How to Find Your Home for First Time Buyers

Should you Utilize the Services of a Real Estate Agent?

Advantages – When you start to consider whether to purchase your first home, one of the first questions that comes to mind is, should I use a Real Estate Agent? Although it is certainly possible to do it on your own, there are several more compelling reasons to use an agent than to “go it alone”. There is a misconception among many first time home buyers that by using a Real Estate Agent, they will be subject to paying a commission. In virtually all situations, this is not the case. The commission for the sale of a home is paid for by the seller, not the buyer. The advantages of using an agent are as follows:

You will have access to a much wider choice of homes. Although the internet provides for more search capability than ever before, you will have access to a much larger selection going through an agent.
Determining value is the biggest advantage. An experienced agent will insure that you are not overpaying for the property by preparing a detailed Comparative Market Survey (CMA).
Experience in negotiating the contract and protecting you with the proper contingencies and special stipulations to insure you get the best value and are protected in the process.
Can offer recommendations on everything from home inspectors, mortgage companies, closing agents etc…
A good agent will handle all the details leading up to the closing and insure that everyone is performing their contractual responsibilities.

Pitfalls of Searching for a Home on Your Own

If you do decide to find that dream house on your own, your choices will obviously be very limited. The only homes that you can buy without any Agent assistance are those that are "For Sale By Owner" (FSBO)--generally a small percentage of the market. These are home owners who, for whatever reason, have decided not to use an Agent in the sale of their house. It may be because they think they can get more return by not paying a commission, or it may be because there was no Agent who would take their house listing at the price they demanded. Many Real Estate analysts have found that the selling prices of FSBO homes are equal to--or higher--than those listed by Agents. The biggest hurdle is how to determine if the value is fair.

How do you decide? There is too much money potentially involved to make a "seat of the pants" decision. If you’re not comfortable with your own analysis, be sure to have a proper contingency written into the contract for protection. The next mistake that many buyers make, when they find that their choices are so limited by only dealing with homes for sale by owners, is to jump into the "listed" market by checking advertisements and calling Listing Agents directly or visiting Open Houses. Typically it is possible that the listing agent may agree to a reduction in their commission (which could be used to reduce the sales price) by going direct yourself. There is not a dime to be saved with this strategy (the seller is still going to pay a commission) and you run the risk of ending up with no representation, since the Listing Agent is duty bound to represent the seller. Please see the discussion on Agency. It is crucially important that you understand how it applies when you buy a home.

Agency – What are an Agent’s Obligations

About Real Estate Agency
One of the most common misconceptions that is shared by a large number of home buyers is that when working with a Real Estate Agent, he or she will "automatically" represent you as a buyer. As we will discuss, unless this is specifically disclosed in writing, in all probability the Agent will be representing the seller.

The traditional relationship (probably going back to when the first thatched hut was sold by someone other than its owner) has been that a Real Estate Agent's primary loyalty was to the seller of the property. This relationship was in effect whether the Agent was the listing agent or working with a buyer. This situation caused many home buyers to be confused: they assumed that the Agent that had been driving them around showing them houses for the last 3 weeks was representing them. In reality, the Agent was representing the owners of the houses they saw, and was bound to reveal to those owners any information he or she knew about the buyers.

Buyer Agency, which is almost universally available now, changed all that. The buyer now often has a choice in representation: the Agent with whom they were working could continue to represent the seller in the transaction, or the Agent could represent them as buyers. The buyer is now able to compete on a more level playing field.

Although there are state to state variations (please verify the situation in your particular locality), the following is a basic summary of the types of agency, and who the Agent represents.

SELLER AGENCY: The "default" situation. Unless disclosed to the contrary, all Agents involved in a Real Estate transaction (and their Brokers--with whom a listing agreement is actually with) represent, and owe their allegiance, to the seller. If you contact an Agent who has a property listed, that Agent will always represent the seller.

BUYER AGENCY: When an Agent represents the buyer, that Agent "rejects" the implicit seller agency and thus owes loyalty to the buyer. For more information on this subject, see the section devoted to Buyer Agency.

DUAL AGENCY: This occurs when 2 Agents--or the same Agent--working for the same Broker each represent a buyer and a seller in a transaction. This situation must be disclosed to both the buyer and the seller. Privileged information (e.g. the price that a buyer will pay or a seller will sell at) cannot be disclosed to the other party without the express permission of that party.

What it means to you
If you leave the agency question "as-is", your Agent will automatically represent the seller in the transaction (although it is very likely that they will suggest Buyer Agency.) If the Agent does not represent the seller, in most areas you can opt for Buyer Agency. If the house in which you are interested is listed by the same Broker as your Agent, then you have an automatic Dual Agency situation. To sum it up, if you want full representation and it is available, insist on Buyer Agency.

All About Buyer Agency
Why a special section on Buyer Agency?
Many visitors to this Web Site, in their search for a home, pass by some of the most important information in it--the discussion on agency. They, like many home buyers before them, believe that the Agent with whom they are working--sometimes on a daily basis--represents them and their interests. Without certain disclosures, this definitely is not the case.

The Agent, unless specifically disclosed otherwise, represents the seller in any transaction for the sale of a home. It is that Agent's fiduciary duty (where their loyalty lies) to protect the seller's position at all times.

Buyer's Agency, however, may be an option available to you. Simply put, it allows the Agent with whom you are working to be your representative and to put your interests above all others.

Example 1: You see a house advertised in the newspaper, a home magazine, or the Internet. You contact the Listing Agent (this is who will be advertising the home) and make an appointment to see the house. The Agent is friendly, informative, and tells you what you believe to be everything about the house. The Agent represents the seller, not you.

Example 2: You are working with an Agent, who shows you 25 different homes over 3 weekends. The Agent buys you lunch twice, knows all 4 of your children by name as well as all of your personal likes and dislikes, but does not offer Buyer Agency. You feel comfortable with the Agent, revealing important personal information. Without Buyer Agency, "your" Agent represents, and owes loyalty to, each and every one of those 25 sellers--not you. Any information you reveal to the Agent must be relayed to the sellers.

"Okay," many buyers say, "so the Agent represents the seller and not me. Is that a big deal?" Maybe not, but it is important to understand that if the Agent represents the seller, they cannot reveal certain things to you, as the buyer:

The reason for selling (unless the seller specifically authorizes it)
Any concessions, in price or otherwise, that the seller may be willing to give up.
Any conversations that the seller and the Agent may have had.
Any information that could be detrimental to the seller, or give you, the buyer, an advantage. This would include a CMA (Comparable Market Analysis) that could put the seller at a disadvantage.

Buyer Agency turns the tables. If a Buyer's Agency agreement is struck between you and the Agent, it is you, rather than the seller,who has the representation from the Agent with whom you are working. If you are represented by a Buyer's Agent, some of the potential benefits include:

The Agent can develop a CMA (Comparable Market Analysis), revealing at what price similar properties in the area have been listed for and sold for.
The Agent can reveal to you any information about the seller that the Agent has been able to ascertain. This may include reasons for selling, potential concessions, or other information that may be to your advantage.
Information about property value trends that may influence your decision about a certain area can be relayed to you.

Summary. Is it necessary to have a Buyer's Agent? No. Thousands of home buyer's have been well served dealing with the seller's Agent. (For years, it was the only way it was done). The important thing is to understand your options, so that you don't unintentionally accept less representation than you want.

How much will a buyer's agent cost me?
If you are looking at property that is listed on either Georgia MLS or FMLS, the seller has already agreed to pay the agents commission for you. The only time that you would ever have to pay your buyer's agent, would be if a property is not listed and the seller will not agree to pay commission. If this service is essentially free to you, why in the world would you choose to not be represented?