When I began searching for a house several years ago, I was very defensive in my dealings with realtors, rejecting offhand any suggestions of signing up with an agent as my representative. Having always been very independent in my business and financial dealings, I wanted to maintain control, to avoid being limited or pressured in any way. In retrospect, I did myself a disservice because of my strong bias against "salespeople" and my lack of understanding of the home buying process.
In reality, representation by a competent realtor (known technically as Buyer Agency) gives you MORE control as a buyer. Your agent's role is not to pressure you or limit your options, but to provide you with resources, information, and advice that helps you to make intelligent decisions. A buyer's agent is your advocate through the entire process of defining your desires & options, finding the right home for you, negotiating the best price and terms of sale, and coordinating the steps leading to closing.
Even though you probably have a vision of the home you would like to purchase, a good realtor will ask questions and raise issues that you may not have considered in order to clearly identify appropriate properties to meet your needs and desires. In addition, your agent can help to define your financial options and limitations and can provide references for quality lenders who can pre-qualify or even pre-approve* you for a home loan. It is essential to have a firm handle on what you want and what you can afford before you begin looking at properties.
While there are many resources available to the potential home purchaser (newspaper advertisements, real estate publications, Web sites), only a licensed realtor has direct access to the Multiple Listing Service (MLS), where the large majority of properties are presented as soon as they hit the market. In most cases, your agent will create an automated search, based on detailed criteria that you provide, which will e-mail you new listings as soon as they are entered into the MLS system. Your agent may also monitor other sources for government-owned homes, houses listed for sale by owner, or other non-MLS properties.
Once you have identified properties of interest, your realtor will save you time and hassle by performing the necessary research to answer any questions or concerns you might have before scheduling showings. When actually viewing property, your agent's trained and experienced eye may catch details or issues that you might otherwise have missed.
You should be aware that when you contact a listing agent about a property you may have seen in an advertisement, that agent is legally and ethically obligated to be looking out for the best interests of his client, the seller. You can even the playing field by having a realtor represent you as a buyer, looking out for YOUR best interests.
Once you have found the right property, the next challenge is negotiating the price and terms of the sale. Even if you are an expert negotiator, your realtor's knowledge and experience will prove valuable in assuring that you understand the process and incorporate appropriate contingencies in your offer to protect your interests. By examining similar properties that have sold recently and those currently on the market, your agent can provide you with a competitive market analysis, which will help you to determine the value of the property and to decide on an offering price. It is very common that there are several rounds of negotiation, at first to reach agreement and execute a purchase and sales agreement and later if the home inspections reveal any problems or issues that need to be resolved before closing.
If you are not represented by an agent, you will be responsible for hiring an attorney and various home inspectors, negotiating any necessary repairs or credits indicated by the inspection reports, communicating with your lender, inspectors, attorney, and the seller (or the seller's agent), and trying to resolve unanticipated errors or surprises that can derail a closing. To make matters worse, many of the properties for sale in today's market are bank-owned or potential short sales**, adding another whole layer of bureaucracy to an already complex process.
A realtor cannot eliminate all the stresses of buying a home, but a good agent will provide you with one central, reliable source on which to rely, coordinating communication among all the various parties involved in the transaction and ensuring that all contractual dates and contingencies are met. In the midst of what can be an emotionally trying time, your realtor acts as a steady and rational guide, smoothing the path to prosperous home ownership.
The most amazing part about buyer agency is that you can reap all the benefits of representation without a dime out of your pocket! If you purchase a property listed with a realtor, your agent's compensation comes from sharing the commission paid to the listing brokerage by the seller. In the relatively unusual event that you purchase a home not listed with a realtor, your agent's commission will normally be negotiated as part of the purchase and sales agreement and paid from the seller's funds at closing.
As with hiring any professional, you should use care in choosing a realtor to represent you. Critical qualities that you will want to find in an agent include responsiveness, knowledge & experience, good communication skills, and a strong commitment to ethics and integrity. Perhaps the best way to start your search for a competent agent is to ask your friends, colleagues, and family if they know someone that they would recommend. Before making any commitments, you should meet with your prospective representative for a buyer counseling session, where you will discuss your needs, desires, limitations, and expectations. If you feel uncomfortable or unable to establish a rapport, you should probably continue your search. Of course, you should also not hesitate to ask for references from recent clients who would be willing to share their experience.
Purchasing property involves critical decisions that can have a major impact on your life. While you should always retain responsibility for and control of these decisions, you can greatly improve the odds of making the right choices by first making the decision to engage a competent realtor as your buyer agent.
*Pre-qualification is based on the lender's assessment of information that you provide verbally and does not guarantee that you will be approved for a loan. Pre-approval requires documentation of your assets, income, and debts and is a much stronger indicator of your ability to borrow funds, though the lender will still need to approve the specific property before issuing a mortgage commitment.
**A short sale occurs when the owner of the property owes more to the lender than the sale price. In these cases, the sale must first be approved by the lender, which can add months to the process.
Paul Hodosh is a Dartmouth graduate who now works as a realtor in Rhode Island and Connecticut.
For real answers about real estate, please visit his website.
Epoch Properties
1856 Broad St.
Cranston, RI 02905
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