have the time or practicality to do your own research or are a short sale foreclosure purchase of gold.
By JT Steele