Handouts and Notes:

Why you need an agent.

The four biggest benefits you get from working with an agent (or, rather, a good agent, since as we discussed there are a lot of not-so-good agents out there):

1. They can make the process much, much, easier. The Steps In The Buying Process (PDF) handout summarizes just some of the things that you need to do to cover all of your bases when buying a home; for the typical consumer, doing all of these things on their own is a full-time job in its own right.
2. They can reduce your risk. The most obvious example, as we discussed, is the Regional Sales Contract in use in the Metro DC area, which is growing to 10 pages plus addenda as of September 15th, 2006; if you’re purchasing from an owner who is using an agent (as most sellers in the DC area do), then you’ll be using that contract, and you need to have someone who can walk you through that contract and make sure you understand where it exposes you to risk and where it protects you from risk.
3. They can save you money. We went over this a fair amount; from knowing how to craft an offer that uses things other than a higher price to appeal to sellers, to being a deft negotiator, to having the market knowledge to advise of when it might make more sense to walk away from a property, a good agent can save you thousands of dollars in the buying process.
4. They can provide some objectivity in what can often become a very emotional process.

Why you should use an exclusive buyer’s agent.

Since, in the end, nobody raised their hand for the “I would use an agent but not use a buyer’s agent” question (aka the “I want to be screwed” question), I’ll assume that I don’t need to go into too much more detail about it again; the only thing I’d emphasize is that even though most agents won’t go out of their way to screw you if you are working with them without a buyer agency agreement, the way agency law is worded in Virginia and DC means that they technically almost have to do so, so if they don’t, then either they are ignorant of the law (which you don't want your agent to be) or they are willing to ignore the law when it’s convenient to them (which, again, you don’t want your agent to do). Here’s the handout that you should have received on seller & buyer agency, and for those who do want more information, here’s a more detailed article on buyer agency. (Note: this is the article from which the material in the handout was taken, so the first half of the article will probably seem very familiar.)

How agents get paid.

This wasn’t actually part of the handouts. The important things to remember:

• When you sign a buyer agency agreement, you are committing to pay your agent a commission on any property you purchase during the term of that agreement, but that is usually offset by a “cooperating commission” (or “co-op commission”) offered by the seller’s agent. Make sure you understand exactly what the relevant paragraph in the buyer agency agreement says.
• In my experience, almost every buyer agent in the DC area charges 3% as their commission. Some charge less than 3% if you have already picked out the property you want to purchase and just want help preparing the offer and representation during the negotiations, and some others offer rebates of a portion of that 3% that they will give back to you after closing. These commissions are always negotiable, of course, but (once again in my experience), you want to avoid the agents who instead agree to take whatever commission the owner is offering, or who don’t have specific discounts/rebates (like the ones I just mentioned) that they offer you but who are willing to negotiate their commision down when you bring it up: if they were really looking out for your interests, they would have offered those discounts up front, so the ones who don’t but who you can convince to give them to you are, basically, the ones who aren’t going to look out for your interests, and who (since the very first thing that most agents are taught is how to negotiate with clients to justify their commission) are poor negotiators to boot–and that’s a combination that’s not what you want in an agent.
• Make sure you know what your buyer agency contract says about what happens if the seller’s agent is not offering as a co-op commission the same amount that you are commiting to pay your buyer agent, and that your agent will tell you before each property they show you whether the offerred co-op commission is more/less than the amount you would owe your agent. If the co-op commission is less than your agent’s commission, then you will usually have to pay the difference out of pocket (or, if the seller and your lender are OK with it, pay the seller a higher price for the home and have them rebate the difference between the commissions back to you, so that you can finance that difference as part of your mortgage loan), so you’ll want to know that up front; if the co-op commission is higher than your agent’s commission, then usually your agent gets to keep that extra amount, in which case they have a potential conflict of interest because the best home for you might not be the one that earns them the highest commission.
• Many brokerages also charge “administrative fees”, which I’;ve seen range from $95 to $400, and which (despite what the brokerages claim) are basically just there to pad the brokerage’s profit. You should be able to find good agents who don’t work for companies that charge those fees, but if you have a choice between a mediocre agent who doesn’t charge them and a good agent who does, go with the good agent, and don’t waste your energy trying to negotiate with them to remove/reduce that admin fee–many brokerages don’t let their agents negotiate those fees, and the fee is profit for the brokerage, not the agent, so i’s not a sign that your agent is trying to pad their bottom line at your expense. (You might want to try to convince that good agent to go to work for a brokerage that doesn’t charge those fees, though; if they don’t know of any, I’d be glad to talk to them about the options that are available to them.)

How to choose an agent.

1. Find at least 3 agents to interview.

   1. Ask for recommendations from friends, coworkers, etc. Remember to ask for recommendations of agents that people have worked with, and would use again, rather than just asking if they know an agent; everyone knows an agent in this market. Treat it like they were setting you up on a blind date–make your friends convince you that it's worth your time to give that agent a chance.
   2. If that doesn’t work, search on the web. Use Realtor accreditation sites like Quality Service Certification or REBAC, or use the Realtor search engine to find an agent with their ABR or GRI designations; as a last resort, use Google.
   3. If you still can’t find agents to talk to, just try walking into the offices of local Realtors. Be advised, though, that the agents who have “desk duty” to deal with walk-in clients are often (though not always) the agents who have the most trouble getting other business. Before you get to the point of just grabbing random agents off the street, though, drop us a line and we’d be more than happy to put you in touch with some good agents for you to interview.

2. Interview the agents.

   • Talk to them, honestly, about your needs and wants. If they don’t spend enough time to make you feel like they understand your circumstances and goals, then move on to another agent. And if, in the course of talking to them, you just don’t get a warm fuzzy feeling from them, then, once again, move on to the next candidate.
   • Ask them, up front, how they will help you get a house, and what value they bring to the table. If they can’t give you 10 specific ways that you are better off working with them than the typical agent (including ways to make your offers to sellers more appealing that don’t involve you spending more money), you probably shouldn’t be working with them.
   • Find out about their experience, training, and accrediations. As I mentioned in class, this is an area where the exact answer doesn’t matter as much as that they can explain their answer to you. Some agents are very experienced but not very skilled and/or too busy to spend enough time with you; other agents are new and untrained, but have lots of time and energy and have spent a lot of time in training; in every case, make the agent explain how their particular combination of experience, energy, and training will directly and specifically benefit you. In some cases, a team of agents might be most useful–newer agents on the team will have the time to work with you, but you get the wisdom of the more experienced agents on the team to help you as well. Conversely, if you do work with a team, make sure that you do understand how involved the experienced agents will be with your transaction; it’s not uncommon for a buyer to be sold on the benefits of a team by its superstar leader, and then have everything done by lesser-caliber agents.
   • Find out how many other buyers they are currently actively working with. A number between 0 and 5 (for a single agent) is good, but again, use your common sense and let them explain why they have enough time to give you the attention you need (if they have a lot of buyer clients), or why they don’t have any other buyer clients at all.
   • Use your gut. In the end, trust your instincts; if you aren’t comfortable with an agent, just tell them that, and move on. It might be annoying to the agent (agents never believe that there isn’t some other reason why you didn’t choose them that they could have convinced you wasn’t a valid reason if they just knew what your objection was), but honesty is always the best policy for these sorts of things.

Extra bonus for those who took the initiative to come to the website for the notes

I ran out of time before I could offer this to you in class, but for anyone who is interested, I’d be glad to set you up with the automated email updates I mentioned in one of my anecdotes, so that you can see what sort of properties are out there in the price range you are considering. And as I mentioned in class, I’m not trying to sell anything, or add you to any lists; I’m not taking on new buyer clients right now, so I’ve got nothing to gain by providing this service other than the goodwill and good word of mouth from which I get the majority of my clients. If you’re interested, or if you want to sign up for the free buyer consultations or buyer tips newsletter that I mentioned in class, just let us know.

Possibly related posts (automatically generated):

1. Disclaimer: Agency Commission Examples Are Only Examples
2. Find A Buyer Agent
3. An Overview of Buyer Agency In The Metro DC Area