Once you’ve decided to buy a home, you’ll probably start by visiting one of the popular online real estate websites. There you’ll find contact information for the Listing Agent, who works for the Seller. If you are not already represented by a Buyer’s Agent of your own, you should be aware of a couple of reasons the Listing Agent would welcome your call. They’re also good reasons why you shouldn’t call them. First, the total commission in a real estate transaction is paid from the Seller to the Listing Agent. If the Buyer has an agent, then that agent is paid a portion of that commission, usually half. If you have no agent, the Listing Agent gets the whole bundle. So, you the buyer don’t save any money by not having an agent. The second reason you don’t want to call the Listing Agent is because there’s a lot of negotiation between the initial visit and closing on a home purchase. Without your own agent, you’re at a disadvantage throughout the whole process.
At this point you might be thinking that all I’ve done is convince you that you should simply accept that the game is rigged — one way or the other, the net price you pay is going to be higher because of unavoidable commission. But stay with me while I dig a little deeper.
The Buyer’s Agent commission share is usually no more than 3% of the selling price — that’s $9,000 on a $300,000 house. I’m about to argue that so-called expense is actually an investment bargain! How so?
Finding the Right House
I admit you can get a lot of helpful information about houses in Richmond from a huge database housed on computer servers in California. But there’s no way that can replace experience on the ground. If you’ve ever visited a home you found on Zillow, there’s a good chance you’ve seen some big differences from what you expected based on some carefully staged photographs and online data. Possible comments: “So that’s why they didn’t include a picture of the upstairs bathroom!”, “What a nice view of a busy highway!”, “Those wide-angle lenses sure make the rooms look bigger, don’t they!” A good Buyer’s Agent is familiar with all the tricks of the trade, and looks through those online listings with a more critical eye than most consumers. Equally important are their knowledge of neighborhoods, nearby amenities and the current housing inventory. An agent can help you efficiently narrow down the options.
Agents spend a lot of time looking at houses. We develop a pretty critical eye for spotting potential defects or problems waiting to happen that most consumers might miss. It helps to have a partner whose job is to look for problems. It can be heartbreaking and frustrating, as well as expensive, to go through most of the purchase process on a house, only to discover once you pay for an inspection that there are issues that force you to back out.
Each house you consider has a list price as well as an automated value estimate on a website like Zillow. Those automated estimates are simply not accurate enough to guide you in price negotiations. According to Zillow’s November, 2017 update, a Zestimate®️ in Virginia is within 10% plus or minus of the selling price 81% of the time. In other words, about 8 times out of 10, a home that sells for $300,000 will have an automated estimate somewhere between $270,000 and $330,000. 2 times out of 10, it’s off by even more! That’s not much help in negotiations!
On the other hand, a Buyer’s Agent has access to data on recent sales and current prices of comparable homes, the current inventory and demand, current trends in days on market, and experience using this information in price negotiations. That’s an ally who can save you money!
You can do your own research to find a decent mortgage price. But it’s hard to know in advance if your mortgage broker is going to come through on schedule. If your likelihood of qualifying for an acceptable financing package is at all in question, then you really want some guidance on choosing a vendor. It happens far too often that prospective buyers will go through an extensive application process over a far too long time period only to be denied financing when their pending offer has run out of time. A Buyer’s Agent from a good real estate brokerage will be well positioned to offer guidance to avoid this problem.
Your agent can advise you on the selection of a thorough and reliable home inspector, who will identify defects and maintenance issues that you may want the seller to correct prior to closing. Some issues give you a straightforward right to withdraw and recover your deposit if the seller refuses to remediate. Others are subject to negotiation, and some costly repairs may result in the seller releasing you from the contract. There’s a surprising amount of leeway for judgment and negotiation, and having a skillful agent from a good brokerage on your side can be critical in determining whether you let too many problems slide or walk away when the deal really might have been salvaged.
Your Buyer’s Agent performs a host of other so-called “ministerial tasks” in helping you proceed from your initial dream to a satisfying closing on a suitable home. But hopefully you get my point that his or her commission is a sound investment.