Buying from an Agent -- Buyer's Agent?

StellaMarieMay 16, 2011

Would appreciate the advise of savvy buyers and sellers on this site. :)

As a bit of background, I have purchased and sold before, but it was a condo in a highrise and was pretty straightforward. Also, I am not a real estate expert (though I try to be informed), but I do negotiate for a living!

I am not in a hurry to buy, and I am pretty cautious about doing so in this market (still declining in my city). However, I am keeping my eye out. I am interested in a very specific, and fairly small, neighborhood in my city. I also have fairly specific criteria about what I want -- price range, lot size, type of house, etc.

A house that meets all of my criteria, on paper at least, was listed recently. It is owned by the listing agent. It is also listed for a fairly large premium over the 2005 price. While the '05 price may have been a good one, and it's not clear what updates have been done since, I think the house is pretty clearly overpriced. And, in any event, I'm not willing to pay what they're asking.

I'd still like to see it. Maybe the owner will be willing to come down; maybe I'll realize that the layout doesn't work that well.

My question, at long last: should I get a realtor of my own? Comps in this market, in this specific area, aren't easy, though a couple of similar homes have gone under contract recently, so hopefully there will be better ones soon.

I would think I could save money doing it on my own (with the help of a RE lawyer), since the agent/owner wouldn't have to pay the 2-3% (is that correct?). However, since I am admittedly not an expert, I wouldn't mind the advice that comes from a good realtor. I am looking at a firm that is known in my particular market for offering well-priced, well-marketed homes. The buyer's agent I spoke with actually knew the owner/agent.

Buyer's realtor or no? I don't particularly want to potentially "lose out" on that money -- but I don't want to be penny wise and pound foolish, either.

Also, would my (buyer's) agent require a contract before taking me on an initial showing? I wouldn't have someone show it and then ditch them for a side deal, but I also don't want to lock myself in to something going forward right now.

Thanks in advance, and apologies for the rambling post.

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Re: "I would think I could save money doing it on my own (with the help of a RE lawyer), since the agent/owner wouldn't have to pay the 2-3%" there is no savings to either you or the seller, since the seller's agent is the one to split any commission with a buyer's agent. So... get a buyer's agent, it's FREE for you, and you'll have someone representing YOUR interests. I'm amazed how often this comes up on this forum!

When we bought, we looked at the house first, fell in love with it, THEN contacted an agent to act on our behalf. We could have done it the other way, but I wanted to do the looking on MLS.

    Bookmark   May 16, 2011 at 7:32AM
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I think I would want a buyers agent. The agent who owns the home will think he/she knows more than you and may know ways to take advantage of you. The fact that the house is "obviously overpriced" makes me think he could be tough to negotiate with.

Many buyers agents will take you out to see a house without forcing you to sign a contract right away. BUT, I think if an agent shows you a house (other than the listing agent), he/she is owed the commission (although I can't speak regarding legalities). You could maybe negotiate for a lower commission since he/she isn't having to show you a bunch of properties.

    Bookmark   May 16, 2011 at 7:37AM
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Sorry to be so persistent about this...but why bother negotiating a lower commission with a buyer's agent? It's FREE for the buyer, which the OP is, and any such negotiation is only putting more $ in the agent for the seller. There is no savings for the seller or the buyer.

    Bookmark   May 16, 2011 at 8:30AM
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"It's FREE for the buyer, which the OP is, and any such negotiation is only putting more $ in the agent for the seller. There is no savings for the seller or the buyer."

Huh? The owner is selling the home and acting as their own agent. Any $ paid to a buyers agent most certainly impacts the bottom line to the seller.

If you are having a hard time determining a fair price, I'd definitely get an agent to help though.

    Bookmark   May 16, 2011 at 9:51AM
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In my state if you don't have a contract with an agent stating they are acting as a buyers agent then they also work for the seller even if they are the ones showing you the place.

If you are worried about signing a long term contract you could ask if they are willing to do it on a per property basis, OR make sure you can just cancel the contract at any time if you are not a good match.

    Bookmark   May 16, 2011 at 10:15AM
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Thanks very much for the advice -- I really appreciate it!

I agree that since the house seems overpriced, and the owner/agent clearly should know the market, he may not be easy to deal with. Also, I'm not sure that he appropriately disclosed the agent/owner relationship -- which is fine, because I figured it out, but I don't know if it means anything more than that. (The buyer's agent I spoke with was pretty upset about it.)

I actually don't mind paying for the advice, and appreciate it; it just seems like a kind of hefty premium in this case. Ah well. If only my potentially perfect house were bargain priced, too! ;)

    Bookmark   May 16, 2011 at 10:17AM
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imo, you can get a better deal on sales price if you go directly thru the selling agent, since this person is the owner also. this is approx 3% less money out of pocket that they won't have to pay the buyers agent. they will easily take 3% off home price and still net the same money as if they sold for 3% more and you had a buyers agent.

However, if you go through this person, stay tight lipped 100% or only tell them what you want them to know from a negotiation standpoint. (not that you only want in this neighborhood, but you can mention that you don't need to move and like this area).

but you must be careful if going directly via this agent, as they might try to pull the wool over your eyes. your #1 issue is you must know the market price of this home TODAY. Doesn't matter what they bought it for in 2005, what upgrades they did since then. Bottom line, what is is worth now, as is. if you know this, then you are ready to rock. maybe there is an open house coming soon? then you can show up casually and just be a looker?

    Bookmark   May 16, 2011 at 10:38AM
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I would be inclined to see the house on my own and find out if it meets the minimum purchase criteria. IMO you would be under no obligation to any agent for a showing, but I don't know the rules of your area.

You stated you negoiate for a living, so it does not seem a buyer agent will be needed for this area. If you need comps, then ask the seller/agent to provide them to you in order to justify the asking price.

    Bookmark   May 16, 2011 at 11:03AM
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sweet_tea, I do think the prior price is a decent indicator of value today. Prices in my city, as a whole, are certainly below 2005 pricing -- again, taken as a whole. I don't think it's the only indicator, but I do think that it's relevant.

Houses in good shape in this price range haven't been showing up/selling all that much in the past 6 months. Really, those that have sold have cost a good amount less, for fixer uppers, or a lot more, for ginormous new construction. There are a couple of similar properties (one a short sale and the other a flip) which have gone under contract recently, so I'll be glad to see what those end up going for.

No open houses yet. It hasn't been on the market for quite a week, though.

    Bookmark   May 16, 2011 at 11:06AM
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I missed that critical detail that the seller is also the agent - read this too early this morning! I'd still get a buyer's agent if I were OP, to ensure her interests are covered, definitely the seller has a conflict of interest to act on her own AND buyer's behalf. Presumably the buyer's agent commission would be factored into the price negotiations, just as a FSBO would.

    Bookmark   May 16, 2011 at 12:54PM
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you don't know if owner got it for a steal in 2005 or what condition it was in 2005 or whether it was from a family member in 2005 or if they paid full market price in 2005. that is why you should throw out what they paid in 2005. does seem strange that they are asking MORE than 2005 price. But what if they got it for a real good price from an aunt and it needed lots of work. you just don't know.

sounds like you know the market in this little area that you targeted. the current asking price, is it within expectations of what you deem market price today? assuming you have seen photos online and mls listing of what is new/upgraded.

go see the place and take it from there.

    Bookmark   May 16, 2011 at 3:14PM
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^^ Actually, the prior sale info is public. And the prior owner refied their initial mortgage with one that was substantially higher than their purchase price (in the early 2000s; they had purchased in '95) -- suggesting that the prior, not the current owners, did the improvements. The two parties appear to be unrelated.

Of course I don't *know* who did the improvements, and it could well have been both owners. And the area itself really increased in value between '95 and '05. It's all good information, though. :)

As for the current price, it is listed over what the comps I previously mentioned, which just went under contract, are listed for. But those two were listed higher than this property's 2005 price. Confusing enough? ;)

Anyway, at the end of the day, I just need to see it. It may not work for me. And the owner and I may just be too far apart in our ideas of value. Either of these things is entirely possible, perhaps probable. I may also decide that, since this is still a declining market, I'm not yet ready to take the chance.

Thanks again -- to everyone -- for posting. I really appreciate it.

    Bookmark   May 16, 2011 at 6:08PM
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If you are not in a rush, take your time and keep your eye on your market. You do not need an agent, at this point.

I am looking in to buy in two different states, NY & Florida. I have been watching listings on MLS in both states. In NY I have been looking for about 6 months and have seen prices slowly fall and inventory increase. Sellers have been very rigid about dropping prices but when I see properties sitting over 6 months, without selling, I feel justified making low offers.

Watch the comps and note the DOM and final selling price. Look to see how many houses are for sale.

This market is tricky. My area is desirable because of proximity to NYC. Prices have remained high but inventory has increased. I find high-end houses are selling but mid-price homes more slowly. I don't understand that. I could be wrong, but there is a glut of mid-price homes available.

The comps are confusing because some homes are selling way below list price yet others are selling close to list. I've noticed bidding wars where the houses sold above list price.

Hard to make heads or tail of this market. I am using an agent to gain access to properties only. I am not using her to do any searches for us. I have made an offer on a property which she submitted. It was considered a low offer and she was not supportive yet did submit it. The seller would not counter. I'm okay with that as there have been no other offers at this point. We can wait.

I think the market in my area is starting to decline; later than other areas but definitely dropping. Sellers are dropping prices after a year. When they sell, they become the comps.

My advice is to wait it out and keep an eye on your market. Let this listing sit for a while and watch what goes on in the neighborhood.

Good luck,

    Bookmark   May 17, 2011 at 11:02PM
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I had a buyer's agent & I think he did an OK job -- but remember that all agents are really representing themselves and the buyer is the ONLY one looking out for the buyers' interests (unless you have a real estate attorney). All agents want to get a contract to close (and that may or may not be in the buyer's best interest).

If you do not have an agent the owner/listing agent will save money. If there are multiple offers, your offer will be the one the owner will choose. It's a different market today and multiple offers are not as likely as they once were. I'd take a look at the property (without a buyer's agent). If I wanted to proceed, I'd consult a real estate attorney who could draft the offer & offer give advice. Good luck

    Bookmark   May 18, 2011 at 5:31PM
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If you know the market - it should not be too hard to learn since you are interested in a very specific, and fairly small, neighborhood in your city.

If you know how to negotiate - you have all the training and experience in performing due diligence and carrying out negotiations.

If you have a good real estate attorney and good inspectors - it is not too hard to find them.

If you know your affordability - it is easy since no one knows your financial situation and comfort level better than yourself. You can get yourself preapproved by a lender that would give you an advantage in the upcoming negotiation.

It is hard to come up with any reason for you to use a buyer's agent. By buying directly from owner, you should get a better deal.

You need to see the house; in this case it is your first step to see what you are buying and to meet your negotiation counterpart.

    Bookmark   May 19, 2011 at 8:57AM
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