Do I need a buyer's agent?

So, you’ve decided you want to buy a home, but don’t know where to start? You need a buyer’s agent to represent your interests because you simply don’t know what you don’t know.

Your agent has a fiduciary duty to provide you with the best representation for your needs, and a good buyer’s agent is worth their weight in gold - they can save you thousands of dollars in the purchase price by negotiating on your behalf, and helping you spot issues that reduce the market value of the property and may be problems down the road. Contrary to a listing agent, whose job it is to represent the seller and get the highest price for a home, a buyer’s agent helps you evaluate the market value of the property, helps you understand all of the seller disclosures and inspection reports, helps you secure a loan pre-approval, and gets all of your ducks in line to present a comprehensive and complete offer for the seller to consider. There’s much more to it than just showing homes. A buyers agent doesn’t get paid unless your offer is accepted, so the goal is to get your offer accepted by the seller, and you over the finish line by tying up all the loose ends of a property transfer.  

So, let’s consider the main factors in getting your offer accepted. 

1. Use an experienced local agent who knows the market where you want to buy. Local agents work with networks of colleagues and can get you more information, sometimes even finding you a property before it comes on the market. They know the local ordinances and point of sale requirements for each locality, can give you an idea of what taxes are in different locations and can get you the best inspectors. After the sale, they can also refer you to the best local contractors for things like refinishing hardwood floors, or landscaping, or painting. They can direct you to local venues for activities, restaurants, schools and much more.
2. Use a local lender, and get underwritten pre-approved. Local lenders, like local Realtors know their market. They know the Realtors and closing agents in the area and can typically close faster, which gives you an advantage when competing with other buyers. Having your loan pre-underwritten allows you to present your offer with your loan already approved, with only the appraisal and confirmation of clear title pending. They can direct you to the best loan product for your situation and will send out local appraisers who also know the local market, so the appraisal is as accurate as possible.    
3. Read the disclosure packet and inspection reports. In the East Bay market, sellers typically will have inspections done in advance of marketing the house, primarily to make the transaction run smoother. It’s easier for everyone, buyer included, to know what the house needs before you write your offer. Then, your offer reflects the value you are offering knowing what you’re getting into in advance. Your agent will help you decipher what the inspection reports say, and what to look for. They can tell you which reports should be weighted more heavily when deciding on a purchase price and what possible additional costs you will have to consider. If, on the rare occasion there is no report, or the one presented is insufficient in some way, your agent can refer you to a competent inspector to look at the house with you and point out what you should be concerned with, if anything.
4. Understand what your options are for contingencies. Typically there are 4 contingencies you have at your disposal - 

Title - the sellers have to provide evidence of clear title and their right to sell the property. This is an automatic contingency neither buyer nor seller has control over. It is a legal requirement.

Appraisal - If you are using a loan to purchase, your lender will call for an appraisal to ensure that their investment in the property is justified. If the appraisal comes back “at value” or higher, the loan can move forward. If the appraisal come back below the purchase price offered, you have a couple options. If you have a sufficient down payment, you can adjust the funds to cover the appraisal value overage and have a smaller down. Or, if you have an appraisal contingency, you can go back to the seller and ask for a price reduction or seller credit. Or, if you have an appraisal contingency, you can simply cancel the offer and get your earnest money deposit refunded. Typically if your down payment is higher, or if you have set aside additional funds, you can waive this contingency, as you’ll have enough cash to make up the difference.

Loan - If you have been pre-underwritten approved, you can usually waive this contingency, as your loan is already approved, pending the appraisal. If your loan was not underwritten in advance this is the time it takes your lender to confirm all of the items in your application, including verifying employment, pulling your credit report and tracking down any discrepancies.  

Inspection - This is the big one, from a seller’s perspective. If a buyer has an inspection contingency, they can essentially cancel the contract for almost any reason, so this is the one that makes sellers the most nervous. Providing all of the inspection reports in advance helps a buyer in that the buyer knows exactly what they are buying. It helps a seller reduce the risk of a buyer needing an inspection contingency, and therefore the risk of cancellation. Full inspection reports should include a pest inspection which looks for wood-destroying pests like termites, dry rot and boring beetles; a home inspection which looks for proper operation of systems - heating plumbing, electrical, as well as health and safety issues like mold, broken windows or properly strapped water heaters; a natural hazards disclosure report - which identifies earthquake zones, environmental hazard zones, etc; and any specialized reports for issues called out by the pest and home inspectors - things like chimney or foundation inspections, or further inspection for dry rot behind stucco. In addition to inspections of the property itself, a buyer can look at anything that would affect the value of the property - like school districts, or noise issues from a nearby park, etc. 

Keep in mind, particularly in a market with multiple competitive offers, that if you can do your investigations in advance and present your offer with the lease number of contingencies, you have a distinct advantage. Sellers are looking for the highest dollar amount, but terms also play a role. Terms include whether you’re paying with cash or a loan, whether your lender has already underwritten your loan, how quickly your lender can close escrow, and how many contingencies you can waive.

5. Be flexible, yet realistic. It’s easy to get caught up in the excitement of a bidding war. Rely on your Realtor to provide you with enough information to make an educated evaluation of the property value and cost for possible repairs. Your buyer's agent is there for you to lean on - they represent you and have your best interests at heart. They work just for you. That's why it's always a good idea to use an agent other than the one who represents the seller, as they have to keep the seller's best interest at the top of their priorities. A good buyer's agent should also be able to tell you about where the appraisal will fall, and what to expect from the buyer competition. Determining the offer price will be up to you, but your agent will be able to tell you about where you need to be to be chosen as the winning bidder. A good agent will continue to negotiate on your behalf during the offer process to give you the best advantage of winning the bid. But if that doesn’t work, don’t worry, your agent can put you into a back-up position, so if the first buyer backs out, you take their place. This happens more often than you can imagine, and an aggressive buyer’s agent can make your dreams a reality with innovative strategies and work-arounds to put you in the position of becoming the new property owner.

Over the last several years in our market, the average number of offers a buyer would have to make before winning a bid has been eight. My average is three. I am very aggressive when it comes to representing my clients, and in most cases I can find out exactly what it will take to win the bid. I have developed working relationships with a large number of agents who work in our market and have a reputation for presenting complete compelling offers while being a great client advocate, and maintaining collegial working relationships which foster cooperation amongst the players. 

If you are thinking about buying and wondering if the time is right, let’s chat. I can refer you to some local lenders, and I can set you up with a property search tailored to your needs and alert you to properties that I think may fit your needs from those that I see in person each week on brokers tour. You can also get on the list to receive a complete list of the homes open each weekend. 

Let’s talk, and find your dream home.