In todays buyer's market, what is buyer - realtor etiquette?

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swkin_IHB

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Long time reader, kudos to all the great work that helped convince my wife to hold off on the purchase... as first time home buyers, we had started looking at homes last march and the realtor was recommended by wife's acquaintance base on her experience with the realtor... she promised that she will not charge us any fees, took us around, was not happy with the homes, decided to hold off after stumbling on this site and doing more research, been communicating with the realtor again to change the filters on the MLS listing we get, she starts to warn us on the need for a 20% downpayment, get a loan first... home later advice....





I understand that the realtor will be making money from somewhere, is it good/bad etiquette to ask what commission she expects to make from a sale? What other questions can I ask to ensure that she is 'representing' my best interest? Though we are barely 1/3 of the 20% needed, it would be nice to know where stand to establish a clear relationship with the realtor..... Thanks for all the feedback!
 
You shouldn't have any qualms about asking what the commission is on a particular property - keeping in mind it may vary depending on the deal the seller's agent and the seller worked out on any particular house. Among realtors its standard to split the full commission 50/50 with the buyer's agent. In some cases they may be splitting less than 6% or in some cases a listing agent may try to get away with keeping 3.5% and offering 2.5% to the buyer's agent.



There might also be buyer agent bonuses involved -- e.g. an extra $1,000 to the agent that brings a buyer on top of the commission- (which the seller pays for - out of the sales price, of course) . In the state I came from this had to be proactively disclosed to the buyer, lest they feel they were being 'steered' to properties offering a bonus. That's even more common on new construction -- builders will sometimes offer one-off bonuses for each sale of a new home -- or, some type of progressive bonus like $10,000 if you bring buyers for three or more houses in their new community. Then its not tied to any one particular sale so the disclosure gets a little fuzzier. Grab a copy of a local Realtor Association magazine and check out the ads from the builders....



I would definitely ask about the full financial details up front on any given property you're interested in (you might be able to negotiate a commission rebate on all properties offering the buyer's agent at least 2.5% - for example). Be especially wary if you feel you're being steered to a particular property or neighborhood or toward particular provisions like closing in 30 days (this might be a factor in the bonus). Its unethical for realtors to do this, but it happens.



Another thing to remember - it can be deceptive for an agent to say you won't be charged any fees. If the house you end up liking is a For Sale By Owner, or isn't otherwise listed in the MLS with a co-op commission, your buyer's agent can turn around and get 3% from you directly (look for this language if you sign a buyer agency agreement). This is why your agent is also not likely to show you FSBO properties or ones listed by discount brokerages -- they will have a lower likelihood of securing a good commission so either purposefully or subconsciously, these are not likely to garner a lot of enthusiasm on the part of your agent, even if its the best house for you.



This is a big, serious transaction. Don't be afraid to ask questions and negotiate. Your agent should be working for you and you shouldn't worry that you're being impolite by following up on the details. Also, don't allow dual agency.
 
Urban,


By dual agency, do you mean agent representing both parties? I am a cautious purchaser of any item (down to a toothbrush), after reading a lot of feedback here and elsewhere on the net, I am almost ready to deal directly with owner and seller agents.... yet being a first time homebuyer, I'm mainly a little weary about the legalities, granted I AM willing to read ALL the fine print in every contract presented to me, I am worried that there are issues that I should be aware off that may not be pointed out by this realtor.... I've always been on my own on any minor or major purchase in doing research hence my doubts with any kind of representation in which I have no legal/financial contract with... since i have no such contract, what are my boundaries??? Thanks!
 
You'll probably be asked to sign an exclusive buyer agency agreement that basically says you're promising only to work with that agent and if you buy something - even without them finding it for you - that they are owed a commission. You'll also be asked on a buyer agency agreement whether you'll allow dual agency.





You might even ask to sign a buyer agency agreement to officially document that your agent is "your" agent, solely working for you and at your instruction. Otherwise, if they want to keep it open, they could be trying to get both sides of the sale and only show you FSBOs or listings about to expire where they have a chance to represent both sides.





Dual agency can happen when your buyer's agent wants to show you properties that are listed by another agent in their office (or, worse, it could even be their own listing). Its considered dual if both the buyer and seller are working with agents under the same broker (even if its such a big agency the two agents don't even know each other). Some agents just don't do it because of the hint of possible ethics issues.





Agents also typically get to keep more of their commission split if the brokerage has both sides of the deal. This is why you often get agents who show you properties that don't come close to matching your criteria but "are SO cute and I think you'll just love it".





The risk in not allowing dual agency is you could miss out on your perfect house, just because its listed with the same agency; but I think it has more potential downsides. How can someone truly negotiate your best deal and the sellers best deal at the same time? Normally, there are things an agent cannot disclose to the other side (for example, distressed circumstances, things that are 'bad' about the property but are not a required disclosure, how high a buyer is really willing to go). If its dual agency - they already know both sides.





An honest, well-informed buyers agent with good market info and negotiation skills can be a fantastic asset when you go to buy. I don't mean to make it sound like they're a bad bunch. Just feel free to interview several to find someone you're really comfortable with and really seeks to understand your questions and concerns. Don't be afraid to go over your agreement and the disclosures with a fine-tooth comb. Some less experienced agents get really nervous asking you to sign an agreement or giving you a disclosure and they just try to gloss over it really quickly with a 'here, this is just standard, just sign it and we'll get on our way'. But sit there for an hour and read it and ask questions if you need to.





Of primary importance -- be very very clear about who is representing who.
 
swkin - For the most part, I find a buyer's agent gets in the way and I find their input is more of a hindrance. But, the paperwork language is beyond me and I hire an attorney to look everything over. Personally, I do not care what the exact nature of the agent's commission is. I care about the bottom line and I don't care if the agent gets 1% or 50%, as long as I am paying as little as possible.
 
swkin- try www.ziprealty.com they are ok. only shows you property you want to see and you get a little something back at the end. i have dealt with them and they are ok overall. depends on the agent, get one that you feel comfortable with if you want mine in particular whisper a comment to me and i will give you her info... the greatest compliment is a referral. If they ask you to sign anything, tell them to go pound some sand. In this market, the buyer control everything. granted that you have good credit, downpayment and preapproved already. but even if you don't have that you are still in control...... you can always walk away and find someone else. AS ALWAYS GET A LAWYER TO GO OVER YOUR PAPERWORK.



with that said... short sale is a whole new game. the bank will try to slash commission first to save some cost. but if you go with zip you will still get something, just less. i think they promise you 20% of their commission.
 
awgee,


where would you start looking for a lawyer that specializes in real estate transactions? what is the going rate?? I have very limited experience with lawyers, mainly because of fear of thier lexicon, I've taken some environmental law classes, the verbage is heavy....
 
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