Why You Need a Buyer’s Agent: Key Benefits and Best Practices
New NAR Settlement Reforms Buyer Agent Commission Practices
In March 2024, a settlement resolved lawsuits about broker commissions, banning the publication of buyer's agent commission offers on Multiple Listing Services (MLSs). While these commissions can still be offered, they must be negotiated directly and not advertised on MLSs.
Sellers can still pay buyer's agent commissions off-MLS, and the National Association of Realtors (NAR) now requires buyer's agents to have written agreements with clients before home tours to clarify their relationship.
This change aims to increase competition and negotiation around commissions. Experts predict sellers might offer "buyer credits" on listings for buyers to use toward agent commissions or keep as cash. However, concerns have arisen that if sellers cease paying buyer's agent commissions, the financial burden could shift to home buyers. Buyers might have to cover their agents' fees.
Most buyers don't have extra funds to cover these costs, and specific loan programs, like VA loans, don't cover buyer's agent commissions. This could make it more challenging for buyers to afford their agents' fees on top of other purchasing expenses.
What is the buyer’s agent commission?
The buyer’s agent commission is typically 2.5% of the purchase price, and the property seller pays it from the sale proceeds.
Who pays the buyer’s agent fees?
The seller typically pays the buyer's agent fees, usually 2.5% of the purchase price, from the sale proceeds.
With the new regulations after the NAR settlement, sellers can still cover these fees, though it will be part of the negotiation process. While in most cases, sellers will continue to pay, there may be instances, such as multiple offer situations, where buyers, wanting to remain competitive, might choose to pay the commission themselves.
Traditionally, sellers compensate the buyer's agent for bringing in a buyer, and this practice is expected to continue. If some sellers choose not to pay the commission, buyers will likely prefer properties where the seller covers these fees to avoid additional costs. It is the agent's responsibility to help sellers understand the value a buyer's agent brings to the transaction.
What makes a good buyer’s agent?
In-Depth Local Knowledge: The agent should be well-versed in the local market, including trends, pricing, and neighborhood insights, to provide valuable guidance.
Excellent Communication Skills: Effective communication and active listening are vital. The agent should be able to understand your needs, respond quickly, anticipate your needs, and prepare you for the buying process.
Broad Network: An agent with extensive connections can offer access to a wide array of listings and has a network of professionals, such as lenders, attorneys, contractors, and inspectors, to support your purchase.
Strong Negotiation Abilities: The agent should be proficient in negotiating to secure the best terms and prices for you based on market conditions and through research about the properties sold nearby. A great agent understands human psychology and ensures all parties feel valued and not exploited.
Accessibility and Promptness: The agent should be readily available, flexible with your schedule, and quick to act when you're ready to make an offer.
Good Reputation: Choose an agent with a strong track record and positive feedback from previous clients to ensure reliability and effectiveness.
Are buyer’s agents worth it?
Yes, skilled buyer's agents are worth every penny:
They represent solely the buyer's interests and advocate for you, unlike the listing agent who represents the seller. This ensures you get the best deal possible.
They have access to listings and properties not publicly advertised, giving you an edge in a competitive market. Their local knowledge is invaluable.
They handle negotiations skillfully, using their expertise to secure a lower price and better terms, removing the emotional aspect from the process.
They coordinate the entire process seamlessly, from arranging showings to managing paperwork, saving you significant time and effort.
Their fiduciary duty is to you as the buyer, providing objective advice and protecting your interests, preventing emotionally driven mistakes.
Buyer’s agent versus listing agent
Choosing to be represented by the seller's agent instead of having your buyer's agent is like hiring the same divorce attorney as your spouse. It's baffling why some buyers, even for high-end properties, use the listing agent, thinking they'll get a better deal. It's a wrong move—get your own advocate.
Why hire a buyer’s agent?
A great buyer's agent will help you with some of the following:
Prepare you for executing a buyer representation agreement, explain agency relationships, and obtain any required legal consent to represent you.
Inform you about the working relationship based on state law, the Realtor Code of Ethics, and the broker’s business policies.
Obtain signatures on the buyer representation agreement after explaining what is done for you, how it is done, and the benefits.
Explain how compensation is paid, who pays it, and your options for paying it.
Learn your wants, non-negotiable needs, must-haves, and nice-to-haves.
Assist you with your budget to understand the type of property you can afford.
Assist in comparing different financing options.
Request a closing cost breakdown from your lender to get a clear estimate of the total purchase cost and avoid surprises.
Work with you to identify suitable properties, match your needs with available listings, and re-evaluate and adjust showings and locations.
Reassure you that your personal information will remain confidential.
Explain the timeline for house hunting, mortgage approval, and closing.
Explain the local market and how it impacts you, and show statistics on what percentage of list price sellers in the area are currently receiving. Educate you about the market conditions and what to expect so you can anticipate and be ready for all eventualities.
Provide MLS data on how quickly homes sell in the area and their price per square foot. Inform you about popular home features and explain why some homes sell faster and at higher prices.
Schedule showings based on on- and off-market properties.
Preview properties before showing if needed, research unlisted properties, and contact homeowners in focus areas.
Provide resources with neighborhood information on municipal services, schools, etc.
Inform you of positive or negative aspects like nearby venues or operations that may impact value.
Help narrow the search until you identify the top choices and prepare a comparative market analysis (CMA) before making an offer.
Craft a standout offer to help you secure your chosen property at the best price. Explain various offer strategies and develop the best approach tailored to your needs and budget.
Explain common contract contingencies and include approved protective clauses in the purchase offer.
Coordinate with the listing agent, inspectors, escrow, title company, lenders, and everyone else involved with scheduling to streamline the process and ensure effective communication and timely delivery.
Explain the escrow process and what is involved—educate from day 1, from opening escrow to closing, on what to expect and anticipate. Have precise contingency dates and key points highlighted and respected for a smooth transaction.
Explain to you who pays for what during the escrow process.
Explain wire fraud risks and remind you to verify wiring instructions before transferring funds.
Ensure you receive and understand all state and federally-required disclosure forms and write an offer with a reasonable chance of acceptance.
Help you thoroughly evaluate options for a home inspector, title company, title insurance, mortgage lender, and other essential services
Assist with inspections, including foundation, sewer, mold, HVAC, electrical, termite, mold, and any other required assessments.
The agent will ensure the home complies with local and state ordinances and that you have obtained all the necessary certificates.
Explain home insurance and refer you to a qualified insurance broker,
Assist with ordering necessary surveys, geological tests, civil engineering assessments, and percolation tests.
Review and discuss home inspection concerns and negotiate repair requests to secure the best terms based on the findings. Remember that the home isn't brand new so that issues will arise. Focus on health and safety matters, such as mold remediation and proper drainage, to protect the foundation over time while maintaining a respectful negotiation to avoid offending the seller.
Guide you on meeting all contractual deadlines.
Ensure all parties have the necessary forms and information to close the sale.
Assist with the final walkthrough of the property, providing guidance on what to look for and ensuring everything meets your expectations.
Support you in final closing activities and advise rekeying using the home warranty. Explain the benefits of a home warranty.
The agent will remind you to switch the water and gas services to your name and activate them, ensure your mail is forwarded to your new address, assist with moving company referrals, and provide a list of essential local businesses and localities.
Hand you the keys to your new home.
Conclusion
Buyer’s agent- selling agent duties involve:
Helping the buyer search for suitable properties
Arranging property viewings
Submitting offers and negotiating on the buyer's behalf
Advising the buyer throughout the purchase process until closing.
A buyer's agent can save money and hassle, negotiate skillfully, and streamline the buying process. They help you understand ever-changing local and state disclosures to ensure compliance, act as a buffer to mitigate risks, and protect you from potential legal issues.
Many consumers don’t fully grasp the complexities of purchasing a house, and buyers’ agents are often undervalued. A great buyers’ agent can simplify the process and make it seem effortless. If you’re in the Los Angeles area and interested in purchasing a property, contact us for a complimentary consultation.