Only 60 percent of consumers use a buyer broker when they are hunting for a house, according to the National Association of Realtors. By contrast, 89 percent of consumers selling their homes use a listing agent.
Why 40 percent of the people shopping for what is usually the single biggest investment of their lives do not want to be represented by an agent is the topic of this month’s question-and-answer session between John Rebchook, of InsideRealEstateNews.com, and Lane Hornung, CEO and founder of 8z Real Estate.
Hornung says that given the lowest inventory of homes in most metropolitan cities across the country, consumers need the help of a qualified real estate professional now more than ever.
John: Lane, why do you think so many people looking to buy a home don’t use a buyer broker?
Lane: I think there is a misconception out there that a consumer will save money if he or she isn’t represented by an agent. But that is usually not the case. Typically, the home seller has a listing agent, so what usually happens is that the listing agent gets “both sides” of the commission. That is, the fee that would have gone to the buyer’s agent, goes to the listing broker.
John: Lane, do you think that a buyer’s agent often will get a better deal for the buyer than if they go it alone?
Lane: I do. A good listing agents works hard to get the highest sales prices and best deal for their clients, the sellers. The listing agent has a fiduciary duty to the seller.
Conversely, the buyer’s agent has a fiduciary duty to the buyer. You want someone looking out for the best interests of you, the buyer. You want someone who is watching your back.
John: Is it all about dollars and cents?
Lane: Not at all. Buying a home is a very emotional experience. You want someone who can be somewhat removed and objective. Your agent may tell you that the seller is asking a fair price, or a low price, or a high price, based on the supply, demand and comparables. They may point out issues in the house that do not meet your needs or are actually at odds with what you have said you desire in a home.
A good buyer’s agent has the goal of also being your agent when the time comes to sell, so they are assessing whether or not a particular home may have challenges in the resale market. These issues are often overlooked or simply ignored by a less than objective, emotionally engaged buyer.
John: With so many home buyers starting their search on the Internet, do you think a lot of consumers no longer feel they need an agent?
Lane: I think so. But the truth is, while the Internet is a great tool, and believe me, at 8z, we are big believers in using the Internet to empower buyers, there is so much information out there, it can mean information overload for consumers.
In some ways, the Internet makes it more difficult for a consumer to find the right house for the right price. Frankly, if a consumer is using sites like Zillow and Trulia to find a home, they probably are not doing themselves any favors. The information may be outdated and/or incomplete. They could be missing out on listings for sale that take days or weeks to hit these sites. Consumers are much better off using information provided by an agent’s website or a broker’s website that is affiliated with the gold standard of listing data, the Multiple Listing Service.
John: Today, there is a severe shortage of homes for sale in most markets across the U.S. Does that make it more important than ever to use a buyer’s agent?
Lane: Without a doubt. A good broker is on the phone and searching the Internet for homes that will fit your needs and pocketbook. Agents at 8z, for example, are not only asking other 8z brokers about listings, they are talking to brokers at other companies about what is available or will be available soon. Sometimes, they find homes before they are listed.
John: Will having a buyer broker help reduce the stress of trying to find a home in today’s market?
Lane: Make no mistake, buying a home when there is a severe shortage, is very stressful. But having an experienced agent who can help you navigate these waters is extremely helpful. You may have to make a decision quickly or lose a home, but you need someone to put it in perspective. An agent can give you a reality check – maybe it is worth bidding above the asking price, but maybe you are better off waiting.
Also, after a while, your agent will start to pick up on some things that you, the consumer, may not even be aware of. After an agent gets to know you, he or she will have a good idea of what you want or don’t want in a house and can really help you make the right choice. Sometimes people are too close to the situation and need someone who can step back and look at the home objectively.
John: How does a consumer pick a buyer’s broker?
Lane: First, you want someone who sells real estate full-time. There is no room in this market for part-time agents. If you have identified a neighborhood, find a broker who works in that neighborhood and really knows it. The average real estate agent only sells three homes a year. At 8z, our agents sell an average of 22 homes a year. An agent who is selling 20 or 30 homes a year does not depend on any one closing and is not going to pressure you to close on a particular house.
John: A broker who sells a lot of homes also probably knows what he or she is doing, correct?
Lane: Absolutely. That is extremely important. It doesn’t matter how smart you are – if you are a lawyer or are in finance, for example – if you only buy a home once every five or seven years, you are not going to know as much about it as someone who does it 25 or 30 times a year.
John: Since prospective buyers may be spending a lot of time in the company of their buyer’s agent, I imagine the chemistry between them is important.
Lane: Definitely, it’s quite important. You want to make sure you are reading off the same sheet of music. You might even go out on a “test” drive with an agent to look at a house to assess whether or not you click. And don’t be afraid to ask the agent for references.
John: What about hiring your brother-in-law, the agent?
John: I think consumers have become so sophisticated that hiring a family member or a friend of a friend, for no reason other than they are a friend or a family member, is becoming less common. Today’s consumer wants to hire an agent who knows the market and the area, knows the transaction cold, and will provide them with professional grade service.
John: Thanks, Lane.
8z Real Estate is a sponsor of InsideRealEstateNews.com. A question and answer with Lane Hornung is a monthly feature of InsideRealestateNews.com. If you have any topics you would like Lane to address, contact John Rebchook at JRCHOOK@gmail.com. To learn more about Hornung’s company please visit 8z Real Estate