Home Buyer's How-To:Saving Thousands on Your Next Real Estate Purchase
by Bob Hendrickson
Until relatively recently, the process by which buyers used real estate brokers and agents remained the same for quite a few generations. Real estate companies are paid to provide the service of matching up a buyer with a seller of property. Historically, those folks acted as representatives of the owners of property for sale and owed those owners certain duties and obligations by what is called the law of agency. Not to go into too much detail, let's just say that brokers and agents, which I will just call agents from here on, worked to promote the best interests of their clients, the sellers. This includes getting the buyer to pay the maximum price for the property.
Now, speaking from experience, I can tell you that after an agent has spent quite a few hours learning about the needs, desires, dreams and finances of the buyers, the buyers start to feel friendly and trusting towards the agent. After all, it's just human nature to respond that way. This may create hidden problems for the buyer. For example, most folks don't realize that unless the agent has made special arrangements with the buyer to act in THEIR best interest, and not the sellers', anything that was told to the agent, whether in confidence or not, needs to be divulged to the seller. Consequently, the steps involved with finding a suitable home, negotiating a sales contract, acquiring financing, and closing on the property, historically has been very one sided in favor of the sellers, and at the expense of the buyer.
In the past 10 years, a comparatively short period of time in the overall history of real estate sales in our country, an alternative has emerged which changes all of that. It is now possible in most areas, to have the agent represent the buyer's best interests, instead of the sellers' needs. This approach is called "buyer brokerage".
In using the buyer brokerage concept, the agent is working to get the best (read lowest) price for the buyer, instead of the highest price (for the seller). Everything else in the transaction, such as financing terms, extras included in the sale, favorable possession date, etc., is also usually negotiated by the buyer's agent as part of their duty to the buyer. In this scenario, the seller still pays for the services of the real estate companies involved, but the agent working with the buyer is now free to be more helpful and much more valuable to the buyer.
But beware! Not every real estate agent is willing to be a buyer's agent. And some cannot. Just as a divorce lawyer could not fairly represent both a husband and wife simultaneously, no single real estate salesperson can simultaneously protect the interests of both the owner and the purchaser, since they have opposite desires and goals. This means that every transaction involving buyer representation needs two agents: one to represent the seller, the other to represent the buyer. Any less is lop-sided and inherently unfair to someone.
Of the agents that say they are willing to represent a buyer, not all are very qualified or experienced. You need to find someone who has helped other buyer-clients before and who understands fully that protecting and promoting a buyer's interests is not necessarily synonymous with creating win-lose situations. In order for the sale to take place, everyone must feel they are getting what they need, or it won't work. Win- lose scenarios rarely go to completion.
My experience tells me that the biggest savings for home buyers come about through one or both of the following two techniques. The first involves having an agent (who represents you) aggressively search for available properties frequently and continuously to let the buyer know FAST when an incredible bargain first comes on the market. The buyer needs to know this before the sign goes in the yard and the ad is placed in the paper. The second, and more common money saving strategy, is to have the buyer's agent competently and skillfully negotiate an offer to purchase with the seller and/or the sellers' agents. The most spectacular purchases I have seen were not transactions where the seller offered a fantastic buying opportunity, but instead were the result of hard bargaining on the part of the buyer's representative. So it is important to find an agent who knows how to do this, is willing to do it, and do it well.
A home is usually the most expensive purchase that people make in their lifetimes. It is important to find a skilled practitioner who can negotiate on the buyer's behalf to save the maximum amount of money, and also to take care that the buyer isn't purchasing a property which will be extremely difficult to sell later on.
Finding someone to help you, the buyer, should be given the same care as you would choose a skilled surgeon. This is much easier said than done. Yellow page and magazine ads are not going to give you any real idea as to whether your prospective choice is the right agent for you or not. A better solution is to find a buyer's agent the way you would find a talented surgeon. Ask someone in the business to help you locate a skilled buyer's agent. After all, isn't this what you would do if you had serious medical needs, or would you just "pick someone" from an ad?
If you would like more information on this important subject, email me and ask for a copy of the free report entitled "How Not to Get Eaten Alive in Your Next Real Estate Purchase". Bob Hendrickson is a licensed real estate agent with RE/MAX Tradition in the Annapolis area. He has been in the real estate business since 1981 and is a real estate buyers' consumer advocate who helps people find and purchase homes all over the United States and Canada.
Take the Next Step
- If you haven't looked for a lower mortgage rate in the past year you could be wasting money each month. Use our simple tool that compares different lenders to see what your monthly mortgage payment could be. It's private, only takes a minute and could show you how to save thousands!
More Tips & Tools to Help You
Live Better...For Less
- 6 cheap, effective home security solutions
- 5 frugal ways to expand your living space
- Top 10 DIY mistakes made by home 'handymen'
- How to hire an affordable, reliable housesitter
- Helping your adult children with housing
- 10 ways to cut the cost of cleaning
- Installing bathroom in-floor heat
- Natural homemade laundry soap recipes
- How to reduce heating bills this winter
- Find the best mortgage rates in your area
- 3 ways to use a mortgage calculator
- Mortgage calculator: Calculate your payment and more
- Home equity calculator: HELOC vs. line of credit
- Should I borrow from my home equity?
- How much can additional payments save me on my mortgage?
- Who offers the most home insurance discounts?