A Buyer’s Agent works on behalf of the buyer to reach the best terms possible for the Buyer in a real estate transaction. This may be a lower price, seller paid closing costs, inclusions etc.
Here is an example of where a buyer’s agent could be helpful:
Consider the case of an unrepresented buyer. The buyer sees a house. The buyer calls the real estate agent on the sign in the front yard, and schedules a showing with the agent. The agent is most likely a SELLERS AGENT.
Lets assume that the agent the buyer calls is in fact the seller’s agent.
The agent comes and shows the house to the buyer. The buyer absolutely loves the house and wants to buy it. The buyer would die if they didn’t get the house. The buyer communicates these facts to the agent. The agent is more than happy to complete the offer for the buyer. The house is listed for $200,000. The buyer wants to offer $192,000 and ask for seller to pay $3000.00 closing costs. So the agent writes the contract, tells the buyer they will call back with the seller’s response, and then takes the offer over to the seller.
Now, the agent presents the buyer’s offer of $192,000 and closing costs. The agent also tells the seller that the buyer really wants the house, and would die if they didn’t get the house. The agent then rightly advises the seller to counter very close to list, and probably cut out most of the closing costs as well. The reason this happened is because the agent, who is working on behalf of the seller, KNOWS the buyer really wants the house and is emotionally attached to it.
Now before writing an offer, the agent would have asked the buyer to provide a lender letter. Now many lenders will write the lender letter to specify the MAXIMUM AMOUNT the buyer is qualified to finance.
So now the seller’s agent not only knows how much the buyer wants the property, he knows how much he can pay for it. With this valuable information, the seller’s agent and seller can use these two important pieces of information to the buyer’s disadvantage when preparing the counter offer.
Now, bring in a buyer’s agent.
The buyer calls a buyer’s agent. The agent shows the house, and the buyer absolutely loves it and would die if they didn’t get it. Now the buyer’s agent would probably advise the buyer to offer close to list, so they wouldn’t lose the house. The buyer chooses to offer $192,000 and ask the seller to pay $3,000.00 in closing costs.
The buyer’s agent asks the buyer or buyer’s lender for a lender letter. The lender should be informed to prepare the lender letter to MATCH THE OFFER PRICE.
The buyer’s agent prepares the offer, and sends it to the seller’s agent with the lender letter.
NOW the seller’s agent presents the offer to the seller, but this time they do not know two important pieces of information:
1. The buyer absolutely loves the property.
2. How much the buyer can pay for it.
The reason is because the buyer’s agent acts as a filter, filtering out stuff we really do not want the seller to know.
Sure the seller can still counter, but they do not know buyer’s motivation, or ability to pay more than what was offered.
The same goes for the inspection period, where the seller is usually asked to make repairs to the property.
The buyer’s agent is a professional who can help the buyer negotiate the purchase of their home on a level playing field.
The buyer’s agent can also provide valuable advice to the buyer, look at recently sold homes, help the buyer come up with a reasonable offer price for the property, help them through negotiating price and terms, and help them through negotiating inspection issues.
The buyer’s agent receives a commission for their services, and is usually paid by the seller’s agent at closing, resulting in no out of pocket costs for the buyer.
Some buyers would rather pay their own agent for their services. Their concern is that the agent is working too hard to get a house sold so they earn a commission, that they are not fully representing the buyer. This is easily accomplished in the buyer agency agreement.
If you have questions about buyer’s agency please call me at 1-800-504-8669 or email me.
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