So you’ve weighed the pros and cons of renting or buying and decided to buy. Well, you better get yourself ready because you’re in for a long process that can be confusing. Buying a home is rarely as straightforward a purchase as other things. There will be legwork involved as you seek out different properties on the market, assemble a mountain of paperwork, compete with other buyers, and a host of other challenges to overcome before you get your hands on the keys to the front door. All of this can get very stressful. Having the right real estate agent by your side to act as a guide and confidant can not only reduce the risk, stress, and time involved but also save you a lot of money. Now is where a buyer’s broker comes in.
Things have changed a bit in the real estate world in the last few years. Many listing websites and apps now make it much easier to find a property without the need for a buyer’s broker. But the problem with many of these sites is that they can’t differentiate between a desirable, home and a lemon. It takes in-depth local market knowledge, and an understanding of a functional floorplan versus a bad one to weed through all the listings on offer to find your dream home. There, of course, is a multiple of other factors that happens during the buying process that we divulge.
Table of Contents
Why should you use a buyer’s broker?
There are many listing sites available now where buyers can use an advanced search to find properties to their liking. StreetEasy is probably the best in NYC, but it still suffers from the same problems as others. Mainly that you’ll have to comb through hundreds of different properties that have all the bad mixed in with the good.
You’ll have to make a shortlist based on your wish list, preferred neighborhoods, and budget. Even if you can narrow down a list of 10 or 20 properties to call, you’ll then have to find the time to visit each one and evaluate them. All of this isn’t hard, but it can be time-consuming, especially if you’re unfamiliar with the neighborhoods, streets, and buildings.
When you hire a buyer’s broker, they will do all the searching and calling based on your needs and budget. They can then schedule appointments to view properties which they feel are suitable for your need and potentially worth considering. If you’re working full-time and don’t have a lot of free time, this alone can be invaluable. When viewing properties together, they can explain the pros and cons of each to help you decipher, which is the right one. All this saves you time and ensures that you find a desirable property with great long-term potential that matches your needs and budget.
Negotiations and making an offer
The vast majority of listed properties in NYC are represented by listing agents who you will deal with rather than the sellers. Without a buyer’s broker to represent your interests, the listing agent will assume dual agency. Meaning that while the listing agent will help you with any questions you might have, their loyalty will be to the seller.
Their job is to sell and for the highest price possible. Therefore, in negotiations, they will always lean towards favoring the seller. Unless you have a lot of experience handling negotiations, on your own, you could be in for a rough ride. There may be counter-offers and other interested buyers which without; excellent negotiation skills could see your offer rejected.
A buyer’s broker can handle all of this and make suggestions on how best to answer counter-offers and deal with a bidding war. If you’ve chosen the right buyer’s broker, they will know the neighborhood, current market prices, and perhaps something about the seller’s motivations.
Also, keep in mind that in NYC, real estate contracts are not binding until both parties have signed the contract. The sellers have the distinction of being the last to sign. Meaning that even if they gave a verbal agreement to accept your offer, a better offer might come through and lead to them canceling yours. Unfortunately, there is little you can do if this happens, but at least if you have an agent, you’ll be better prepared.
Helping more ways
Once you have an accepted offer and a fully signed contract, the agent’s job; is mostly done. Your real estate attorney will handle the due diligence, closing documents, and schedule for the closing day. But your buyer’s agent can still help in a few other areas that will ensure a smoother sale.
Recommend other professionals
Buying a home requires the help of a range of different professionals. You’ll need a home inspector to ensure there are no problems with the property. A real estate attorney to handle due diligence and arrange everything for the closing day. A mortgage lender to underwrite and approve your mortgage. And a contractor if you plan to do any renovations after the sale. Your agent can provide tried and tested ones that they’ve worked with before or had recommended to them. All this helps you get through each step of the process and lead to a successful sale much faster.
Help you secure financing
Mortgage financing can be very complicated and confusing. If it’s your first home purchase, it can be very hard deciding which mortgage type is right for your circumstances. A buyer’s broker will help you navigate through this stage. They’ll help you understand each of your options and help you to secure a mortgage through your chosen lender.
Help you overcome setbacks
It’s rare for a home sale to go entirely smoothly with no road bumps. The home inspectors report may come back with issues that need to; be addressed. If that happens, your agent can advise you on how best to proceed and handle any renegotiations. If negotiations become deadlocked at any point, it can be reassuring to know you have an agent standing between you and them.
They can act as an emotional filter
Buying a home can be a very stressful time. At such times it’s easy for people to allow emotions to cloud their judgment and make rash decisions. Since a buyer’s broker isn’t emotionally attached to a property you’re interested in they can help keep you on track and see the pros and cons.
What are the duties and responsibilities of a buyer’s agent?
Traditional dual agency real estate brokers work with the seller to determine a price, get the home on the market and convince a potential buyer that a particular apartment or house is the correct one for them while this is a valuable and necessary service for sellers. Often leaving buyers in the awkward position of trusting the advice of a listing agent, whose primary objective; is not the satisfaction of the buyer, but the sale of the home for the highest price possible.
This uniqueness of each home and neighborhood also leads to what economists call “informational asymmetry”; when one party in a transaction is privy to information, and the other isn’t. In this case; unless the buyer happens to be a real estate expert; he or she is always to a certain extent at the mercy of the broker in regards to the various minute details of the home.
Demand for buyer’s brokers on the Rise
Understandably, this situation has led to a steadily; growing demand for brokers that work without this potential conflict of interest and focus solely on the, interests of the buyer.
It is no surprise that this growing demand for exclusive buyer brokers is in flux in New York City; where the high prices make real estate decisions all the more critical. Furthermore; the city is full of various traits and unique market dynamics that most buyers find challenging to navigate on their own.
The city’s luxury market holds an unusually high demand for buyer brokers. Usually quite financially sophisticated; buyers in this market are well aware of the complexities of the real estate market and of the financial power that comes with having a specialist representing the buyer’s interests.
The last few years have seen significant changes in the real estate industry. Thanks to the internet and new technologies, buyers have unprecedented access to listings and real estate information. Question; are buyer’s brokers still necessary? The short answer is yes, and here’s why.
They guide you through the home buying process
All the information available on the internet might make it seem like buying a home is relatively straightforward abut that’s rarely the case. The home buying process can be complicated with many pitfalls. An experienced buyer’s broker knows all the ins and outs; of the industry and will be there to guide you through the entire buying process.
They’ll be able to take a look at your finances; understand what your needs are, and set a realistic budget and goals. If you require pre-approval for a mortgage, they can refer you to plenty of efficient mortgage bankers. They’ll also help you with filling out your REBNY Financial Statement which you’ll need for making offers.
If you’re buying a co-op or condo; they’ll help you with putting together a Board Application Package that will give you the best chance of success. In short, buyer’s brokers make the whole purchase process a lot less confusing and frustrating.
They can find the right listings and help with scheduling properties
The online market might make it look more natural to search for a home on your own, but few have the time to examine properly. An experienced agent knows the inventory on how to search for the right properties and can devote themselves to it fulltime.
They also have preferred access to other listings such as off-market properties and New Developments off the plan with schedule A pricing which you may not. An experienced buyer’s broker also peels back the noise and knows how to differentiate between a great property and a lemon.
When you attend open houses, you can leave your agent’s contact details on the sign-in sheet, so you aren’t annoyed by follow up calls and promotional emails from listing agents. If you come across a property; you like but aren’t doing an open house, you can have your agent call and schedule a personal viewing. Seller’s tend to take such requests more seriously if it comes from a buyer’s broker as it shows you’re serious about buying.
They can help overcome setbacks
If a home inspection or appraisal report brings attention to some issues, your buyer’s broker can help you proceed. Negotiations in these moments can become quite heated. It’s much better knowing you have an experienced professional by your side that knows how to handle these moments.
They can help with bidding strategy and negotiations
Possibly the most useful duty of a buyer’s broker is their ability to estimate fair value and gather information on a listing to help you plan a bidding strategy. Knowing about the seller’s background; their expectations and previous offers; provides a significant advantage, when it comes to offering the right price.
Once you have an offer accepted the agent can then handle negotiations with the listing agent as they iron out the specifics of the deal. Remember; NYC is mostly a seller’s market. Submitting a signed purchase offer does not make an offer legally binding, at least not until the seller has counter-signed.
There will probably be other offers with the seller free to choose the best one. Your agent will ensure you remain on the seller’s radar to give your proposal the best chance of being accepted.
Experienced buyer’s brokers have an understanding of the market, evaluating trends and properties. Also, handling the purchasing process and all paperwork required. Invaluable to a home buyer.
New York’s first Exclusive Buyer’s Agency
Elika Real Estate, a firm composed exclusively of buyer’s brokers; is the leading such brokerage in New York City. The success of Elika Real Estate has begun to show that; even in a market as old and settled in its ways New York City; a new type of service can be combined; with emerging technologies in ways that can begin to level the power dynamics between sellers and buyers fundamentally.
How to find a suitable and excellent broker?
All the benefits covered you can have when you hire an excellent agent. But as with many professions, there are good apples and bad apples. To ensure you get the services and professionalism you need, take your time in choosing the right agent for the job. Don’t just go for the first one you meet. Instead, it’s best to interview at least three agents and ask them a series of questions to determine if they’re the right match for you. Also, watch for any signs that you may have made the wrong decision.
Ask about what neighborhoods they specialize in
If they don’t have experience in your favorite; area (s), then they’re not the right choice.
What are their schedules and availability?
You’ll want an agent that is available when you need them and is committed to working for you.
Ask about their negotiation style and experience.
You’re more likely to get along with them and work better as a team if their negotiation style matches yours. Knowing the buyer’s brokers’ level of experience will also allow you to judge their competency. However, don’t necessarily dismiss less experienced agents; they may have other perks up their sleeve.
When doing your search for a buyer’s broker, you may come across agents who are willing to rebate a part of the fee back to you. Before jumping at the chance for this, it is worth looking a bit closer to understanding clearly, what you’ll be getting.
Agents must have a reason for doing this, such as a chance to drum up business. If they’re inexperienced, you may not get all that you expect with this such as a Comparative Market Analysis (CMA). The CMA determines the properties approximate fair market value, as well as what the offer price should be, so you don’t offer more than the place is worth it. An experienced agent will know how to put all the variables together to create the best offer price. If you go with a discount broker, you may be losing out on this and end up losing money rather than saving it.
Sign the agent/buyer contract
Once you’ve found your ideal buyer’s broker, you’ll usually be asked to sign an Exclusive Buyer Agency Agreement.e This outlines your agent’s duties and compensation (covered below). This agreement will also make this agent your sole representative, so you can’t work with other agents.
However, some agents, like Elika Real Estate, do not require a contract that locks you in for several months. All Elika asks for is a two-week commitment. If you’re not happy with the service by that time, you’re free to seek alternative representation.
How much does a buyer’s broker cost?
If you needed any more reasons to go with a buyer’s broker how about that fact that you won’t be paying for them, this is because their commission is built into the purchase price, if you choose to go buying without a buyer’s broker, you will still be paying that 5-6% commission. It will just go entirely to the listing agent.
If you buy with a buyer’s broker that 6% will be split between them 50/50. As such, it makes little sense to go without representation as you have little to lose by it. When weighing buying with or without a buyer’s broker, the pros outweigh the cons.
How to interview a buyer’s agent before hiring?
For most people, buying a home is amongst the most important purchases they will make in their lifetime. Buying a home can be an intimidating experience, with a lot of facts and figures and general knowledge to cover. Recommended that you hire an exclusive buyers agent, especially if you are a first-time homebuyer or relocating to a new city.
When you’re in the market to buy an apartment in NYC, it’s essential that you take the time to interview your chosen buyer’s agent properly. This person will be your guide, representative, and council through the buying process. As such, it’s crucial that you have the right one for the job. The way to do this is by asking them some tough questions.
There will be obvious ones, such as ‘What are your fees?’ ‘What Neighborhoods do you specialize in?’ and ‘How long have you been in the business?’ These are the right questions, but there are other more probing ones that you might not think to ask.
Finding a buyer’s agent that best suits your needs can be challenging. Before you hire a buyer’s agent, ask the questions below.
How long have they been a full-time buyer’s broker?
While the number of years in real estate isn’t necessarily an indicator of success, working full time in the industry indicates that they have a lot of time on the job, where most skills are; learned.
How familiar are you with the neighborhoods that I like?
Spending time buying homes in the neighborhoods you prefer indicates that the buyer’s agent has a solid understanding of the area, especially if they have already helped buy homes there in the past.
What type of buyers agency do you practice?
There are three different buyer agency types; so if you are looking for a specific representation, then you will want to ask this question.
The types include
- Non-exclusive buyer agents (represent buyers and work with brokerages and sellers of their choice, but there can be a conflict of interest if they work with an office that also has sellers agents)
- Designated buyer agents (represent the buyer)
- Exclusive buyer agent (represents buyers only and doesn’t list properties for sale).
Can you recommend service providers to help with all aspects of home buying?
A buyer’s agent should be able to recommend mortgage providers, inspection services, and other services that are necessary for buying a home. A seasoned buyer’s broker will be able to give you more than one company and let you know if they have a relationship with or receive compensation for their recommendations.
Are you aware of any special programs that can help me buy a home or make improvements post-purchase?
A buyer’s agent familiar with the area you are considering should be familiar with local laws and regulations and be able to point you in the direction of local, regional, state and federal programs that help with home purchases and improvements. A great buyer’s agents may also be aware of alternative programs and even grants and loans as well.
Do you know of any incentives, being offered?
Despite a robust recovery in the housing market and limited inventory, developers and sellers may be offering incentives to help sell their property.
Do you have any credentials and certifications?
These include those from the Accredited Buyer Representative (ABR) certification from the National Association of Realtors® and The Certified Buyer Representative (CBR) designation. Also, the National Association of Exclusive Buyer’s Agents (NAEBA)
How are you paid and do you charge a fee?
The seller pays the commission for the buyer’s broker; but as commissions can be negotiated differently, be sure you know upfront who will be paying, the buyer’s broker.
How will you contact me about new homes available, and any questions?
Find out the best way to reach your buyer’s broker and how they communicate so that you can make sure that you are both on the same page at all times, whether text or email is your preference. When working with a buyer’s agent, you will want a responsive and dedicated agent, keeping you ahead of your competition.
Who was your most challenging client, and how did you handle it?
You’ll want a buyer’s agent that knows how to handle challenges with grace and professionalism. Having them relate a client horror story will give you an insight into how they deal with challenging people and circumstances. Any agent that immediately starts trash-talking a former client in the worst terms should raise a few eyebrows. That’s not the way a professional should speak about previous clients, nor is it an agent you should consider. But if they demonstrate patience and expertise in how they handled a difficult situation you can be a lot surer of them.
If it was you looking to buy a place, where would you look and why?
You’ll work best with an agent that has a similar lifestyle to yours. Asking this question gives you an insight into what the up-and-coming neighborhoods are but also your agent’s mindset. You’ll both work together much better if the agent listens properly and understands your needs on a personal level. For instance, if they have a family, they’ll know what neighborhoods are the best for raising kids. If they’re career orientated, they’ll know what amenities and local services are vital to you.
How can you help me narrow down my choices and fit house hunting into my busy schedule?
House hunting can be very time consuming and exhausting. You won’t have time to see every place your agent finds so you’ll want to know how much legwork their willing to do for you. Their answer will not just tell you how they’ll help you narrow down your choices but also what their approach to house hunting will be. A seasoned buyer’s agent will know all this in advance and have a system that allows you to eliminate options without having to drag you out there. For instance, taking additional photos or videos of each apartment, they preview and giving you an honest opinion on its pros and cons.
What are some ways I could make my offer more attractive other than raising the price?
Money always opens doors expect for a Co-op, if you’re to compete in a hot market like New York, you’ll need an agent with a few more tricks up their sleeve then just upping the price. They should demonstrate the right market knowledge and negotiation skills that will give you an advantage over the competitors. Simple as asking the sellers agent the right questions to find out what is most important to them. It could be a quick closing; a delayed closing, a post possession agreement a specific contingency or just a buyer they like and trust.
How do you help the buyer’s come to the right decision?
Sometimes a simple list of pros and cons won’t be enough. That’s when having an agent who fully understands your needs and has clarity of vision can help move things along. You should be able to feel comfortable talking with them about any issues or concerns you might have, including property valuation and future potential of a particular property or neighborhood. An experienced agent will help you look past the small details and see the bigger picture.
Do you have testimonials or a list of previous clients?
As with any service provider, ask for referrals to find out if previous clients were pleased representation provided. Websites like Yelp; Google and others can also provide an excellent reference to learn what other home buyers experienced when working with the agent or brokerage you are considering.
These questions are an excellent way to start a conversation about home buying. Depending on your needs and preferences; you may also want to choose a buyer’s agent specializing in first-time home buyers, condos, co-ops, or townhouse properties.
Buyer’s broker myth’s
There are a lot of myths in the real estate world, and it can be tricky to sort fact from fiction. Welcome to Truth or Myth, where we look at the most common real estate myths, legends, and adages to see if there’s anything there.
Today, we’re asking: are buyer agents worth it, or should you represent yourself?
The myth is this: you only need a real estate agent when you’re selling a home, not when you’re buying one.
The rationale is that when you’re selling, you need someone to list it on real estate databases, market the property, negotiate the best price, help with any legal and building requirements, run open houses, and do all the legwork involved in any significant sale.
- But when you’re buying, what would you need an agent to do?
- You know what you like, you’ve negotiated things like salaries and cars before, so you’re not exactly a novice in that arena, and your bank can help you work out the financials. What’s the point of a buyers agent?
- That’s the rationale. But what does the evidence say?
Before we get too far into our evidence, let’s get a couple of terms straight.
The listing agent (or seller’s agent)
Most of us think of when we think of real estate agents. It’s the agent who’s listing the property and represents the seller. In some states like New York, the listing agent can serve as a dual agent, meaning they can represent both the seller AND the buyer, however, when doing, so their fiduciary responsibility remains to the seller by contract.
The buying agent (or buyers broker)
The buyer’s broker is a real estate agent who represents the buyer. They have a responsibility to be unbiased, find the right property, get the best possible deal for you and give you any information to help educate you about the property and help you make an informed decision.
Now that we’re clear on what’s what let’s look at what’s wrong with the single-agent model.
Problems with using the listing agent only
For starters, the listing agent has a fiduciary responsibility to the person selling the house. And while it’s possible for one broker/brokerage to represent both, it’s a situation that is rife with potential conflicts and pitfalls (despite measures in place to minimize that possibility).
For example, as a buyer, you might go directly to the listing agent and negotiate yourself. This means the listing agent is getting 100% of the commission and gives you an “in” to the seller, opening the door for a more constructive; negotiation (in theory). What’s more, the seller might drop the price because they can reduce the commission (since the agent isn’t splitting it).
In practice, though, neither of these myths play out.
A single representative means that the agent is wholly incentivized to get you to buy the house for as much as possible, regardless of any problems or lack of potential the home might have or what their expertise about market value is telling them. Even if they’re representing you as a dual agent (and can convince the sellers to drop the price), the agent gets the most value from you buying that house, regardless of whether it’s the perfect home for you or even worth buying. And also if the seller AND the agent both wanted to drop the commission, it’s often not up to them because the agent works for a company, who have no reason to lower the commission.
In contrast, a buyers agent has no vested interest in any one particular property thus gets the most value from you buying a home you’re happy with, regardless of who the listing agent is.
Why a buyers agent is a good idea
First, a seasoned buyers agent means that you have someone representing your best interests throughout the search and purchasing process. The benefits of that experience are almost innumerable. They can help you:
- Find the right property for you with insider knowledge of currently listed and off-market properties
- Understand existing market conditions
- Estimate the fair value of a property
- Know how much to offer initially
- Handle negotiations
- Perform the final walk-through
- Submit a condo or co-op board package
These factors give you access to the skills you need to find the best property for you, as well as a representative who has a responsibility to get you the best possible price.
Second, buyers agents often have a dense network of real estate agents, lenders, home inspectors, contractors, and legal help they can call on for you to move the process forward with confidence. These costs add up when you’re buying an apartment, and getting them scheduled and processed is hugely time-consuming. Buyers agents can do this quickly and efficiently.
Third, they don’t cost you anything. Buyer’s brokers; is paid out half of the commission of the home (usually 4-6% of the sale price).
There’s a misconception that listing agents won’t deal with them because of this, but that’s not a reality. In New York, listing agents are regulated; by the Real Estate Board of New York (REBNY). This means that a universal co-broker agreement restricts them and that they have to submit all offers equally to the seller, regardless of whether the offer was with a buyers agent or not. So while it seems like listing agents are incentivized by higher commissions to avoid buyers agents, there’s not a practical way for them to do so.
Finally, buyer agents’ sales often move faster because they have someone working full time to get offers in, paperwork filed, as well as financials and contingencies squared away in this case, suitable for both you and listing agent.
Why? Because listing agents are incentivized to get the property sold quickly to reduce the number of days on the market and allow them to drum up a new business. Plus, most listing agreements are only for three months, so agents would prefer a deal to move faster rather than risk losing it altogether.
Listing agents are like everyone else – they like to work with professionals.
The myth that buyers agents don’t bring anything to the table is just that — a myth. You can think about it this way — you wouldn’t get your spouse’s attorney to negotiate your settlement, would you? It’s the same with real estate.
A buyer’s broker has a fiduciary responsibility to get you the best possible deal (and years of real estate negotiation experience). Not only that, buyer agents can help with paperwork, house inspections, offerings, and condo/co-op board packages, and those with good reputations can expedite preferred access to a property before other buyers and agents.
Their years of real estate experience and knowledge, paired with dense networks to call on give you a unique advantage and can help you find the right home at the right price that’s going to be a sound investment for the long term.
So why not use a buyer’s broker? That’s the real mystery.
Schedule a call with an ELIKA agent to help you find a home.