Real Estate 201 Finding A house - Agents And Agency
OK, so you've read through Real Estate 101 and you're pre-approved and you know how much you're qualified to borrow. You're ready to start shopping for houses! And you've found an agent with whom you feel comfortable working - by the way, this agent should be me, if you're in the Waco area. Why get an agent, you ask? Don't they cost extra? You could always just get those nice, color real estate magazines and/or drive around neighborhoods you like and just call the agents in the ads or on the signs. You have to call all those agents anyway since they NEVER put the price in the ads or on the flyers. Besides, once you call them, they'll get you all fixed up and look out for your interests.
OK, time for dirty little secret #2: The agent that has the property listed is working for the seller, not YOU! This isn't really a secret since agents are required to disclose this if you have any substantive discussion about a house with them, but most buyers, especially first time buyers, don't understand all the implications of this disclosure. Now the listing agent is not out to rip you off or anything, in fact we are duty bound to be honest and fair with all parties. Let's say that you decide to make an offer on the house (under the asking price) with the listing agent, but you happen to mention that you'd be willing to pay the full price if that's what it would take to get it. That agent is required to tell the seller that information, after all they are working for the seller and one of their common goals is to sell it for as high a price as possible. It is important to remember that in a scenario like this one that, as a buyer, you and your interests are not being represented, and the agent cannot give you advice and opinions.
Seem crazy? Well, it is! Thankfully there is another option in Texas: buyer's agency. A buyer's agent represents the interests of you, as a buyer. No big surprise there. The buyer's agent is working for you to find the house you want and get you the best possible deal on it. Your agent will give you advice and opinions and use his training and experience to negotiate the deal for you. There is an agreement called a Buyer's Representation Agreement that spells out the terms and details of this agency relationship. You may be wondering who pays the buyer's agent. Well, actually the buyer's agent and the listing agent split the sales commission so it is the seller who actually pays both agents, even though the buyer's agent is working for the buyer.
You may be wondering what incentive the buyer's agent has to get the buyer the best deal, since the seller is paying him and the higher the sales price, the more commission the agent makes. It boils down to integrity. That's what Realtors are charged to do, look out for the client's interest above their own. Plus the simple fact that the percentages are tiny - for say $1000 differential in price, the agent stands to make maybe $25 more. No self-respecting agent is going to sell his own client down the river for twenty five bucks, or for any amount. This is especially true because Realtors depend on referrals from past clients to get new business. If you feel like I didn't work hard to represent your interests, you sure aren't going to recommend me to one of your friends. Then there's simple pride: any decent agent loves to outmaneuver his counterpart (the other agent) in negotiating a deal. A few dollars more (or even a few hundred more) of commission will never replace the bragging right you earn when you do some clever negotiating. Remember, our job as a Realtor is to get the best deal for our client and we want to do our job well, just like anyone else does.
There are some other benefits to having a buyer's agent that might not come immediately to mind. Some of the best deals are sold "in-house" before they ever hit the MLS (multiple listing service - the computerized list of available properties for sale) or the open market. If one agent at a particular brokerage lists a great house for an awesome price, they will naturally tell their co-workers about it and should any of them have a buyer looking for something similar they are going to rush out and show the property and submit an offer before it's even entered into the MLS. You will never find a deal like this looking through magazines or driving the neighborhoods.
Also, a good agent will automate the searching process for you. He will set it up so that you will receive an email the moment a property that meets your specifications enters the MLS, often before many Realtors know about the property. That way you can beat other buyers to the best deals, it's quicker and easier than driving around town or sifting through magazine ads which are 2-3 weeks old at best when they first come out.
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