Talk to enough people about real estate and you're sure to encounter different opinions on why a REALTOR® is important when buying or selling a home. To many people their agent is a local, friendly face who is an essential part of helping them through a real estate transaction once every 7 or so years.
If your REALTOR® does a great job, the process of buying or selling will be smooth — so smooth that you might think you’d be able to do it yourself. Don’t let that fool you. A real estate transaction is a complicated process, with 181 distinct steps. With 88% of home buyers opting to use a real estate agent to purchase their home, according to the National Association of REALTORS® (NAR), it’s safe to say that most people would prefer to leave the transaction complexity to a professional.
In this guide, we will highlight some of the key functions that a REALTOR® performs during a real estate transaction, both from a buying and selling perspective. Most importantly, we’ll detail some of the key reasons why using a REALTOR® will help you get the best deal whether you’re buying or selling your home and why using a licensed real estate professional will secure you increased peace of mind about a transaction with huge emotional, practical and financial consequences.
Do I Need A Buyer’s Agent?
A buyer’s agent is a fiduciary who is dedicated to your needs during the buying process. They represent you during all stages of the process and are your advocate with the listing agent, the title and escrow company, and the closing attorney. Any agent who only represents the buyer in a transaction is called an exclusive buyer’s agent.
The most valuable asset a buyer’s agent has is their local experience and knowledge. Whether you are a first-time or experienced buyer, leveraging your agent’s local knowledge about schools, neighborhoods, and individual homes will be crucial to finding the perfect home for you and your family. From small details like which streets get crowded during commute times to large ones like when you should (and shouldn’t) offer more money in an offer, your REALTOR® is there to guide you through these decisions and others like them with confidence.
As a home buyer, you are entitled to a buyer’s agent’s service at no direct cost to you — your buyer’s agent’s fees will come directly from the home seller when the house is sold as home sellers typically agree to pay commissions to both the listing agent and the buyer’s agent. If you opt to buy a home using only the seller’s agent (this is called dual agency), the listing agent gets both halves of the commission. Since the overall cost to you is the same whether you employ a buyer’s agent or not, it typically makes most sense to employ one to ensure you have an advocate who’s solely responsible for ensuring you get the outcome that’s best for you.
In limited instances there are times when working directly with the listing agent, and not retaining a buyer’s agent yourself, can yield some benefit. Sometimes the listing agent will have some additional influence with the seller in regards to which offers to accept and what an acceptable offer could look like, which could benefit you, the buyer. However in such circumstances you would be well advised to exercise caution and to remember that the seller’s agent’s primary loyalty will often be to the seller (who they will usually have a listing contract in place with) and that their financial incentive will tend to be aligned with a higher sale price. Each situation is different, however, and ultimately you’ll have to weigh the risks and rewards in such a situation of the agent possibly having more influence over the seller versus you having a dedicated advocate with only your interests at heart.
What Does An Agent Do For Buyers?
A buyer’s agent is active in the market year-round. They track new listings, drive neighborhoods, walk through open houses, and talk to residents. They live and breathe real estate transactions and have deep experience and familiarity with all the possible pitfalls and challenges associated with getting real estate transactions over the finishing line. Here are 6 ways a great agent serves you as a buyer.
1. They Solve Problems
If you’ve purchased a home before, you know that surprises and strange things can come up during a transaction. Perhaps the inspection reveals needed repairs, a neighbor encroaching on the property, or a historical problem with the title. Issues like these need to be resolved during the escrow period, and rapidly, or they can become the buyer’s sole responsibility.
A buyer’s agent is with you at every stage through the home-buying process to protect your interests and address issues as they arise.
2. They Negotiate On Your Behalf
The price and contract terms of a real estate transaction are only two dimensions of a complicated negotiation. If the inspection process reveals unexpected repairs, for example, you’ll need to negotiate with the seller to resolve that. Similarly, the appraisal and loan process can bring up unanticipated information that calls for further negotiation. Your buyer’s agent represents you intelligently during each of these steps and stays with you through the whole process until you have the keys of your dream home in your hands and are ready to move in.
An agent who does multiple transactions a month knows how to get you the best deal. Even if you are confident in your negotiation skills, there will be details in a real estate contract that you may miss because you’re not a professional doing this dozens of times a year. For example, a buyer’s agent usually requests and receives a home warranty from the seller during the negotiation. Transfer taxes, repairs, and closing costs are some of the other areas where a seasoned agent can use their experience to help save you money. Your buyer’s agent is your professional negotiator through this process and understands the full range and complexity of what you should be negotiating.
3. They Manage The Paperwork
Going digital has made real estate paperwork easier to file and sign, but if you’ve ever bought or sold a home, you know there are stacks of paperwork at every step. Documents used in the purchase of a home include:
- Pre-approval letters
- Disclosure statements
- Offer letters
- Purchase agreements
- Escrow instructions
- Inspection reports
- Loan applications
- Mortgage terms
- Bill of sale
- Title paperwork
Your REALTOR® will walk you through each form, contract, and disclosure, so you have the information you need to complete them correctly and have a full understanding of what you’re signing and agreeing to.
4. They Represent Your Interests
You can purchase a home through the seller’s REALTOR®, but the listing agent represents the seller first and will only get paid if you buy that specific property. The listing agent’s main goal is to secure the highest price for their seller’s property. On the other hand, a buyer’s agent is your legal fiduciary when purchasing a house and is there to exclusively represent your interests and your interests alone. They aren’t tied to a specific property because their only job is to find your dream house to negotiate the best possible purchase of that property on your behalf.
5. They Help With Offer Strategy And Managing Emotions
Homebuying can be a highly emotional process. Today, multiple offers on homes is common, which inevitably leads to home-buying fatigue for buyers who don’t win the bidding war their first time around. Having an experienced REALTOR® at your side during these emotional moments is important since they will help you manage and navigate these emotions by ensuring that you keep a clear head during the offer and negotiation process. A good buyer’s agent will be a responsible and trusted sounding board you can use throughout the sometimes lengthy process of buying a home to help ensure you don’t lose sight of your best interests when emotions start running high.
In addition, one of the most important functions a buyer’s agent can help with is to find comparable home sale prices, both from public records and from their network of other real estate professionals, to make sure you’re going to pay a fair market price for the property you’re interested in. While there is a plethora of housing information available on the internet, much of the timely house-specific information is still exchanged between real estate agents informally and statistics available on the internet can often miss important nuances. Using comparable sales from tax rolls and the MLS, their local expertise and relationships, and your personal circumstances, your agent is best positioned to suggest the strongest offer for success. Buying a home is a substantial financial investment and working with a great REALTOR® will provide great peace of mind and confidence that you paid a fair price for the home your purchase.
6. They Walk You Through The Home Inspection
Your agent walks through home inspections on a weekly basis and will use their experience to help you understand the condition of the home, the true severity of identified issues, and most importantly, which items may warrant further negotiation.
While inspection reports are very thorough with comprehensive photos and notes, if you read one for the first time, the information can be overwhelming. Having an exclusive buyer’s agent at this point in the process is even more important since you’ll get suggestions that are 100% focused on your best interests.
Your agent will also typically recommend a trusted inspector who they’ve worked with in the past to make sure that important details aren’t missed. Home inspections are a vital step in the buying process since many defects are not visible to the naked eye.
Do I Need A Listing Agent?
If you’ve never sold a home before you may be surprised to discover how much work goes into the marketing and sale of your home. It can be easy to sell your home in a seller’s market, but it’s also easy to leave money on the table because you don’t take the right steps to get the most from your listing. Here are nine things a listing agent does for sellers.
- They help you prepare for the repairs and improvements that maximize buyer confidence and market value.
- They help you stage your home to sell, so buyers see it in the very best possible light.
- They take great photos to advertise your home and prepare great marketing assets to spread the word about your listing.
- They help you select a listing price that brings buyers and offers with favorable terms at the high end of market prices.
- They put up a sign, create flyers, have an open house, and list your property in the MLS.
- They spend their own money on marketing to bring the highest number of offers on your house and help you get the highest price.
- They utilize their professional network to tap into potential buyers.
- They negotiate the final deal on your behalf so you get the best terms.
- They manage the paperwork and advise you through every step until the closing process is complete.
Will I Make More Money Selling ‘For Sale by Owner’?
Websites like Redfin and Zillow make it easy to search for homes online. This has brought a rise in “discount brokerages” and For Sale by Owner (FSBO) arrangements. On the surface, these look like a simple way to save a few thousand dollars in commission, but when you dive deeper, the advantages become less clear cut.
Statistically, sellers who use REALTORS® net more than FSBOs do. That means more cash goes into their pocket even after paying the commission. According to the most recent statistics published by the National Association of REALTOR® (NAR), FSBOs account for 8% of home sales. The typical FSBO home sold for $217,900 compared to $295,000 for agent-assisted home sales. That’s 36% more for the average home listed by an agent. Even if the actual increase you get from working with a seller’s agent is only one-third of that amount, it still exceeds the 5% to 6% listing fee you will pay.
There are multiple reasons why selling through a professional REALTOR® can net you more money than selling FSBO. Here are a few:
- FSBOs still have to pay a commission to the buyer’s agent. According to NAR, 88% of buyers use a real estate agent to purchase their home. Accessing those buyers means paying 2.5% to 3% in commission to the buyer’s agent, cutting your FSBO savings in half.
- Agents provide broader market exposure. Many real estate agents have a pool of buyer clients who may be interested in your house, which includes your listing agent. Good REALTORS® are always thinking about matching the right buyer with the right home. Real estate market prices are held up by buyer pressure and so if fewer buyers walk through your home and make an offer, you may be giving the buyer a discount by limiting their competition and reducing your ultimate sale price.
- Setting the right listing price. Your listing price impacts how your property is perceived and how many buyers come and see it, ultimately impacting your sale price. Pricing your home is a critical part of selling for the right price at the right time, and objectivity is essential to success. Agents understand how to find the sweet spot to avoid losing money by pricing too low or turning away prospective buyers by pricing too high. One of the single biggest things that a listing agent can do for you is to set the proper price for your home.
- REALTORS®️ understand the paperwork. When you sell yourself, even if you price your home correctly, market, and stage it like a pro, you’ll still have to handle all of the paperwork that goes along with a sale. While a FSBO provider will give you the contracts and essential disclosures that you may need, a listing agent will navigate the paperwork for you. Licensed agents also carry E&O (errors & omissions) insurance as an added protection. Local agents often have additional disclosures and protections for their clients based on decades of experience selling property in the area that give you more protection.
- Real estate agents weed out unqualified buyers. Real estate is a full-time job. To keep your house ready to show, host open houses, and continually market your home takes time and energy — all of which your agent will handle for you. Some homes can take weeks or months to sell. A REALTOR® will pre-qualify buyers before allowing them to waste your valuable time. They will also talk with the buyer’s agent to determine the eligibility of the buyer. This informal communication between the listing agent and the buyer’s agent is an underrated step in the process which ensures that both parties to a transaction have the right information to reach a successful deal.
- REALTORS®️ have experience negotiating real estate contracts. Real estate agents know the local contractual norms for selling a home, such as who pays the closing costs, how home warranties are handled, and a whole host of other city-specific customs that are popular in your area. Emotions are the enemy of successful negotiations — your listing agent will be there to guide you through the sale process in a level-headed and calm manner throughout the transaction in a way that benefits everyone. Your home is dear to you and it can be hard to separate the emotional attachment you have with your home from the business of selling it. Your REALTOR® brings a broader perspective and will ensure that emotions and feelings don’t get in the way of a successful sale.
Summary: A Good REALTOR® Makes It All Look Easy
Don’t be deceived by your agent’s easy going demeanor — he or she works hard behind the scenes to support, protect, and inform you. If your REALTOR® is doing their job right, you’ll feel like your transaction is so smooth that you’d be able to do it yourself, but just remember this may be an illusion! Most people buy and sell a house every 7 years. It’s worth getting each transaction right by partnering with an experienced REALTOR® who knows your local market and is strongly positioned to help you succeed.