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Buyer Agent FAQ

Frequently Asked Questions on Buyer Agency:

Do you work as a buyer’s agent?
How much do you charge?
What do you do for buyers?
Do you work as a buyer’s agent?

Yes.  we work for buyers, not for sellers when our client is buying a house.

How much do you charge?

We charge 3% of the sales price of the house, but this is often covered in whole, in part, or in excess by the seller of the house.  Agent compensation is still based on a time when both agents involved in a transaction worked for the seller and were therefore paid by the seller.  That evolved into sellers offering to pay the commission of both agents, even if one represented the other party.

We still have this system today, except the last couple of years have seen changes in the amount sellers are offering.  While over 99% of listings on the market offer buyer agents somewhere between 2 and 4% commission, I’ve seen the commission offered as low as $1 and as high as 10%.  Additionally, many listings have various amounts of bonus dollars that are being offered to buyer’s agents, either straight up, or on the condition the buyer pays a certain amount or closes by a certain date.

The varying commissions on listings creates a conflict of interest for buyer’s agents who have a duty to represent their clients best interests in the transaction, but also (obviously) want to make as much money as they can.  How should a buyer agent respond when a client is asking their advice as they consider two houses, one with a 2% commission and one with a 4% commission?  They, of course, should give their best advice on which house would be better for the client.  As you can imagine, agents will be tempted to see the positives in the house where they will make twice as much money.  A trust issue is created when they tell their client that they like the house with the 4% commission.  The client will have already assumed they would say that and will have a hard time believing the advice, even when it is true, good advice.

Is this why you hire an agent?  No.  You want your agent to give you advice without having his own interests clouding his judgement.  You don’t want an agent who is tempted to avoid showing you a listing because of a low commission or who gets excited about a house because it will pay him well.

So…pay your agent!  We consider any amount offered by the seller, in commission or bonuses to belong to our clients.  Our client then pays our commission of 3%.  Most of the time this is a wash, but not always.  The house that is offering only $1 is an example.  With many agents avoiding it because, really, who would even drive to a house for $1, the price on the house should be significantly lower.  If you can save 5-10% (and ask the seller for an extra 3% towards your closing costs) on that house and pay us 3% you are way ahead of the game.  And the sellers trying to get us to “sell” their house for that extra $5K bonus.  That’s great.  As a buyer you can include that $5K bonus (that YOU’ll get) in your thinking about how much to offer the seller.  Now the buyer and their agent are on the same side.  We can offer advice on whether it is better to buy the house that pays 2% or the house that pays 4% in an objective way and from the buyer’s perspective.  The agent is in a position to do his job the way it should be done.

So..we charge 3%.  And we’ll help you get that from the seller.

What do you do for buyers?

In a nutshell, we listen to what you want and we help you get it.

We work a little differently with different buyers.  Some buyers know exactly what they want to buy and our job is to find it for them.  Some buyers need to buy a house in the next week, and our job is to help them get the best one available right now.  Some buyers, usually first time home buyers, are trying to figure out where the best place to live is and what kind of house they need.  Our job is to ask them lots of questions and give them lots of suggestions in order to bring clarity to their decision.  As a buyer it is important that you communicate what you are trying to accomplish so that we can help you in the appropriate way.  We want to show you houses that will make the decision on which one to buy easy and obvious.  Then we want to give you information and advice that will help you decide how to approach negotiating with the owner of the house.

We answer three questions for you to help you make wise decisions in your negotiating:

–What is the house worth on the open market?  We will show you similar houses that have sold recently, and point out the differences with the one you are considering to establish a value range for the house.  You make all of the decisions on what you want to offer, but we help you to establish a framework for making an offer.  You may decide to offer higher than market for a unique house you don’t want to lose.  You may want to wait on a house you can get under market.  Those are your decisions, but we want you to make them with your eyes open.

–What is the seller’s and listing agent’s thinking about the house?  Most listing agents have sold many houses and have established patterns of price reductions, and willingness to advise their clients to bring their price down.  Some price close to market value and get their price very quickly.  Some price with lots of room for negotiating.  You need to know which type of listing agent you are dealing with and act accordingly.  Sellers are often more difficult to understand.  Most haven’t sold a home for many years and when they did, it was in a whole different market.  In the case of foreclosures and flips, you will deal with sellers who sell houses on a regular basis.  How much have they come down on their last several sales?  How has the time a listing has been on the market affect their willingness to negotiate?  When you are negotiating a purchase worth hundreds of thousands of dollars, it’s worth finding out.

–What are the (very) local market conditions that can effect the value of the home going forward?  You need to find out if the neighbors have been given public notices of foreclosure to see if a similar house might be coming on the market at a discount soon.  Are many of the neighbors having financial issues?  This is especially important in the case of a condo.  You are going to be relying on other members of the condominium association to pay their dues in order to maintain the complex, including the exterior of your unit.  I’ve found condo complexes right here in Fairfax where over a third of the units were behind on their condo payments.  You need to know what is happening in the neighborhood before you commit to becoming a partner in an association that means a lot to the value of your property.

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Written by Jeff Royce of Frankly Real Estate, Inc. Fairfax, VA,  703-585-5663

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