Where readers ask, and we (the community) try to answer:
Hey theFrontSteps —
Say I’ve I found a place I love, and they gave me the disclosure package, and I’ve got a bank ready to give me a loan, and I want to make an offer. I’ve talked with agents here and there, but never officially signed with one. Do I need to have an agent to put in an offer?
I know this question is chock full of conflict of interest. As an agent, I assume you’ll say yes, you need an agent. I know that agents are there to protect the buyer, but how do agents work with someone like me who’s already done a lot of legwork?
Your blog is always so candid, I thought if anyone would give me a straight answer, it’d be you.
Thanks,
[reader]
ps – Feel free to use this as fodder for the blog.
Fodder it shall be, answer you already have, let’s see what some other people have to say.
[Update: For those that have already emailed and are wondering what our original reply was. Here you go:
“You get someone like me to represent you to hammer the other side down in price, terms,etc. Then you get someone like me to make sure that disclosure package covers your ass, and someone like me to help you determine a price, find inspectors, and make sure you ultimately get title to the home. Or you can go it alone, know that the money you think you are saving [on commissions] is actually going to the listing agent’s pocket, you can hope they’re looking out for your best interest, but never truly know, so you might consider hiring an attorney. You hire us for piece of mind and experience to get you through this painful process.
Sorry to be so curt but I’m outta town and reaching for a beer.
It’s kinda like wearing glasses or going for prk [laser correction eye surgery]. I’ll help you see it all clearly.”
Just don’t read this post, and certainly not this post or you’ll be turned off on agents forever.
I am in the same situation, doing tons of research etc… wondering the reason not to get a real estate lawyer to close the deal. Using an agent adds about 30-40K to the purchase that could go to the downpayment. The only answer someone has given me is: for negotiation and pocket listings. I just started seriously looking, but I am asking myself the same question.
question to agents: would you be willing to take a smaller percentage in these situations, or have your compensation based on how much money you saved the buyer plus an hourly rate for setting up inspections etc?
Only an agent will tell you that you need an agent. You have absolutely no need of one. There is simply nothing they can bring. Nothing. In fact it’s even a negative because the agent will be an unnecessary layer who will filter information for you and add delays. Especially in California, where the law is strict and the laws aggressively protect buyers.
You have a couple of good choices:
– get a discounter who will rebate most of the buy side commission to you.
– use the listing agent as your agent. Let them keep the whole commission. It’s worth it because they’ll make sure you get the deal. They’ll keep you fully informed and give you inside information on the seller that will help you negotiate. They will stifle any other buyers who foolishly approach the deal via other agents. They’ll keep you closely informed of the other buyers’ moves. Agents will swear this never happens but I have done it a dozen times and each time the lister has worked fiercely in my favor.
Certainly in a competitive buying situation you need an agent. I am convinced that both times I purchased homes (2002 in SF and 2005 in Sonoma) I would not have gotten them without the help of my agent. Penny wise, pound foolish.
Nonagent007 – You are obviously more educated than the average buyer or seller. I guarantee most aren’t. Everyone has their own specialty. I wouldn’t be surprised to see your properties in FSBO listings in the future – we all choose our own path. What works for you doesn’t work for others. Witness people who pay HR Block to prepare their 1040 EZ.
I am an agent, so what I say here probably won’t be taken seriously, but still, I HAVE to comment on this.
Not all agents are created equal. Some add serious value to helping their clients create wealth while others are just hucksters facilitating a transaction for the commission. The key is associating yourself with the experts. Instead of spending your time researching how you can “go it alone”, you should spend your time finding an expert to guide you. And let me tell you something about real estate advice… those discount companies will NOT employ any experts. They are just transaction facilitators. There are certain things in life you don’t want a discount on. 1) Legal Advice 2) LASIK surgery 3) Accounting Advice, and 4) Real Estate Advice.
I deal with clients all day long who are PhD’s, CEO’s, doctors, attorneys… and all around VERY intelligent people. These very intelligent people write glowing reviews for me after every transaction. And they should, for I’ve provided them with invaluable services and insider information that only an expert can provide. Knowing how hard I bust my ass each day and the info I’m privy to, it is no wonder I am sought after by people who clearly have the capacity to “go it alone” if they so chose.
The only thing anyone in this world will ever pay you for is expertise, and if you don’t have any, then get to the back of the bus. I can’t stand that a lot of agents taint the image for the few experts out there, but hey, lawyers deal with the same as do accountants and doctors. It sounds like some of you have not been exposed to what working with a true real estate expert is like… so I can’t blame you for your opinions. But don’t underestimate the power a solid agent has in representing you, your interests, and the role they play in helping you build your net worth. There are money making opportunities no matter the market condition, and experts know where the solid plays are, and have the connections to get it done. And yes, even just a simple $500K purchase can make or break someone, so find an expert and do it right.
You’re crazy if you don’t use an agent in San Francisco for a myriad of reasons. Crazy, crazy, crazy and I am not an agent. I didn’t know the first thing about buying and stumbled upon an agent that truly educated me on the process, the paperwork, the inspections, and everything. I would have been lost without them, and I can’t say enough that you absolutely need an agent in SF!
having bough several properties in varied circumstances, I can only say you should have an agent working hard for you.
I have two arguments:
– as in any transaction, there are two sides of the story. and there are at least two human beings – thus a world of possible and probable disagreements and misunderstandings. Unless you have a witness listening for what is said and specially for what is NOT said – and taking appropriate steps to protect you, there are always risks and hurts… Little story. We bought with a (then-) standard 30days rent back. By day 28 after the closing, the sellers were stalking our phone pleading against us “evicting” them (WTF?!?!?). Their agent was burning herself on a beach – she had delivered to her clients. I’m glad we had some strong support from our agents to sort the mess out – and we were lucky our agents had airtighted our rentback agreement (we wouldn’t have rented back without a strong RE support, and we wouldn’t have gotten the house without rentback)
– it’s San Francisco, and we are not talking about something the price of a car or even a nice car. We are talking about amounts worth stopping world hunger. The buyer is always the one sc..ed because the buyer gets the land and a pile of wood and nails on it – along with any neighbors fights, roof leaks etc – while the seller gets the cold cash away. Not only is a RE transaction one of the most important decision in your life, but because it’s SF, a misshap can literally kill you. Part of a good RE agent’s job is not to assess your dream property, but to assess you – as in wealth management, family planning, job mobility etc – and to help you steer into the best economic decision. What makes a good agent is to have seen it all – and help you not become the next SFRE casualty.
Last. Discount? yes and no. I think someone not ready to adjust and figure out something that would work for both of you is not worth wasting time. But I’d also pay for some intangible value beside the “hourly lawyer time fee”. Having your own agent being XX or from company YY, from the same group than seller or from a different group in the city might be important for you, or for the seller, or for the seller’s agent. If it’s important, then it has some value. We try to pick agents who are well [b]respected[/b] and have some good professional contacts across the boards… so we (‘d) buy a RE agent his/her Rolodex and we’d value his/her representation on that.
So consider what part of a Realtor (I wouldn’t waste a minute on a non-Realtor agent in SF) you would value the most, appreciate the support of, use the service most. And put a price on that. (and be fair on pricing. Example: saving 20K on the house and spending 21K on Realtor is a saving after a few years of property taxes!)
when i was a new agent i didn’t know what i didn’t know. 6 years later, taking a lot of classes, getting mentored by senior agents, learning something from each of my own transactions, having bought my own property, and learning from every change in the market, i can tell you there is no way an unrepresented buyer is going to avoid making mistakes. and mistake in SF are incredibly costly.
as a new agent i made up for my lack of experience will over the top research, got other agents involved as needed, and worked my tail off. of course i still do those things today, and see experienced agents fly by the seat of their pants who i would not personally trust to serve me coffee. so ideally you get the best of both worlds, experience and over the top hard work.
as for the idea of going direct to the listing agent… that’s fine if you are experienced AND don’t mind over paying. that agent has a relationship with the seller, and they aren’t going to give you a break without the seller’s consent. that agent and that seller probably had LONG and hard conversations about price… so the agent can’t back pedal and try to pull the wool over the seller’s eyes no matter how fat the commission on the other end is. i know a buyer who does this all the time…. he knows he’s paying the highest price, but has done it in hugely competitive situations. he’s very slick about it, and pretty much gets the agent to tell him what price he has to offer to get it done, and states up front that he wants the agent to pocket both ends of the commission. other buyers who go in blind often pay even more. sellers always think the homes are worth more than they really are, and an unrepresented buyer usually ends up paying the seller’s price, not their own, for the reasons stated above. my friend has told me he’ll use me on his next purchase because it’s a slower market and he doesn’t need to compete. i’m quite sure i could have gotten him the last home he did this on, probably at a lower price, but that’s just him. he is head strong and is loaded, so spending more than he should wasn’t his concern. getting the property at all costs was.
finally, the 30 day escrow has a lot of moving parts. putting in the offer is not the end of the hard work. after inspections what should you negotiate for? are you really working with the best lender? there are so many little things we can help you with… taking me back to the original statement… “you don’t know what you don’t know” and the only way you’ll learn is via a mistake, or via your agent.
only thing that bugs me about this: as a buyer, I hear the agent telling me all the time how they are looking out for my best interest / trying to get me the best price.
But really?? My skepticism is that they’re getting paid essientially by the seller. So it just seems to me that they are more interested in getting the deal ‘done’ and done as quickly as feasible, then necessarily getting the absolute best price for their customer.
The last thing they would want is a customer who creates lots of pain for them, ie, takes a long time to buy a place and is very picky. So I just don’t know if I buy a lot of the ‘you need an agent’ because they are looking out for you.
I do think that there are options of getting an agent who is 100% paid by you, not paid by the commission of the seller agent, and that *may* be worth looking into.
My agent was horrible. She tried to get us to put down an offer that was very high because that was what her 20+yr expert at her office (a VERY big name office here in SF btw) was telling her that the property was worth in that area.
We ended up saying no to her idea, put in an offer that was above but not nearly as high as she suggested, and we got the place.
I would never use her again and I hope she is out of the business.
#1) There isn’t an agent out there that wouldn’t give you 30% of their commission back on the promise that you would only require the agent to write your offer and do nothing more on 1 single property. So if you do the leg work, and all you want is someone to dot i’s, cross t’s — go for it and ask. But the second you want a shred of advice — then you are a client and they deserve a commission. Agents give referral fees all the time so you could also ask for your own personal referral fee. But at the end of the day you don’t NEED an agent if you are very smart, but….
#2) it’s highly unlikely that you are going to save any money by not using an agent unless you are buying from a condo and can get the agent credit back to you directly — which is very do’able. A lot of agents in SF will not act as both both a seller & buyer representative. Most will refer you to someone in their office. And unless you are dealing with a totally stalefish property with no competition you are going to have a hard time convincing anyone to credit the buyer fee to you unless they are big-time desperate (in which case you probably have more leverage in dealing with an agent who can help you strategize on bid price.)
#3) Having a buyer agent isn’t a guarantee that you are getting good advice. With all respect to the profession, “anon expert agent on Apr 17, 2009″‘s #1, #2 & #3 professions all require an advanced degree with an objective external governing board. Real Estate agents are like a box of chocolates; and any goofball can get a RE “license” and Brokers are all to willing to load up the coffers with low overhead salespeople. Take a read on this article:
http://www.examiner.com/a-782304~S_F__condo_rules_snarl_FBI_agent_s_plans.html
One of my favorite. It basically tells of a woman in SF who bought a BMR condo at Above Market Rates and got scr#wed big time. Thanks PacUnion & McGuire — way to stand behind your transaction. This is one of the most egregious cases of agent mis-representation I’ve ever come across.
#4) The good news is that there are some really outstanding agents out there. As someone said above — you should be finding one of these agents to represent you. In this market, if you are a serious buyer than you should have no problem getting an agent to represent you. And it’s free. Simply do NOT let just any agent who happens to answer the phone represent you. I could give you the name of a dozen or so agents who would gladly represent, and represent well a buyer.
#5) If you really want to find the best situation w/o an agent — than my advice to anyone who thinks they are sophisticated — go on the offensive. Write a nice letter stating your interests & intent and drive around your target area and send a letter expressing your intent to buy a home at a fair price and avoiding agent costs. You’ll be surprised at the response. I’ve had success with this strategy in the past; but don’t underestimate the complexity of directly negotiating with a seller. Odds are they aren’t as sophisticated as you. I could write a whole blog entry on this discussion alone. Bottom line, sellers are mostly dumb and greedy to their own detriment.
#6) I almost bought a place in SF letting the seller agent work both sides thinking I was being “sophisticated”. Long story short, I had some concerns and decided to get a highly qualified buyer agent. She made a few calls and got some inside information that would have never been disclosed to me. I walked and averted a major major disaster.
#7) In conclusion, find and use the best buyers agent. Call Malin, Nina, Barbara or any of the other top agents in the city. But honestly, I’d simply call Alex (your host here). I’ve never met with, or worked with him — but he’s clearly a stand agent and gives good advice.
Good luck to all!
I used Redfin and was very happy with them. They offer 50% commission refund. My Redfin agent did all the handholding during the offer and negotiation process. You are expected to do your own research finding suitable properties on their website (very user friendly and addictive site).
Some folks are equipped for this. Some are not. I just found some clients a killer offmarket place that they’re considering. (It’s not quite perfect for them, but it’s close.) I do not stop working for them because I know that one day something will work out, whether it’s on the MLS or not. I would be careful about perceived savings. Say the listing agent will do it for 3 points? Are you really getting a 20 – 30 K discount? If you are, then great. Go for it.
A buyer’s agent? In this market where you have almost no competition? You’d be crazy. When there were bidding wars you needed a buyer’s agent. Now you don’t at all. Agents are so starving for deals right now that you’re more likely than ever to face pressure to just buy something, anything, no matter the price. If you really cannot negotiate on your own or need help with the papers, then use a discounter like redfin or retain an agent on an hourly basis.
I’m in a transaction right now and my agent has earned every penny. We’re buyers. I’d pay her double. We were lost and OMG would we have been screwed without one. I have new respect for them, especially here in SF.
Here’s the thing . . .you want to put in an offer, great. But what if it does not work out? What if you get a counter? What if you find out something during your discovery period that you did not expect? What if you didn’t ask the right questions? Appraisal? What if it doesn’t?
My observation after 30+ years of real estate is that folks rarely buy without an agent, even if they think they’ve found the perfect property. Just does not seem to work out, for any of a myriad of possible reasons. A good agent sees ‘problems and issues’ up front and either gets them solved or moves you on to another property. Unless you’ve been around the block as a buyer you may not even know what I am talking about . . .
Anyhow, best of luck!
I understand the frustration with the lack of communication between an agent and the party that he/she is representing. Did you know that some agents belong to companies that you as a buyer/seller can log-in to see the feedback on the house and/or property?
Also another topic up for discussion might be that “Is NAR (national association of realtors) inflating its membership” See article: http://www.viewmylisting.com/is_nar_inflating_membership.htm
http://www.viewmylisting.com/homes-for-sale
I have two types of real estate licenses and have run two successful real estate businesses. I look at real estate all day long and when I’m not, read all about real estate. I eat, sleep, and breathe real estate. What I can tell you all is this… no matter how much you know, you can never know enough. I have never stopped learning in this business and everything I learn helps me help my clients on each and every transaction. For those that think real estate expertise is something you can just pick up by reading blogs and perusing articles, you have no idea how important the experience aspect of being in real estate is. It’s the experience that makes you valuable as an expert, and if you’re going it alone, how much experience do you have? What, one, two, maybe five transactions in your entire life? Hmmm, better rethink your approach.
And for the person that doesn’t want a buyer’s agent, go for it. When you lose your earnest money because you didn’t know how to protect it, maybe you’ll change your mind. And you’re just plain wrong about no competition in the marketplace. SF’s most desirable properties continued to get multiple offers all through the downturn (yes, even in Oct and Nov ’08). If you’re after the crappy properties, however, have at it. No one wants them and you won’t have much competition. But then, you’ll likely be stuck with a non-performing investment. But Refin won’t care, they’ll happily get you into it and rebate half their commission. An expert wouldn’t let you buy that piece of crap in the first place.
Agents desperate? How do you know? Are you an agent? Are you desperate? I’ll tell you this – only the shitty agents are desperate. True real estate experts that add value to their client relationships have staying power no matter the market condition. The number one agent in SF sold $250M in real estate last year in a down market. There were another handful nipping at her heels, and hundreds more who did VERY well. Desperate? Not if you’re any good you’re not.
Taking into consideration everything I know about real estate, the businesses I’ve run (and continue to run), all the books/articles/blogs I’ve ever read, all the situations and experiences I have under my belt, the licenses I hold, the transactions I’ve been a part of, the negotiations I’ve fought through, all the details I handle and fires I put out each and every day for my clients while getting about 5hrs sleep, and all the very intelligent people I’ve represented who agree that my service was absolutely invaluable… I would say you are making a HUGE mistake by not having professional representation during any transaction, period.
Sorry to be so forceful, folks, but I know how hard I bust my ass, I’m proud of the expertise I have and how it helps my clients, and I’m sick of people bashing ALL agents because of the hucksters in our industry. Instead of agent bashing, why don’t you realize there is a hierarchy and work with the best– leveraging their expertise to your benefit. That’s a winner mentality. The loser mentality is to bash the industry or to find the cheapest advice. What the hell does that do for anyone? Be a winner.
Good agents earn every penny and make their clients even more. Good luck out there.
Blah Blah Blah. Look here’s the deal. Buyers are very protected in SF. The forms are all standardized. I used an agent on my frist purchase and itw as great. The seller pays so in the back of my mind I know that my agent has no interest in lowering the price of the purchase. My buyer’s agent wants to churn and burn and move on. As long as I feel happy and he gets paid. Next time around I will probably do it all myself. Earnest money is rarely lost by a buyer. Specially before contingencies are lifted. If I ever use a buyer’s agent, I would negotiate something wehre the commission does not go down even if the bid does go down. This would de-incentivize the buyer’s agent from (1) not bidding down and (2) only looking for the most expensive homes.
Agents have all kinds of angles you don’t and will never hear about. None of it is geared towards your best interest when such a big commission is involved. Everything they say is a manipulation. Everyone knows everyone else. They get you to lower the asking price, then a broker they know coincidentially hears about the listing and ends up getting it. Favors are everywhere.
That’s not true. The commission will remain rather large, relative to the sale price. Therefore the chief motivation criticism that can be levied at agents is that they only want to get the sale done, regardless of the client’s best interest. It seems as if you’re speaking in general terms about something that specifically might have happened to you, Dan. Because “A broker they know coincidentally hears about the listing …” doesn’t fly either. Every agent should be hearing about everything that might be of interest to a client. It’s all on the MLS.