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Do I need a real estate agent to buy a home?

Pete Gerardo
The Mortgage Reports contributor

In this article:

You do not need a real estate agent to buy a home; in fact, many home buyers cut this middle man out of the equation.  However, you might benefit from hiring one. Here’s why:

  • To save time. Agents can often help you find homes in your price range, and they may have access to more properties than what you’ll see online.
  • To get information and help with negotiations. Good agents should have wealth of information to help you make a decision. And, they’ll handle a lot of complex paperwork on your behalf.
  • The services of agents are usually free to buyers. Fees for both the buyer’s and seller’s agent are usually paid by the seller.
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The exception

There is ONE instance in which you must use an agent to purchase property. That applies if you bid on FHA foreclosure properties.

HUD Homes: the best deal you’ve never heard of

The Department of Housing and Urban Development (HUD) requires all bidders to use licensed agents.

Do you (really) know your market?

Conducting a home search by yourself can be a full-time job.

Though the Internet makes it easy to find homes in your price range, a good agent usually has access to more properties. That includes For Sale By Owner (FSBO) properties and homes that aren’t yet listed.

In addition, some  sellers of desirable homes do not wish to “go public.” Only agents (and their colleagues) working with those sellers even know about those so-called “pocket listings.”

Do you love paperwork?

Another plus is that your agent will handle a ton of paperwork on your behalf.

Unless you love filling out forms – and have experience in real estate transactions – this is a chore best left to the professionals, who should ensure that everything is done by the book.

First-time home buyers guide: using a real estate agent

You could easily make a mistake with these documents. Mistakes can cause deals to fall apart or (worse) make you liable for an inadvertent breach of contract. (A licensed agent will have errors and omissions insurance to limit this risk.)

An experienced agent will make sure that everything that needs to take place — counter-offers, extensions, appraisal, inspection, walk-through, loan approval — happens when it’s supposed to and how it’s supposed to.

Do you have crazy negotiating skills?

A good agent should have a wealth of sales and neighborhood data to help you negotiate the lowest-cost deal.

A seasoned pro knows what you can buy in your area with your budget, and what constitutes a good deal. He or she knows how to formulate tempting offers, when to play hardball, and when to walk away. This expertise is especially helpful in neighborhoods where home values vary widely from block to block – or in seller’s markets.

Most home buyers think agents are worth the price, according to the National Association of Realtors (NAR). In 2016, 87 percent of home buyers purchased through a real estate agent. Of these, 89 percent said they would use the same agent again or recommend her to others.do you need a real estate agent to buy a home

Unless you’re a genuine expert in negotiating real estate deals, follow your agent’s advice.

(Remember: most sellers are also represented by agents, and experienced negotiators tend to eat amateurs for lunch.)

If you’re a first-time home buyer, your agent will help you avoid newbie mistakes – such as skipping the home inspection or giving away your bargaining leverage by disclosing too much personal information.

Finally, because the fees for both the buyer’s and seller’s agent are usually paid by the seller, there’s no reason not to interview some agents about representing you.

Beware bad actors

Comedian Yakov Smirnoff once quipped, “To my real estate agent, Chernobyl is a fixer-upper.”

Every industry attracts its share of top-notch pros, mediocre talents and bad eggs. And the real estate industry is no exception.

Can you fire your real estate agent?

While most real estate agents won’t pressure you to buy radioactive property, some ethically-challenged ones will push less-than-desirable houses.

In some cases, the unscrupulous agent wants to unload a slow-moving home to “chalk up a win.” In other cases, the agent has been promised a higher commission by the seller.

Conflict of interest: dual agency

The most common problem, however, occurs when an agent (or agency) represents both the buyer and seller. This is known as “dual agency.” It’s not illegal in most states, but it’s far from ideal.

In theory, when an agent represents both parties, her task is to merely “facilitate” the transaction. In fact, there is no transaction in which both the buyer’s and seller’s interest can be represented fully and without conflict.

Imagine this fairly normal transaction with an agent on each side. The listing agent, who represents the sellers, knows that they are divorcing and frantic to unload the house and leave town. If the agent representing the buyers heard this news, he or she would be doing the right thing disclosing it so they could knock the price down.

Real estate agent: buying agent versus listing agent

But what if only one person represents everyone? By disclosing the divorce information, the agent is helping the buyer and harming the seller. By not disclosing it, the agent is helping the seller and harming the buyer. There is no way to work 100 percent in the interests of both parties.

In reality, agents are likely to favor the seller, if only unconsciously. After all, the seller usually pays their fee (typically 6 percent of the sale price) and a higher sale price equals a higher commission.

Sometimes the listing (seller’s) agent offers to put you together with a “buyer’s agent” from the same office. You may see buyers and listing agents all working on the same “team.” Probably still not an ideal situation. Get your own representation.

There are firms that only represent buyers. That’s one way to avoid conflict.

Something to avoid online

Most people find the homes they buy online. If you’re on a real estate site, you’ll probably see a house and a link to click “for more information.” Don’t click that link unless you want agents who know nothing about the property (but buy leads from the site) burning up your phone.

If you want more information, go directly to the actual listing agent, or have your own Realtor do it for you.

Finding a good agent

Before hiring a real estate agent, do your research. Because chances are excellent that you personally know at least six agents, and have at least 20 in your “friends of friends” sphere. That doesn’t mean you have to work with any if them, but it’s fair to give them a chance to earn your business.

What today’s homebuyers want in their real estate agents

It’s also worth mentioning that while many use the terms “real estate agent” and “Realtor” interchangeably, they are two separate things. Realtors are agents who are members of the National Association of Realtors. They must abide by rules set by their governing body, but agents are not required to join the NAR to work.

Also, Realtor is pronounced “Real-Tor,” not “Real-A-Tor.” In case you want to avoid sounding silly.

  • Work with someone who specializes in your price range (the “agent to the stars” probably won’t give you much attention if you’re looking for a $90k fixer)
  • Work with a full-time agent. Not someone who tends bar four days a week and sells homes on Wednesdays
  • Choose a seasoned pro. Everyone makes mistakes in a new profession, but you don’t want to provide your agent’s learning experience
  • Check their background online to make sure they are licensed and have no complaints or pending lawsuits against them
  • If yours is a complicated transaction, you might want extra firepower — some agents complete additional training and earn extra designations for special expertise — Accredited Buyers Representative, Certified Residential Specialist, Certified International Property Specialist, etc.

It’s usually a bad idea to hire a friend, relative or neighbor as your agent. If Judge Judy has taught us anything, it’s that mixing business and pleasure can lead to damaged relationships and nasty televised lawsuits.

Verify your new rate (Nov 12th, 2018)