This is all extremely useful information. Like I said, we haven’t bought a house for decades, and it’s good to review how it all works and what options are open to us.
The best thing we’ve done so far is spend a week driving around and looking at all the various neighborhoods we could afford and checking out nearby amenities. We were able to include some neighborhoods we didn’t know about, and exclude some that looked fine on Google street view but didn’t meet our expectations in real life.
People are sort of talking past each other here, but the substance here is that the Principal Agent problem is especially pronounced with buyer’s realty agents. Any time you hire someone to do something on your behalf, you should be aware that their incentives do not totally align with yours. They want to do things like minimize their work and maximize their compensation, but of course they also probably want to do things like have a good reputation, so an honest and professional agent is unlikely to totally blow you off or work counter to your interests.
When people say that a buyer’s agent “works for the seller”, they are pointing out that the agent is paid by the seller, and tends to have interests that align more closely with the seller than the buyer. They are paid when the sale closes, and they are paid by the seller in proportion to the price paid. That makes their financial incentives particularly not well aligned with the buyer. A buyers agent earns $0 if they successfully keep you from buying a bad house. They earn less money if they negotiate hard for you. Again, that’s not to say that they are for sure going to screw you. They have reputational and professional incentives to serve you well. But it would be nice if they also had financial ones.
It’s not a crazy or impossible idea. There are fee structures that could give them this. You could pay them hourly to reduce their incentives to close quickly. You could establish some kind of algorithmic price for each house in consideration and give them a bonus for the amount less than that price that you end up paying, which would give them an incentive to negotiate hard for you.
Very well said - the financial incentives for our buying agent were (as you say) not well aligned with us as her client. It’s a silly system.
We were lucky I guess, in that we picked her based on personal recommendations from friends that we trusted. She relied on positive word of mouth to get clients - not advertising. So I suppose this worked in our favour.
Also, isn’t the buyer’s agent hoping that you will turn to them to sell your house when you’re ready to move? So they have an incentive to help you even if it’s not immediate.
A buyer’s agent and a seller’s agent will split the commission cost (usually paid by the seller, which has already been noted here). I don’t think you get any more or less by being the seller or buyer agent.
But yes, Realtors do best when they are left with satisfied customers, who might not become repeat customers (unless they are quick to buy and sell again) but it relies heavily on word-of-mouth. You can definitely build a career on referrals and completely forego advertising costs if you’re good.
There are lots of sales jobs where you can just sort of do the minimal and get the product sold (the product sells itself) and there’s no real need for anyone to pass your name along. But in real estate, referrals are the name of the game. The top people are the ones who are actually doing the work, and working hard.
Keep in mind a Realtor in a distant city may not want to hustle for you without a signed buyers agency contract. It’s acceptable to try each other on for size so to speak to make sure your interests are aligned and there’s a good rapport. But a buyers agent will want your business tied up in a contract before they spend a lot of time scouting on you behalf. Ask the Realtor who’ll list your house for a referral, in your new city. Interview a few agents.