What Does a Realtor Do When Buying a House: Buyer’s Agents – What They Do and Why To Hire One
It’s not surprising that the majority of today’s home buyers are using a real estate agent to help them find their new home. Realtors have a special set of skills, that will help any buyer with contract writing, negotiation, home searches, and neighbourhood information. From finding a home, to facilitating your mortgage, to negotiating the contract and closing a deal, a realtor will ensure that you are safe, protected, and happy with your home purchase. Ultimately, your agent will help you to avoid potential pitfalls, and in the end hand you your keys to your new dream home. However, we often get the question: What does a realtor do when buying a house? This blog will go in to more details on what the realtor does when helping you to buy a house, as well as discuss limited dual agency and why who you hire matters.
What Does a Realtor Do When Buying a House?
The role of a buyers agent is to get you from Point A (thinking about buying) to Point B (happy home owner) in the safest way possible. It is their job to:
- Provide a service in your best interest with a fiduciary duty
Having a realtor represent you on the buying side of a real estate transactions makes sure you have someone working for your best interest. With a fiduciary duty, they will keep you protected as they will be dedicated to you and no one else – not the listing agent, not the home owner. Everything below will be coordinated to positioningyou in the best case scenario if you have a realtor dedicated to your goals and outcomes.
- Educate you about the neighbourhood
Choosing your next neighbourhood and starting the home search is one of the most fun parts of buying a new home! It is your agent’s job to help you to understand the neighbourhood school and their rankings, crime rate, transportation options, demographics, entertainment in the area, and the price homes are selling for. Your buyer’s agent will be a fundamental piece in making sure that your new neighbourhood is the right neighbourhood for you.
- Help steer you in the right direction
A lot of the time when you’re buying a home, especially if you’re a first time home buyer, you don’t know exactly what you want! The buyer’s agent is there to ask all of the right questions, and eventually narrow your focus down on exactly what it is that you need and want based on your lifestyle and goals.
- Share their network with you
There are a number of people involved in the buying process, and it’s the buyers agent job to make sure you’re in touch with the right professionals to have you mortgage pre-approved, home inspected, and contract protected. We have a long list of mortgage brokers, bank professionals, home inspectors, and lawyers/notaries to help make the process seamless. (See People We Trust)
What’s more is that a good buyer’s agent can continue to be an ongoing source for home professionals once you own the home.
- Reduce financial surprises by outlining the buyer costs
When you’re buying a house, it’s not just about the purchase price. You’ll need to consider lawyer fees, property tax adjustments, appraisal costs, and inspection costs… to name a few. The buyers agent is there to help determine an initial statement of adjustments so that you know exactly what to expect, and thus plan accordingly.
- Perform Due Diligence, see “potential” in a home, but also advise you when to walk away.
A big part of a Buyer Agent’s role is helping you do your due diligence on the property. That will involve:
Fully investigating the property: the first round will be to find things that the common eye cannot see, and the second round will be to appoint a home inspector for you to have a professional report on the home drafted.
Asking the important questions and reviewing the property disclosure statement: The buyers agent will be there to carefully inspect the property disclosure statement to determine if there are any red flags. Has the house been treated for termites? Have there been any water issues in the basement? Were the renovations completed with permits? Are there any issues with the neighbours? All of these will be important when making your decision to buy the house.
Finding out about the ongoing costs of the property (hydro, heat, water, etc.)
If you’re buying a townhome or condo, there can be HUNDREDS of pages the realtor can read through for you. This usually includes council meeting minutes for 2 years, annual general meeting minutes, depreciation reports, engineering reports, bylaws, strata plans, Form B, and much more.
One of the Buyer Agent’s most important jobs is to make sure you don’t buy the WRONG house.
- Make sure your contract is rock solid & safe
There’s a number of terms that need to be included in the contract to ensure your safety. A buyer’s agent is there to keep you safe, make sure all the necessary terms are in your contract, and also check over your contract to make sure that the listing agent isn’t pulling any sneaky business that could put you in a tight spot.
- Negotiate price and terms
The buyer’s agent works for the buyer, so it is their job to negotiate the best price for the buyer. The buyer’s agent will be able to pull recent sold properties, active comparables, and expired listings in the subarea and the city, to help compare based on the subject property and eventually come to a price range that would be acceptable based on what’s happening right now in the market. They’ll be able to understand how the differences in properties affect value (for example, lot size, view, bathrooms, renovations) and will guide you accordingly. What is sometimes forgotten, is the importance of the buyer’s agent to also negotiate the best terms! Dates, subjects… and also warrants, which hold the seller accountable on the possession date. For example: the seller warrants that the property will be free of garbage and debris on possession day and be professionally clean. Do you want to move in to a place that’s disgustingly dirty all because your buyer’s agent forgot to put in a warrant? I don’t think so…. It’s all in the details.
- Help to facilitate the offer to completion date process
There’s a lot that can go wrong between the subject removal date and completion. There’s also a lot that needs to happen! The deposit needs to be handed in on time in trust to the buyer’s agents brokerage, you need to meet with the lawyer, all documents including mortgage information needs to be sent through conveyancing, and much much more. Without a buyer’s agent to help you, you can get lost in the process and end up with a hefty law suit if you’re not able to complete because of inexperience and un-organization. To ensure everything goes smoothly, make sure to hire a professional buyer’s agent.
So… Does Who I Hire Matter?
Absolutely! Who you hire to represent you on the purchase of your home definitely matters. Who you choose to work with will help you determine what it is you can buy, what it is you want to buy, and whether or not you buy the right home for the right price. It can mean the difference between:
- Overpaying for a home vs. paying market value
- Moving in to a neighbourhood full of rentals and students vs. a quiet professional/retired family neighbourhood
- Unknowingly buying a house that was a former grow op or will cost you $100K in repairs vs. knowing beforehand and being able to make the decision to walk away from the home without putting any money down
- Losing money on your real estate investment vs. making money & being cash positive.
So again, does who you hire matter? Definitely.
Stay tuned for information on dual agency, and the difference between a client and customer relationship.
Avoiding Limited Dual Agency: Why You Shouldn’t Buy with the Listing Agent
We can’t emphasize this enough. Limited Dual Agency is where one realtor works for both the buyer and the seller. Although legal, with the consent of both the seller and the buyer, dual agency becomes a conflict of interest as the it’s nearly impossible to fully exercise full fiduciary duty and represent two opposing clients with different motives. The seller is trying to get the most amount of money for the home, and the buyer is trying to get the least… how can you possibly represent both while fulfilling your duty to both clients entirely? There are also motives for the realtor, as by eliminating the buyer’s agent he or she will obtain the full commission originally offered by the seller. It is oftentimes that neither the buyer or the seller’s best interests are at heart, but rather the realtor’s own pockets. More and more buyers hire a buyer’s agent, especially in a hot competitive seller’s market to avoid dual agency and make sure that their best interests are protected.
How Buyer’s Agents are Paid
Buyer’s do not pay commissions to their realtor, because once you find your home and the deal is sealed, the seller will be the one paying your realtor. This makes these services free to the buyer, which is why hiring a realtor is an even better idea – their experience, education, and time is all free! The listing broker who is working for the seller, typically requires that the seller pays a gross commission of roughly 4 to 5% of the sales price. This money is then distributed roughly 50-50 between the two brokerage offices, one for the sellers agents and one of the buyers agent.
There are a few exceptions to the commission method of payment, and it usually involves discount brokers. (i.e. those who charge a gross commission of only 1%) If you use a buyer’s agent, you’ll most likely be required to sign a contract which stipulates the fee that should be paid to them, [usually by the sellers] as well that the agent works exclusively for you and must work with your best interests at heart. If you use a discount broker, they cut the buyer’s agent commission anywhere between 1.5-2%, which means that you’ll be required to make up the difference unless a fee agreement is signed by the sellers to make up the difference. Because most buyer’s don’t want to pay a fee [and why should you have to!?], this is a common reason why discount broker listings sit on the market for longer.
Are you thinking about purchasing in the near future? If you’re wondering “What does a realtor do when buying a house?” then give us a call at 604-765-0376 and we can show you what we do to help our buyers save more money with us than with other agents. Prefer text? 604-319-0200. or email firstname.lastname@example.org
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