Home Buying in Chicago>Question Details

CTN, Home Buyer in Chicago, IL

Benefit of buyer's agent?

Asked by CTN, Chicago, IL Mon Jun 30, 2008

I am a prospective first-time homebuyer, and in search of straight talk on the benefits of engaging a buyer's agent. I am a transactional attorney (comfortable with paperwork), and have access to a family friend with a RE license familiar with the market who has indicated he would assist informally. I am wondering how the services provided by an agent might outweigh the possible negotiated discount I could obtain from the seller's agent by being unrepresented. I realize many of the responses are likely to be from agents with some degree of bias on the subject, but would appreciate responses that are as candid and detailed as possible. Thanks!

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If you're a transactional attorney, have access to the MLS through your family friend, and are comfortable handling the negotiations you probably don't need an agent.

An agent is very helpful in finding suitable homes, getting you inside those homes, and insulating you from listing agents wanting to turn you into their client. They're extremely useful in helping you determine what a good comparable price is, and figuring out negotiation tactics. They're very good with keeping the deal ontrack, with the lenders, appraisals, and deadlines.

It seems that you're probably already pretty well equipped for all of that, and If so, I agree that $12,500 is a lot to pay for services you don't need.

You can still hire a local RE attorney ($400-$750-ish), and maybe get a professional courtesy discount... it'll be worth that fee... otherwise, I think you're under control.

Good luck.
4 votes Thank Flag Link Tue Jul 1, 2008
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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I recently bought a home on the near West side. I went through two agents and then just represented myself. I found both agents extremely over-rated and not very helpful. One pressured me to bid above the asking price just to complete a sale! Guess what that "hot hot hot" property has now been on the market for more than six months. I think that I had a bad experience because I knew 1) exactly where I wanted to buy and 2) exactly what kind of property I wanted. One of the agents insisted on spamming me with properties that did not match my criteria just to get me "interested" in something. Regarding discounts: sellers are more flexible with unrepresented buyers and sellers agents will advocate your bid more since they'll be getting a couple grand extra. Don't tell me people don't like more money as opposed to less. The whole negotiation bit - if you're familiar with the area (like I was) you can call seller's BS when you hear it. Best of all, you're not in the "field" so you don't have to worry about your reputation with fellow agents. My first agent told me that submitting a bid 80% under asking price would cause "injury" to his reputation. Even in this market you can't expect miracles and a buyer's agent is primarily helpful if you need someone to hold your hand or have no idea wha you're looking for. The whole bit about doing a $500K lawsuit, I think real estate transactions are only a step above small claims court. It's not like a lawsuit where if you blow the SOL the case is over. The best an agent can do is save you a couple of grand, if that, while getting the same or more for herself. Again, if you need someone to recommend what to buy and where then an agent may be helpful.
1 vote Thank Flag Link Thu Aug 7, 2008
We engaged a buyers' agent for our current search for the geographical knowledge (we aren't that familiar with the area where we're looking), access to information (instant MLS listings, price changes, sold comps. etc.) plus rehab knowledge. If you've got all that already, and are a good negotiator, you might not need an agent! When we bought our last place, our agent didn't seem to do as much, and our lawyer was the one who seemed to do most of the work on the transaction.
1 vote Thank Flag Link Tue Jul 1, 2008
Thank you, Nick. I do not practice real estate, and in no way mean to discount the expertise of an agent who does. You are right that I would not take a murder case. As I am looking at properties in the $500K range, that 2.5% is by no means insignificant.

What sort of mistakes do you see unrepresented buyers making, and what sorts of costs would you attribute to them? If I have my eye on a particular property already, and believe that I have a fair price in mind, are there agents who might engage me on a discounted basis, especially if I am willing to be the point person on the financing issues?

I appreciate your response, and would be happy to come to the conclusion that the $12,500 on a buyer's agent was well-spent. I am just wanting to get my head around all of the reasons why it would be. Any further thoughts out there?
1 vote Thank Flag Link Mon Jun 30, 2008
If I'm reading this correctly, you know the paperwork and have a friend in real estate that will help you for free, knows the market and laws in your area. And the question is? If you are fortunate enough to know the paperwork, have a friend willing to assist that knows the laws, area, and market, and are comfortable with it, why not.
0 votes Thank Flag Link Fri Aug 8, 2008
A couple key points:

1) Think of an agent as insurance. If anything goes wrong, if you used an agent, you likely have legal recourse.

2) Agents will make the process a lot easier and smoother for you. As a first-time buyer, there are lots of procedural issues which if you mess up are potentially costly and will be a pain in your butt.

3) These days, you can easily find agents who will refund for you a part of the commissions they receive from the selling agent. This negates a lot of the reason not to use one. You can find agents like this in lots of places, try http://www.seekingagents.com/

Best of luck,
Dan
0 votes Thank Flag Link Thu Aug 7, 2008
The reason individuals hire professionals like attorneys, real estate agents etc. is to represent their interests and seperate out the emotions involved in negotiating transactions directly between the principals. Anyone in this business for any time has seen deal fall through over ego clashes where both buyer & seller later regret their posturing.

Sharp negotiators earn their keep in many ways. Assuming you can get the sellers to discount your purchase by the full amount they would likely pay a cooperating broker (2.5%?) may be a mistake. Have you "negotiated" that with them already? A good buyers agent may be able to get you tangible concessions like having closing costs paid by seller (3%) throwing in, washers & dryers, swingsets, furnature etc. The real issue is whether the buyers agent you choose is an order taker or negotiator. Speaking to their references, reading their blogs & website should give you an idea of their personality type and whether they are prepared to earn your referral business.
0 votes Thank Flag Link Thu Aug 7, 2008
Let me start by agreeing with you that responses from agents will be biased, probably to the same degree as if I were to ask you how important is it to have an attorney represent me in a $500,000 lawsuit. While the answer to my question is pretty obvious, many home buyers don't consider real estate agents as "professionals" and don't recognize the importance of having an experienced agent represent you as a buyer. After all, while you don't see many attorneys practicing law part time after they get off from their full time job of waiting tables, it's fairly common in real estate. How hard can it really be?

Let me attempt to answer your question as candidly and unbiased as possible. Getting my real estate license meant nothing more than spending less than a month in classroom training and passing a test. That was the easy part. I since have spent the last 22 years becoming and expert in real estate. If you think buying real estate just involves a little paperwork, you're sadly mistaken. And if you think all agents are equal, you'd be wrong again. That would be the same as saying all attorneys share the same experience and expertise. Do you think O.J. Simpson was innocent or that he had an experienced attorney get him off for murder? Would an attorney in his first year of practice have gotten O.J. acquitted? I doubt it.

I save my clients thousands of dollars per transaction because I have spent years learning how to negotiate, the psychology of sales and having the knowledge to get it done. The paperwork has nothing to do with it. I don't even bother with it and have my assistant complete it for me.

Also, what makes you think you'll be able to negotiate a discount by going straight to the listing agent? The seller has already signed a listing agreement to pay a commission. Being unrepresented only means the listing agent doesn't have to split the commission with a buyer's agent. Do you expect the listing agent to give split to you? It doesn't work that way. And if you were to buy direct from a "FSBO", they're not going to give you the discount. They're trying to sell it themselves so they don't have to pay a commission. If they "discount" the price, don't be fooled into thinking you saved some money. That seller just sold you a home for market value.

Go here for more information on benefits of having a Realtor represent you in the purchase:
http://www.crystalclearmarket.com/?p=109

Hope this helps. Good luck to you.
0 votes Thank Flag Link Sun Jul 20, 2008
Yes you could save some money without a buyer agent in terms of the 2.5% commission they usually get. But you could also loose a lot- in terms of purchase price, properties that only a Realtor could find, defects,etc.... What type of law do you pratice? If its Insurance law would you take a murder case? No you would probably refer it out to an expert. Buying a home is the largest financial decision of your life you need an expert by your side and if you end up paying an extra $3K-$5K its worth it- You could be making huge mistakes that could cost you in the future. Trust me, I see buyers make them everyday.

Good luck
Web Reference: http://www.kalerealty.com
0 votes Thank Flag Link Mon Jun 30, 2008
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