If you plan on buying a home and you plan on representing yourself, think again. Many buyers these days are very internet savvy and do a great deal of research online before contacting anyone about buying a house. However, this may not get you the deal you expect.
A number of people have discovered Zillow, which estimates value of homes. People have also discovered county tax appraisal district sites. County Assessor sites may show the assessed value that the taxing authority puts on a home to assess property taxes. Armed with this information, some buyers think they are pretty prepared to negotiate with a selling agent. What they don’t realize is that these sites are frequently not very accurate compared to the actual market value of a home.
Many unrepresented buyers also assume that a home may have a 5% to 7% selling commission built into the list price, assuming that the buyer’s agent will be paid around half of that to bring a buyer. So unrepresented sellers go to the listing agent and state that they know there may be around a 3% reduction right off the top because they do not have a Buyer’s Agent. This also happens when some unrepresented sellers to straight to a builder’s rep rather than being represented by a Buyer’s Agent.
What the unrepresented sellers don’t realize is that many builders don’t negotiate much, if any, regardless of how much they planned on paying out as commission. This is also true of many Listing Agents and sellers. A Listing Agent negotiates a commission with a seller, not a buyer. There is no way an unrepresented buyer can tell whether or not the Listing Agent chooses to discount his or her commission to the seller.
Some Listing Agents will accept a variable rate commission. What this means is that if the house sells to an unrepresented seller, the Listing Agent will actually be paid a rate less than the full commission that was initially to be paid. So the unrepresented seller doesn’t have any benefit at all of a price reduction. The seller simply pays less commission.
With this in mind, the buyer should get representation. A good Buyer’s Agent will have access to real information about the market value of a property. The Buyer’s Agent does this by comparing the house the buyer is interested to recently sold properties that compare favorably to it. The only accurate way to do this is to search the MLS. A buyer can not do this. A Buyer’s Rep who is a member of that area’s Board of REALTORS® can.
A good Buyer’s Rep will also guide the buyers through the process. They will assist in the inspection process, help find a lender and a variety of other things in addition to negotiating the contract.
So buyers should beware. If you choose to go it alone, you may not be as prepared as you think.