Which is why I said “if you know what you want”. The listing agent can show properties, and you can get your own independent appraisals (which I personally find much better than BPOs). The lawyers will negotiate terms, and the RE lawyers I know do it on a flat fee basis per closing. The RE lawyers I’ve dealt with (who deal with more investor rather than retail clients) actually did know sales prices within a specific area. I would imagine most lawyers see a lot of RE closings in their area, know the market, and they are your advocate. You can amend or withdraw any offer you do make up until contract signing. The lawyers order all the title work, and survey work if you want that too.
NY is a very weird state for RE closings. It throws off even experienced buyers coming from other areas.
I’m in Pennsylvania, by the way. I will be meeting with a mortgage broker tomorrow to try to get preapproved for a loan, so I will talk to him about a buyer’s agent.
Writing the contract is the area where I would be least comfortable suggesting that a first-time home-buyer try it himself. You may not have the experience to think of the right contingencies to add, to understand any non-standard terms that the seller proposes, to propose adequate inspection-related escrow, etc. It’s not that the other agent is going to be out to harm you; it’s just that she can’t advise you about what’s to your benefit, especially if it involves terms that place a burden on her client.
That said, the buyer’s agent is not at all “free,” and it’s not unreasonable to think about ways to reduce that cost. The sale price on offer is premised on the assumption that 3% will be going to a buyer’s agent, and make no mistake – you’re the only one bringing money to the transaction, so you’re paying that fee.
Because you have already picked out this property, you will not be having a buyer’s agent spend time taking you around from place to place week after week. As others here have noted, that’s certainly not the only thing a buyer’s agent does, but it’s a significant part of the job, and since you’re not asking for that service, you can propose to a prospective buyer’s agent that he accept 1.5-2% instead of the typical 3%, and rebate the difference to you. You’ll probably have to shop around, because many brokers will decide that a non-standard agreement of this sort is not worth the hassle, but others will see it as comparatively easy money. As with any professional service, you may have better luck getting agreement to an fee from a smaller firm, where the internal procedures may be less standardized. The seller and the listing agent are unaffected and will not care.
If this property falls through, and you begin a new search that requires your agent to take you around and show you new possibilities, your buyer’s agent might then ask that you execute a conventional fee agreement with her, which would be entirely unobjectionable.
I think it’s more accurate to say that the situation itself is contradictory. The buyer’s agent is, by law, on the buyer’s side. He is, by financial incentive, on the seller’s side.
The only way I see to change that (i.e., align his own financial incentives with his legal obligations) would be to concoct some scheme by which the less you paid for the house, the more your agent made.
Here’s the thing, and it may vary in different areas, so you would have to investigate it.
When a Sellers agent takes a listing, the contract contains the commission - around here 6-7% for a standard residence. That commission is used to not only to compensate the Sellers agent, but also the Buyers agent. When I put a listing into our MLS, I put in the commission for the Buyers agent - on a 6% listing contract, I would probably put in 2.5% for the Buyers agent. That number in the MLS is a binding promise to pay that percentage to a Buyers agent. So, any Buyers agent you would select would have to contact the Listing agent to negotiate the commission, and execute further contracts. In some MLS areas, that number cannot be changed in a contract outside the MLS, and the Listing Agent would have to amend the MLS to show whatever lower percentage agreed on - which could come back and bite them in the ass if for some reason you deal falls through, and they’ve published the lower commission amount.
You would have to use the Sellers agent, and get them to drop the overall commission rate, which would involve more paperwork. And, since it necessarily involves other information to be passed between the buyer and seller, I’m not even sure the Sellers agent could do it, since it may involve breaching the fiduciary duties implied in a dual agency arrangement.
And again, showing houses is not the bulk of work done by a Buyers Agent. It may be the most time consuming, but that’s really only the driving (which is a write off anyway). Showing a home takes about 30 to 45 minutes. What you pay for, and what makes it worth the commission rates, is the expertise, familiarity and CYA that the Bueyrs agent brings to your side, not just with this house, but with the local market and other agents.
House Hunters is not in any way an accurate reflection of the reality of a Buyers Agent, people.
I don’t disagree, but I think this is a limited perspective. Word of mouth advertising by former clients is a big deal for a real estate agent, and it’s not in an agent’s long-term interest to develop a reputation as a soft negotiator just for a few hundred dollars on the table.
Similarly, the selling agent is ostensibly set up to want to maximize the price to increase fee, but the reality is the selling agent wants turnover. The selling agent will happily try to get the seller to lower the price if that means the property will sell faster. Holding out for a higher price will only get the selling agent a few hundred more – not worth the time and effort.
You are confusing oranges with apples. A BPO (Broker Price Opinion) is a wild-ass guess from a professional agent. An appraisal is a formal study, with figures and calculations, adjustments and comparisons, from a professional appraiser.
I will give a prospective seller a price range opinion for free. I will do a BPO for $100 or less, and I am qualified to do so. An appraiser will charge about $350 for a multi-page document, and they are qualified to do appraisals, I am not. Do you think there might be a difference in the value of the resulting data?
I have no doubt that lawyers CAN do all those things, and it sounds like they do in New York. But you skipped over an important question, “Will they do it for free?”
Technically, you are correct. But did you read the sample contract? Do you think that a wise agent who wants to remain in business would run the risk of violating clear legal obligations in order to make an extra buck or two? Agents who do that lose their license and/or are fined.
If all parties agree, that can happen.
How about this: If you are concerned where your Buyer’s Agent’s allegiance lies, why don’t you propose paying him a fixed amount (yourself) regardless of sale price? In the sample blank contract I provided, it’s in lines 21 to 24. Problem solved!
I know the full difference between BPOs and the various types of appraisals (and just how professional some appraisers can be). I usually commission ARV appraisals, but I’ll get a desktop appraisal before I get a BPO. Finding a good BPO agent is harder than finding a good appraiser (though having good ones of both is best). And I’ve learned to value a broker’s free advice equivalent to what I’ve paid for it (show me the comps and I can tell you just as well what a house is worth).
No, of course not. But you must have a lawyer to close a purchase/sale in NY. I make about 12 purchases/sales per year; believe me, if I could avoid the extra $12,000 expense (about a grand each way), I would (more on the selling side than on the buying side - I like the protection as a buyer). So you are going to hire one if you are buying or selling no matter what. That’s one of the things that throw off out-of-staters looking to buy property in NY for the first time. (“Why do I need a lawyer? I didn’t need one in 48.5* other states!” - NJ is weird as most transactions in the northern half use lawyers and most in the southern half don’t.) A buyer’s agent will help you find the property you want, but if you know which one you want (thank you Zillow, Trulia, Realtor, Redfin et al) and are ready to submit a bid, in NY a buyer’s agent adds no value.
*That’s a guess, I only know about a dozen other states, and none of them require lawyers.
I’m in NW Indiana, right at the state line. Illinois requires lawyers too. So far as I can tell, lawyers phone their part in when they’re not unnecessarily making deals more complicated. And, the agents then do very little. So not only are you overpaying for the agents’ time, you’re adding on a few hundred to your costs for the lawyers.
Just remembered another thing about NY (and NJ) properties that causes anyone who understands RE to shake their head - we don’t list square footage of the home. As many areas don’t have cookie-cutter housing, this makes analyzing comps even more of a headache.
You can list it, nothing prevents you, but the vast majority of listings omit it. As for why…who knows? My WAG - they are afraid of buyers thinking a place is too small and writing it off sight-unseen by just looking at the number. It’s stupid, but that is the way things are done around here.
Funny thing - about a third of the MLS listings I come across without square footage will actually have it listed on Zillow (which I think pulls it from county and tax records if it is available).
The question you need to ask yourself is this; Will the agent I hire tell me to back off this purchase if he/she feels it is a bad deal? Some would, but most would not. Personally, since you already have a house you like, I would not bother. Get a good house inspection done, get a good lawyer and you are pretty much there. Often an agent will recommend an inspector or lawyer. Never take their recommendation, always get your own.
If you are not sure of prices in that area, do some research or hire someone to dig up comparable sales in the area (if you are getting a mortgage, your bank will have this done).
It is not legal (in my state, at least) for an agent to recommend an inspector or lawyer, because that would constitute steering. The only ethical way of doing this is to provide a list of at least three choices. The decision is up to the buyer.
Banks do not dig up comparable sales nor do they do research of this kind. They hire an appraiser, who will use comps and other data to arrive at a fair market value. Banks that I have known just want a single dollar figure, and will ignore most everything on an appraisal report. As long as that dollar figure is equal to or more than the purchase price, you’re good to go.
You, as a buyer or seller, can hire an appraiser, too, if you wish, but the bank will not and can not, by federal law, accept an appraisal you provide, nor can they use an appraiser you request (unless he just happens to come up in the rotation).
I’m totally confused. I would think that a “buyer’s agent” should mean someone you hire to help you buy a house, and you pay them either a fixed or hourly fee, whether you buy a house or not.
As soon as their compensation is based on the sale, they have a giant conflict of interest. I bought a house in Texas many years ago, using a realtor to show me houses and arrange the inspections and such, and she absolutely fucked me, and not in a good way.
The termite inspector she hired must have been Stevie Wonder, because after we moved in we found that the place was riddled with them. She also talked me into making a very large earnest money payment with my offer, claiming it would show I was serious, and then told me I would forfeit it if I decided not to buy based on my dissatisfaction with other inspections, which I later learned was not true. I probably should have known that, but I was young and dumb and it was my first house, and I was working 80-hour weeks, and I just didn’t have any time to spend on it.
And as soon as the sale was completed, she never returned my calls.
Rant over. I guess my question is, are there REAL buyer’s agents who have no incentive to see a house sold, and if so, what recourse do you have if they are incompetent?
