Home Buyer Tips,  Real Estate

Why a Buyer’s Agent is Important for You as a Consumer

The Big Real Estate Debate!

If you haven’t already heard, there is an ongoing lawsuit between the DOJ (Department of Justice) and NAR (National Association of Realtors) about real estate agent commissions, pocket listings, and MLS (Multiple Listing Site) regulations. This four year long debate has the potential to force some significant changes in the real estate industry. One of the biggest changes could be the commsion structure of a transaction.

The big question is: 

“Should sellers pay both buyer’s agent and seller’s agent commissions?” 

Although this has been the practice in the industry for the past 75 years, many feel it is time to restructure how commissions are paid. Restructuring could save home sellers a lot of money, but how will this affect a home buyer?

Competition in Real Estate

First, let’s cover some of the important questions being asked in the lawsuit.

Why are MLSs needed when you can find listings for homes in so many places online? Why not require buyers to pay commissions directly to their broker instead of the historic practice of listing brokers paying the buyer broker? Why should real estate professionals make the money they do in commissions when so much information is available online?

NAR published “Competition in Real Estate” to answer these questions, and more, as a way to be transparent with consumers about policies already in place. Here’s my take on these topics.

Why Have an MLS?

So, what’s the point of an MLS when so much information is already available on the internet? As NAR explains, most of the information on third party listing sites such as Zillow or Realtor.com comes from the MLS. The information added to the MLS is created or inputted by real estate agents, including professional pictures, property descriptions, and additional home information. Meaning without an MLS, basic property information such as dimensions or HOA fees would not be readily available. Yes, most of this information can still be found on the internet in tax records or other public forums but as a buyer, having all the details in one central location saves you a lot of time and effort when researching a home you are interested in. And as a seller, the photos and information readily available increases apeal for your home and helps market the listing.

Listing data management is only one of the many tasks agents encounter in a real estate career.

Who the Commison Change Would Effect Most

What about commission responsibity? The DOJ argues it would serve the public to require a home buyer take on the responsibility of a buyer’s agent commission instead of the seller covering both agent commissions.

Let’s discuss the largest group affected by the debated commission change – Millennials. Millennials now outnumber baby boomers and make up approximately 38% of home buyers in this market. This age group is experiencing family growth, job change/promotion, and numerous other life events that spark a need or want for homeownership. Although many can qualify for a home loan, a lot will have limited funds to cover a down payment and closing costs. Finding money to cover a real estate agent’s commission on top of that could present as impossible. This would also be the case for low-income families looking to buy a home. Adding this additional financial strain could severely limit who is able to buy a home in this competitive market.

Now you might be thinking, “I can buy without using an agent and therefore, wouldn’t need to pay the agent.” Keep reading and I will fill you in on why you wouldn’t want to make that decision.

Why You Should Consider Using a Buyer’s Agent when Purchasing a Home

It’s important for you to understand where your money is going in one of the biggest transactions of your life, so here’s why it’s necessary for you to consider using a Realtor when buying a home:

  • When hired as a buyer’s agent that agent has a fiduciary duty to act in the best interests of their client. They advocate on the buyer’s behalf for price, who covers what closing fees, home repairs, etc.
  • Agents are trained in the “in’s and out’s” of the contract and related documents needed to fulfill a real estate transaction.
  • Real estate agents know what needs to be completed and when to ensure a smooth closing: inspection, survey, etc. 
  • Multiple Listing Service (MLS) is often used to market properties to other agents and is not available to the public. This service is updated in real time and is more accurate than Zillow or Realtor.com. There are even private listings that are only marketed on the MLS and are not available to the public.
  • Knowing the current market value of a property versus listing price is important when submitting an offer on a home. Sold properties with the purchase price are only available on the MLS and an agent can use those previous listings as comparables to determine the subject homes market value before placing an offer.
  • Agents help save the client’s time and effort by sifting through listings that do not fit the buyer’s criteria.
  • Real estate agents have easier access to homes when the client wants to see them, not when the seller or seller’s agent is available to show the home. 

When you hire a Realtor, you’re hiring a professional with expertise in their field to help guide you through the transaction.

“Buying a house is the largest and most important financial decision most people make in a lifetime, and there’s a lot more to it than what you see online,” said Charlie Oppler, president of the National Association of REALTORS®. “You can look up symptoms on the internet, but you need a doctor to diagnose and treat the condition, much like REALTORS® offer expert guidance to their clients on the complex financial, legal and community aspects of purchasing a home.”

Oppler was correct when he said there’s a lot more to it than what you see online. This list is some of the important jobs of a realtor, but is not a comprehesive list of all of our responsibilities.

Real Estate Agents are Small Business Owners

When you decide to work with a realtor you are not only helping yourself in your journey to homeownership, but you are supporting a local small business owner. Real estate agents are mostly small business owners and with that comes a lot of behind the scenes costs and responsibilities that consumers don’t see. Office expenses, marketing for not only listings but their own services, and quarterly dues are just a few of the many expenses real estate agents have to keep up with. Not to mention the commissions we receive are un-taxed so what we pocket is less than the traditional 2-3% that everyone is familiar with.

To conclude, real estate professionals earn what they do in commissions because the job is not simple. At first glance it seems a real estate career is easy and agents make a lot of money with each transaction. But in reality agents work hard to advocate for their clients, grow their small business, and never stop learning and adapting to the ever changing market.

Change is Inevitable

Despite not knowing how the debate will conclude, we are sure change is inevitable.  If the industry is faced with a transfer in commission responsibility we want consumers, such as yourself, to understand the buying power you have with a trusted agent in your corner. 

If you have any questions about buyer’s agents or other real estate topics please reach out to our team, we would be happy to help.

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