In NYC, the vast majority of homes are represented by a listing agent. Their primary responsibility is to protect the interests of the seller. So how can a buyer protect their interests? Simple, hire a buyer’s agent. There are many good reasons why it’s better to work with a buyer’s agent. Despite this, some buyers choose to go it solo and deal directly with the seller’s broker. The theory being that since the seller’s broker won’t have to split the commission (4-6%) with another agent, they may subtly or not so subtly encourage the seller to accept their offer. If the market is not very competitive, some buyers will work directly with the seller’s agent and try to have them kick in a percentage point of the commission towards the purchase price.
The problem with this strategy is that you’ll be working with the seller’s agent. Their fiduciary duty including obedience, loyalty, disclosure, confidentiality, and accountability is to the seller. When it comes to estimating fair market value and negotiating, they will not have your best interests in mind and may not divulge specific information about problems with the apartment or building. The sole job of a listing agent is to sell the property not to advise the buyer of the pros and cons. Something which they are not obliged to do under state law. Here are some valid reasons why you should hire a buyer’s broker in NYC.
1. You’re new to the city
Not knowing the local market is one of the biggest reasons why you should hire a buyer’s broker. Every market is different from town to town and even neighborhood to neighborhood. If you know exactly what neighborhood you’d like to find a home in, make sure you hire an agent that has experience finding homes there. Also, try to avoid making the most common first-time buyer mistakes.
2. You’re buying a problematic co-op
Purchasing a co-op apartment tends to be much longer and stressful process than a condo or townhouse. You’ll need to go through all the usual negotiating, offers and counteroffers with the extras of putting together a co-op board package and passing the board interview. A good agent will be able to help you compile a great board package that caters to the whims of the board and give you the best chance of success. Before you even make an offer, they can inform you of how easy or difficult the board interview will be. Meaning that everyone saves time and money.
3. You’re buying for investment
If you’re looking to invest in NYC real estate, then you’ll need the guidance of a broker with experience in investment properties. They can help you model anticipated cash flows, internal rates of return, cap rates, and expected net profits. They can also put you in touch with all the right people such as lenders, contractors and property managers. If you plan to rent out units, you can even hire the broker to market the properties and find suitable tenants. They’ll handle everything from open houses to advertising to making it accessible for potential buyers.
4. You’re not confident at negotiating
The moment when the value of a broker begins to shine is when they conduct negotiations on your behalf. Good agents will have a thorough understanding of the property, the building, and the current market, making them crucial when it comes time to strike a deal. Without a buyer’s agent, you’ll be forced to negotiate yourself and even if you are a confident negotiator you may still come up short from your lack of insider knowledge on the market.
5. You’re unsure about financing
If you’re in need of financing and expect that you may have some difficulty with getting it (for example, poor credit), then a buyer’s agent may be able to help. They’re not miracle workers, but they can help you navigate through the various financing options and banks and help you decide which type of mortgage is best for you.
Bonus Tip: You won’t pay a dime
The above points are all very valid reasons for hiring a buyer’s broker, but the most obvious one has been overlooked. Namely that it’s free. There are very few circumstances where the buyer will have to pay for the agent. They get their payment through the commission on the sale, usually 4-6%, which is split between them and the listing agent.