1st Time home buyers, get an agent BEFORE you start looking
Please please please! I just found out a friend of mine in Wisconsin that I haven’t spoken to for a while was on the verge of buying a house, but it fell through. Apparently, he tried to buy a house in Wisconsin for $212,000, but had problems with financing after it got appraised for only $152,000!
I called him immediately, and after speaking with him, found out that he was under the impression that by purchasing without an agent on his side, he would save money.
There is only one case I can think of where this is true. If the transaction is a FSBO (for sale by owner), that only wants to sell directly to a buyer, and refuses to pay a buyers agent. Most FSBO kits have a provision to provide a percentage to a buyers agent.
In every other case, you stand to gain approximately $100-$200 in reduced fees by not going with a buyers agent.
An example
Say for example, a seller wants to put his house on the market, and they find an listing agent, who charges them a 6% commission. When the agent puts the house on the MLS (multiple listing service) they will offer a buyers agent a 3% commission.
If a potential buyer comes along and they aren’t working with a buyers agent already, the listing agent will oftentimes offer to represent the buyer in addition to the seller. This is called dual agency, and while it is legal and usually doesn’t lead to the buyer getting ripped off, it leads to a buyer shortchanging themselves by not having an experienced professional on their side.
So, if an agent is performing dual agency on a transaction, they would keep the full 6%. Ditto goes if you decide to represent yourself, you don’t get the 3% unless you are a licensed Realtor®.
What do you gain
My broker charges in the range of $150 for a transaction fee. Applying this to my friend’s situation, would it be worth saving $150, if you ended up buying a house that was priced at $60K over what it was appraised at? Although this isn’t normal, there are other ways to get ripped off. What if you get talked out of getting a home inspection? What if you don’t write a financing contingency in your purchase, and financing falls through? There are many ways to lose big and possibly get sued if you don’t have an agent on your side. Don’t ruin your first home buying purchase by going it alone. Get an agent, and get pre-approved before you start looking at houses.
