Find the right Real Estate Agent

The vast majority of home buyers use a Real Estate Agent when they purchase their home. Why? Simply because of the fact that without an Agent, their choices of homes will be limited to those offered by FSBO's--For Sale By Owner. Generally, the availability of such "FSBO" houses is somewhere in the 20% range of the total market, meaning that "self-buyers" do not have access to 80% of the available homes in any given market.

Nevertheless, there is always the possibility that by doing it on your own, you may realize a savings, since the seller does not have to pay a commission. How much of that saved commission gets "credited" to you depends on your skills as a negotiator and how badly the seller wants to sell the property.

If you use an Agent, however, it is vitally important to understand the notion of "Agency", which determines who represents whom, and where an Agent's loyalties lie.

Who Represents Whom?

One of the most common misconceptions that is shared by a large number of home buyers is that when working with a Real Estate Agent, he or she will "automatically" represent you as a buyer. As we will discuss, unless this is specifically disclosed in writing, in all probability the Agent will be representing the seller.

The traditional relationship (probably going back to when the first thatched hut was sold by someone other than its owner) has been that a Real Estate Agent's primary loyalty was to the seller of the property. This relationship was in effect whether the Agent was the listing agent or working with a buyer. This situation caused many home buyers to be confused: they assumed that the Agent that had been driving them around showing them houses for the last 3 weeks was representing them.

In reality, the Agent was representing the owners of the houses they saw, and was bound to reveal to those owners any information he or she knew about the buyers. Buyer's Agency, which is almost universally available now, changed all that. The buyer now has a choice in representation: the Agent with whom they are working can continue to represent the seller in the transaction, or the Agent could represent them as buyers. The buyer is now able to compete on a more level playing field.

Although there are state to state variations (please verify the situation in your particular locality), the following is a basic summary of the types of Agency, and who the Agent represents. 

What this means to you

If you leave the agency question "as-is", your Agent will automatically represent the seller in the transaction (although it is very likely that they will suggest Buyer Agency.) If the Agent does not represent the seller, then you can opt for Buyer Agency. If the house in which you are interested is listed by the same Broker as your Agent, then you have an automatic Dual Agency situation. To sum it up, if you want full representation, insist on Buyer Agency.