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Tina Lam - Real Estate Blog

Residential Realtor for the SF Bay Area - 408.320.5261

By Tina Lam | Agent in San Jose, CA

Does it make sense for a home buyer to become an agent?

I run across this reasoning all the time.  Basically, the buyer feels that he knows enough to work a deal and thinks that a real estate broker just handles paperwork.  So, he wonders if he can get licensed as an agent to avoid the broker's commission and maybe get a 1-2% better deal.    Here's my take on the matter.

Back in the boom days when buyers could easily get financing and pay whatever they want with borrowed money, real estate brokers really did add very little value to a deal, besides watching out for the clients' basic interests.  Actually, back then, real estate brokers added negative value to deals by encouraging everybody to over-bid, driving the housing bubble ever higher.  A real estate broker was considered good if he could help you win a deal with carefully crafted appeals to the sellers, on top of nose-bleed offer prices.  In that scenario, where simply putting up a high price with lots of financing would close a deal quickly, I would recommend industrious buyers and sellers to get a real estate license.  

Of course, there are on-going costs to being licensed so that does eat away quickly at any potential commission savings.

However, when it comes to today's specialized opportunities in distressed properties like a short sale, foreclosed, or bank owned property, you're really trying to get yourself in the best position possible to save a pretty significant amount, maybe 5-20% off the market price.  Obviously, nobody is handing out free money, so experienced real estate brokers who can pull off those difficult deals for you must have equally high measures of expertise and tenacity.  

Plus, the banks are getting stingy and are often cutting broker commissions down to 2%, so the brokers of those protracted deals earn every penny over the 4-6 months it takes to close, if they close at all.  Besides, who knows what opportunities you might miss in the years of study you'll need in the school of hard knocks after you get your license to be proficient with these distressed deals.  You'll find virtually no practical knowledge about distressed deals in the licensing materials.  Real estate brokers must put in tons of time to constantly learn and re-learn how to navigate the rapidly changing rules of distressed deals. 

Given that scenario, isn't it a far better return to work with a real estate broker who can find and land you a great deal than going completely green into the shark infested waters of the distressed real estate market?

Comments

By Sam Shueh,  Wed Aug 24 2011, 06:10
It takes 1 year to get a license. 50% of applicants do not pass the license first time. It takes 2 transactions to make enough to pay for membership. So how many properties is your prospect going to purchase?

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