How does the buyer agent agreement work? (Austin: real estate, how much)

[Megan1967]

I've finally got my dates down for when I'm coming to Austin. I'm resigning myself to the fact that I will probably have to use a buyer's agent in the interest of saving time and, if nothing else, just to get around town in the most efficient way.

I did a search and one of the threads I found mentioned fees. Is it typical to pay a buyer's agent a fee upfront and if so how much?

What if the person I pick, sight unseen, turns out to be a smuck? Am I stuck with them?

[Austin97]

Originally Posted by Megan1967

I've finally got my dates down for when I'm coming to Austin. I'm resigning myself to the fact that I will probably have to use a buyer's agent in the interest of saving time and, if nothing else, just to get around town in the most efficient way.

I did a search and one of the threads I found mentioned fees. Is it typical to pay a buyer's agent a fee upfront and if so how much?

What if the person I pick, sight unseen, turns out to be a smuck? Am I stuck with them?

Buyers agent gets paid by the seller. Typical fees are 3% to the buyers agent (really the company) and 3% to the sellers agent. They dont get paid until you close.

They typically make you sign an exclusivity agreement, but there should be an out clause if they arent doing a good job so you can terminate.

You should definitely interview your agent:

What would you want in an agent?

I would want things like, how will you inform me of houses that meet my criteria.

What kind of response time should I expect when I try to call you?

How do you find houses that meet my criteria?

What area should I be looking in? (they should then ask questions similar to the ones ppl on this messageboard ask).

How do you evaluate the quality of a home?

How do you determine the market value?

What is the most off of asking price that you have gotten for a buyer?

Give 3 examples of when you negotiated a lower price.

etc.

[atxcio]

Some of the discount realtors, like 1% realty, ask for an upfront fee if you use them as a buyer's agent... I think then they refund (or take off the price) the 2% additional commission they would receive at closing.

But the traditional method is that they take 3%, paid by the seller at closing, and do NOT ask for an upfront fee. Don't pick the person "sight unseen", get some recommendations, or ask to meet with one of the helpful agents that frequent the forum.

[Megan1967]

I thought of asking for recommendations, but figured I'd get inundated with realtors (or their friends and families) recommending themselves.

How do you tell who the top sellers in the Austin area are? I tried looking at the realtor's association, but they don't seem to have that information.

[DarleneMontgomery]

First step is to research Realtors online. You can go to AustinHomeSearch.com and "Find a Realtor". You can search for Realtors that specialize in certain areas of town. Also, if you'd like to find Realtors that have designations (i.e. more education), you can search at Realtor.com, Find a Realtor, then search for specific designations you'd like them to have. After finding a few and reading some bios, I suggest you call/email them for a "Response Time Check". Most Realtors are not very good about getting back to emails or calls. The ones that are, are motivated and ready to help you. When you get them on the phone, just chat with them, tell them what you're looking for, etc. You'll get a good feel for whether or not this is someone you can work with or not. You can find "Things to Ask a Realtor" list on AustinHomeSearch.com, if you'd like to interview them. When you do sign a buyer's representation agreement, make sure there is a way out of it if you give ample written notice. It is a GOOD thing to use a buyer's agent, since they can negotiate (unemotionally) on your behalf, know the market and what buyer's are able to get in this market, use MLS to do a Comparative Market Analysis of the home you choose to buy to make sure you don't pay too much, and assure the contract to closing process is as smooth and painless as possible.
Good luck with your search!!

[austin-steve]

Originally Posted by Megan1967

I've finally got my dates down for when I'm coming to Austin. I'm resigning myself to the fact that I will probably have to use a buyer's agent in the interest of saving time and, if nothing else, just to get around town in the most efficient way.

I did a search and one of the threads I found mentioned fees. Is it typical to pay a buyer's agent a fee upfront and if so how much?

What if the person I pick, sight unseen, turns out to be a smuck? Am I stuck with them?

The Buyer Rep agreement, even the concept, is one of the most misunderstood in real estate.

There is typically not an upfront fee, but it's negotiable between you and the agent. For a discounted commission, they will probably want an upfront fee and an extended "buyer listing" term.

When you sign a buyer rep agreement with an agent, YOU are agreeing to pay the agent whatever amount is written into the agreement. It is a compensation agreement between you and the agent. The agent in turn agrees to first seek payment from the Seller, which in fact is what happens 99% of the time, but not always.

For example, if you are interested in a listing in which the seller pays the buyer's agent less than the agreed amount, you'll have to factor that into your offer, knowing that you will be paying the gap in compensation out of your pocket.

On the other hand, as a buyer you should insist that any excess compensation offered by the seller comes back to you. For example, if your buyer rep agreement states that you will pay the agent x%, and a builder is offering double that, you should make sure the understanding (in writting) with your agent is that you will be rebated the excess amount toward your closing costs (which is legal). This prevents your agent from having your search be influenced (even subconciously) by the amount of commission being offered, and leaves it entirely up to you either way as to whether bonus commissions, or lower commission affect your interest in the home.

Yes, the agreement should be something you can easily cancel or terminate if you don't feel you are being well served. Many agents will disagree with me on that, but our agreement in fact states that EITHER party (agent included) may terminate the agreement with 1 day written notice. You don't want to feel trapped with a bozo agent if you come to the conclusion that you've eneded up with one.

In picking an agent, find one familiar with the price range and areas in which you wish to find a home. I would call and interview at least three agents. It only takes 5 minutes. Ask:

- How many homes have you sold in the past 12 months
- Given the criteria I've just stated, which areas do you think are best for me to start searching?
- How do you typically approach negotiations?
- What are the most important things I should know in searching for a home and making an offer?
- What considerations whould I be thinking of if I chose to buy a new home?
- What are the advantages of buying in an established area?

You'll know fairly quickly if these questions are being answered by an agent who knows what they're doing. Trust your gut. That said, sometimes a farily new but eager agent can serve you very well because they are not very busy and have more time to devote to you. Just make sure thay have a mentor or experienced agent to turn to for help if needed during negotiations.

I'm resigning myself to the fact that I will probably have to use a buyer's agent in the interest of saving time and, if nothing else, just to get around town in the most efficient way.

I'm sorry and embarrassed that our industry is such that the sentiment you express here is common. Instead of knowing with confidence that in fact there is no smarter move you can make than to immediately find and enlist the services of a really good buyer's agent, you seem to accept it only as a necessary evil.

If YOU do a good job of hiring and picking a good buyer's agent, your opinion about this will certainly change. I'm hoping that will be the outcome for you.
Steve