According to the National Association of Realtors, 87% of home buyers used a Realtor to help them find their new home and 89% used a Realtor to sell their home.

Especially first time home buyers have many questions about what a Realtor does, who pays them and how do I benefit from working with a buyer agent?

This Guide will answer the 5 most important questions for home buyers who are looking to work with a Realtor.

How Much Do I Have To Pay?

This is obviously the most concerning question to most homebuyers. The price of a new home for sale can already be intimidating, so of course you want to avoid any further expenses.

At the same time, a real estate transaction can be very complicated and confusing and you would probably like to have a professional guide you through the process.

The answer will be a great relieve to you, because homebuyers do not pay a cent of commission to the Realtor representing them.

The seller usually pays the entire commission for both agents.

It’s also interesting to know that both agents are not paid until after the closing. That is important because it is a great motivation for a real estate agent to show you the best homes available and be on top of everything to make sure the transaction goes smoothly.

Office Fees

Many real estate companies require their agents to charge their clients an office fee in the range of $100-$500. Usually these fees are used to pay for the operation and maintenance of the real estate office (hence the name office fee).

Not all real estate companies charge a fee like that, so ask your Realtor in advance if there are any office or brokerage fees you will have to pay. If you do, you need to evaluate if the agent or the company is worth the extra money you will have to pay out of pocket.

Will Working With The Listing Agent Get Me A Lower Price?

This is such an obvious question and without knowing how the commission system works it actually makes complete sense to think you could.

Many homebuyers assume that if they don’t use a selling (buyer) agent to represent them but instead work with the listing (seller) agent directly, they would save the seller that part of the commission and hence could get a lower sales price.

Typically, when a listing (seller) agent signs an agreement with a seller to sell their home, the listing (seller) agent is assumed to be a transaction broker. That means the agent would market the home, find a buyer and then mediate between the two parties to reach an agreement.

Therefore the seller pays the full commission (typically 6%), no matter if there is a selling (buyer) agent or not.

When the listing (seller) agent lists the home on the MLS, he/she is usually required by the board to pay a commission split to an agent representing a buyer. It also makes sense to give other agents an incentive to show the home to their clients. That’s how the selling (buyer) agent gets the 3% split of the commission.

So the bottom line is that if you decide to work with the listing agent, the listing agent will receive the full 6% commission according to his/her listing agreement and does not have to pay a selling (buyer) agent.

So the answer to this question is a simple NO.

You will not get a lower sales price because the seller pays the same amount of commission whether you choose to be represented by a selling (buyer) agent or whether you choose to work with the listing (seller) agent.

The Risks Of Working With The Listing Agent

Some homebuyers feel like they would be better off working directly with the listing agent. They believe that because the agent works for the seller they would have information they could use to their advantage or be in a better position to persuade the seller.

The Relationship

Let’s start off with how a listing agent would feel on a personal level. When an agent is listing a home for sale, there is a lot of communication between the seller and agent before they even put the home on the market.

First of all, the sellers will likely interview many agents to pick the one with the best skill set but also one that they like and that they have a good chemistry with. Now that they have chosen the Realtor they will work together to make the home ready to sell.

They will spend time together to talk about possible repairs or staging but also talk about all the best features of the home and the neighborhood. That opens up a very personal level when the seller tells the Realtor about all the great times they might have had in this home and about how they just loved to go to the pond to feed the ducks, etc. etc.

The process of getting a home ready to sell can take weeks or even months. All time that the listing agent and the seller have to form a deeper and more personal relationship.
Now you come along as a buyer, ready to put an offer on the house. Who do you think has a closer relationship with the Realtor, you or the seller?

Finding a Replacement

Another factor is how easy it is to find a replacement. Obviously the agent would like to work with both, you and the seller.

However, if doesn’t work out it is much easier to find a new buyer for the house than to upset the sellers and risking to loose the listing altogether. So again, who do you think is going to have more influence on the listing agent?

Money, money, money

Imagine the following scenario. You have chosen to work with the listing agent and you have made an offer on the house. The listing agent presents the sellers with your offer and the sellers say: “If you can get the price up by another $5,000 we will give you a $2,000 bonus.” What do you think is going to happen next?

Getting it done

So you have chosen to work with the listing agent. You gladly raised your offer by $5,000 because the agent advised you that this would be the only way the sellers would accept it.
Now you need to conduct an inspection and of course your agent will recommend to you the most thorough inspectors available.

And just as expected the inspection report comes back with a few issues. What do you think is going to happen next? Would the agent try to play down these issues as something that is very typical so the transaction could finally close?

It’s not impossible to find a real estate agent who truly has the ethics and selflessness to resist all these temptations and close the transaction in a fair unbiased way. In some scenarios it can actually make sense to use a transaction broker. However, in the typical real estate transaction, working with the listing agent holds a lot of risks for a buyer and requires a large amount of trust.

What Does A Buyers Agent Do?

Some people think being a Realtor is easy and commissions are overpriced. They don’t see what is going on behind the scenes and how much a Realtor is doing every day.

Being a Realtor

Yes, it takes a great amount of work to simply be a Realtor.

Of course a Realtor needs a license, needs to be part of the Realtor association, there are continuing education courses one has to pass, compete with thousands of other Realtors for business, build & maintain an attractive website (which literally takes thousands of hours), maintain various social media profiles, respond to inquiries, keep up with changes in real estate laws and regulations, keep up with the local real estate market, maintain ratings and reputation online, keep in touch with past clients, network with builders, agents, etc., create advertising materials and organize their distribution, writing blog articles & graphic designs and much more.

Interview Buyers

The first step when working with buyers is for the Realtor to talk to them in person or on the phone to evaluate their situation and needs. A Realtor has to have a great deal of empathy to know exactly what buyers value most and what they envision in their minds.
Once the Realtor has an idea of what the buyers are looking for, he/she will explain all the pros & cons of different neighborhoods as well as the current real estate market to give the buyers a better picture of the circumstances.

Setting up a targeted MLS Search

Once the Realtor knows what the buyers are looking for, he/she will set up an MLS profile for the buyers and set up an automatic custom search.

Concierge Service

After setting up the automatic search profile, Realtors will spend time every day to browse through all the listings that match the general automatic criteria. They will evaluate the descriptions, terms, restrictions and photos to determine which listings could be of interest to the buyer and which listings are just a waste of time. Sometimes a Realtor will even have to drive to properties before a showing to determine if they are worth viewing for the buyer.

Schedule Showings

It’s not like a Realtor could just get in his car and go to show houses. Most listings have showing restrictions. For example they could be owner or tenant occupied and therefore the Realtor will have to schedule a specific showing time with the listing agent and of course these times have to be coordinated with the buyers.

Calling, texting and emailing the listing agents and offices and waiting for call backs and then coordinate all showing times with a fast driving route can take hours. Finally a good agent wants to prepare handouts for the buyers and familiarize themselves with all the properties and community features.

Showings

A selling (buyer) agent can spend several months with the same clients until they find the home they want to buy. This could mean hundreds of showings to schedule, various days of driving around for hours to show houses.

Availability

If you have a normal job, you work Monday to Friday from 9:00AM until 5:00PM. A Realtor works from Monday to Sunday from 9:00AM to 11:59PM (or longer), because clients will call their Realtor at any given time of the day or night and expect them to be available to answer their questions and concerns.

Determine Accurate Pricing

For all homes that are of interest to the buyer, the Realtor has to determine whether or not the asking price is fair. That can easily add up to many hours of finding comparable properties and calculating adjustments to truly compare them and determining whether the subject property is priced fairly.

Check the Tax Records

It’s important to check the tax records of a property and compare them to the listing information. Checking the tax records could give the Realtor hints on possible building violations to check on with the listing agent and seller.

Prepare the Offer

The offer or sales contract is a legal document of several pages that has to be filled out by the Realtor and has to be signed and initialed by the buyer. The Realtor will explain the details of the contract to the buyer and advise on a good offer price.

Once the sales contract is all set up, The Realtor will either have to drive to the client to obtain signatures or set up the document with a cloud-based digital signature service for the buyer to sign electronically.

Submit Offer and Earnest Money Deposit

Once the offer is signed, the Realtor has to submit the offer and communicate with the listing agent on whether they want the earnest money submitted to the brokerage or a title company.

Negotiate Counteroffers

If the original offer isn’t accepted, it is the Realtors job to advice the buyer on making or accepting a counteroffer and negotiating the terms with the listing agent.
Updates and Communication

After the offer is accepted, the Realtor will keep the buyer updated on all steps of the transaction and be there to answer any questions or concerns.

Disclosures

The Realtor will deliver all necessary disclosures and ensure both parties sign them.

Coordinate Home Inspection

There is only a predetermined time frame to conduct a home inspection and if necessary cancel the contract based on the “inspection contingency”. It is the Realtors job to keep track of these deadlines, recommend an inspector and coordinate the inspection.

Attend Inspection

An inspection can last several hours and it’s the Realtors job to attend the inspection, to let the inspector into the property and ensure everything is in order. Sometimes several inspections are necessary.

Negotiate Repairs

Should the inspection indicate necessary repairs, the Realtor will negotiate with the listing agent and the seller to repair these issues and extend the “inspection contingency”, lower the sales price or give a credit to the buyer.

Verify Completion of Repairs

Of course the Realtor will ensure that repairs (if agreed upon) are completed on time or extend contingencies or closing dates if necessary.

Keep Up with the Mortgage Company

Coordinating between all the different parties involved, the Realtor will keep up with the progress of the mortgage and contact the mortgage lender on a regular basis to ensure there are no hold ups or complications.

Coordinate Appraisal

The Realtor will coordinate the appraisal with the mortgage lender, the appraiser and the listing agent and will meet the appraiser at the property to let them in and attend the appraisal process.

Provide Comparables for Appraiser

Usually the buyer wants the property to appraise for the price they offered, so they get the mortgage and can close on the house. The Realtor will provide the appraiser with comparable sold and pending listings to support the offer price.

Dispute Low Appraisals

Should the appraisal turn out to be below the offer price, the Realtor will try to dispute the low appraisal by providing additional comparable listings and explanations as to why these are better suited to determine an accurate sales price.

Coordination with Title Company

The Realtor will ensure all documents are signed and submitted to the title company to ensure a timely closing. The title company typically conducts (or hires a third party to conduct) a title search to make sure that there is a clear title.

Make Sure the Loan Funds

Especially during the final days of the transaction it is important to keep in close contact with the lender. Usually a sales contract has a “financing contingency” that expires a few days before closing.

If the lender did not provide a loan commitment at that time, the financing contingency needs to be extended. Sometimes the lender needs more time to get ready for closing. In those cases an extension has to be signed by both parties.

Review HUD-1

The title company will submit a HUD-1 statement (aka settlement statement) to the listing agent and selling (buyer) agent to forward to their clients. The Realtor will check the HUD-1 for any errors and if no errors are found forward the statement to the buyer for signatures.

Schedule & Attend Final Walkthrough

If desired, the buyer has the right to perform a final walkthrough before the closing. The Realtor would accompany the buyer and let them into the property to ensure that everything is still in order and according to the contract.

Schedule & Attend Closing

Once the mortgage lender gives the OK to close, the Realtor will coordinate a closing date and time with the title company, the seller, the listing agent and the buyer. The Realtor will accompany the buyer to the closing where all documents are signed and notarized and all money transfers are handled.

The Benefits Of Having A Buyers Agent

The Listings You Cannot Find

One big benefit for buyers who work with a Realtor is that they will gain access to listings only a Realtor can gain access to. While national websites like Zillow and Trulia might be good places to get an idea of what the real estate market looks like, buyers could loose out on many listings.

On April 7th 2015, Zillow & Trulia’s agreement with Listhub expired. Listhub is the listing syndicator through which Zillow and Trulia would receive listings from the MLS (Multiple Listing Service). While some local Realtor associations have made new agreements, some (including the Florida Space Coast) have not.

In those regions Zillow & Trulia will only provide data that was entered directly on Zillow by an agent or a For Sale By Owner but not data from the MLS directly.

As you already know, 89% of sellers used a Realtor in 2015 to list their home on the MLS.
Even if you live in an area where national websites provide MLS data through a syndicator or you use a real estate agent’s website, you still won’t find every listing that is available on the MLS. That’s because the listings you find online are syndicated through what’s called the IDX. The IDX is an agreement that allows Realtors (and listing syndicators) to show their own listings and those of other participating brokers on their websites.

While most sellers agree to have their homes syndicated through the IDX, some sellers do not. That can have many reasons but the bottom line is that there are listings that only a Realtor can access directly through the MLS.

Another reason to use the resources of a Realtor is that national websites often have outdated listings. Realtors will often receive calls from their clients about homes that they found on a national website and when the Realtor checks the current MLS status, it turns out they already sold 6 months ago.

All in all, use all the websites you like to get an idea of what the market could look like but when you want to get serious, having a Realtor by your side will save you hours of searching online for homes that might not even be available anymore.

Access to Properties

Homes for sale usually have an electronic lockbox that holds the key to the property. Only a Realtor can have an eKey that can open electronic lockboxes to let you into the home. Of course you could call the listing agent to show you the home but then you should go back to part 3 about the risks of working with the listing agent.

As mentioned before, your selling (buyer) agent will keep you updated on the newest listings, filter them for you, schedule and coordinate appointments and chauffeur you to the homes you would like to see.

Saving Time

Just go back to part 4 about what a selling (buyer) agent does and ask yourself if you have the time to do all that (or if you know how to do it). Having a Realtor will enable you to continue living your life with ease as you find and buy your new home. It will give you the comfort and security that you have a professional take care of everything.

Market Data

Your Realtor has access to the most recent market data as well as all available comparable listings on the MLS. He can help you determine whether homes are priced right based on current market conditions.
Realtors also have exclusive access to the MLS listing history. So they will be able to tell you exactly how long the property has been on the market, if it was taken off the market or listed before, how much the owner paid for the property and other useful information when negotiating a fair sales price.

A Protective Shield

Negotiations can get pretty tough in real estate. Buyers and sellers have exact opposite objectives and have very strong emotional and financial motivations. Negotiations can get pretty nasty as soon as these strongly motivated parties bring all their personal feelings and opinions into the discussion.

Real estate agents are trained to negotiate in a professional way. They are the messengers between the buyer and the seller to deliver the uncomfortable news, demands and concerns.
Real estate agents also make great scapegoats. If something didn’t come across the right way, you can always blame it on the terrible Realtor while saving a good relationship between the buyer and the seller. It’s way more important that the sellers like the buyers than the Realtor.

Expertise

Buying a home is most likely the single largest financial transaction you’ll ever make. Hundreds of thousands of dollars are at stake, possible lawsuits, contracts, disclosure requirements, contingencies, deadlines, etc., etc.
A Realtor deals with all these contracts and conditions on a daily basis and is trained on how to use contracts and contingencies to protect you.