Lenders often refer pre-approved buyers to me because of my legal background and my experience in negotiations. Many of the buyer's are first timers, the rest are either new to the area, or simply need a new agent. All of them have the same question: Why should I use a buyer's agent? Won't I save money by just using the listing agent, who will surely reduce their fee and pass the savings on to me?
I confess, before I became a Realtor, I had the same misconceptions. Now, I realize that a buyer's agent is the best deal in town: it usually costs absolutely nothing since most buyer's agency fees are paid by the seller at closing. It gives the buyer all the legal and insurance protections of the brokerage. And, it vastly "ups" the buyer's negotiating power, which usually saves the buyer far more than any fee reduction.
Here's how Buyer's Agency works in the State of Washington:
1. What does a Buyer's Agent do? A Buyer's Agent puts all their resources and skills to work on your behalf. They set up continuous searches on the multiple listing service to find every property that meets your criteria. They take you to look at the houses, point out good points and bad, and disclose obvious flaws that you might be unaware of. If you find a property you like, they will research values to make sure you know what it's real market value is. If you decide to make an offer, they will use their skills to get you the best possible deal. Oftentimes, that means they will work with your lender to make sure they structure the offer in accordance with your financing needs. They will assist you in the inspection and appraisal process, and if there are problems identified, will negotiate on your behalf with the seller.
2. How does the Buyer's Agent get paid? Washington law allows the buyer's agent to be paid by the seller, even though the buyer's agent has no agency relationship with the seller.
3. Does a buyer ever have to pay the Buyer's Agent? Only if the buyer and the Buyer's Agent have entered into a written contract that specifies a different method of payment. The NWMLS Buyer's Agency form has a space to fill which specifies how the Buyer's Agent will be paid. In normal circumstances, I use the wording that the Buyer's Agent will receive the "advertised selling office commission". I change the terms or use different language if the home is a For Sale By Owner, a short sale, and other uncertain situation.
4. So, the Buyer's Agent works for me but gets paid by the Seller? In most cases, yes. There would have to be a specific, written contract between the buyer and their Buyer's Agent to do otherwise.
5. Doesn't that make them more likely to favor the seller in negotiations? No! They want you as a repeat customer. Also, under Washington law, a Buyer's Agent has strict agency responsibilities to their buyer, and little or no contact with the seller. First and foremost, a Buyer's Agent must be loyal to their buyer. They must use their best efforts to find you a home. They must keep you informed, and present offers in a timely manner. They must disclose any conflict of interest, in writing. They must keep the buyer's information confidential, even after termination of the relationship. Finally, they must continuously and in good faith search for properties that meet the buyer's criteria.
6. Does any agent who shows me a house become my Buyer's Agent? Yes, for the houses that they have shown you, unless they are the listing agent or a dual agent for you and the seller.
7. What does a Buyer's Agency Agreement do? It's a legal contract where you and the Agent agree: a. whether you will use them as your exclusive Buyer's Agent; b. how the Buyer's Agent will be paid (usually by the seller); and c. how long they work for you.
8. Yikes, this is all complicated. How do I sort it out? It pays to get referrals from friends, lenders or family members before you even start looking at houses. Look at an agent's designations. If they are a Realtor it means they hold themselves to higher levels of ethics and training. Also, have they completed any certified training? There are Attorney Realtors, like me; Accredited Buyer's Representative, (ABR); Certified Residential Specialists, (CRS); and Senior Residential Specialists (SRS), and many others.