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What a Buyer's Agent Can Do for You

Shopping for a new home can be scary. Most buyers ultimately have one question: Whom can you trust? Will real estate agents act in your best interest -- or will they do whatever it takes to sell their client's home? Will your mortgage broker give you a good deal -- or will that broker stick you with a mortgage that you eventually won't be able to afford?

Some people have decided they've had enough. More than ever, sellers are going without real estate agents and instead marketing their properties by themselves. On the buyer's side, many people have never even thought about getting their own agent.

However, homebuying is a complicated business that requires a fair amount of legal expertise, and many people want the reassurance that comes with getting help from someone who manages these transactions every day. If that sounds like you, using a buyer's agent can give you some protection.

What your agent will do
Real estate agents traditionally represent the seller, not the buyer, and they get a percentage of the sale price. Therefore, it's in their interest (and the seller's) to set as high a price as possible. The higher the sale price, the higher the agent's take-home pay.

This system works wonderfully when you're the seller, but it's not always the best arrangement for the buyer. A buyer's agent helps tilt the transaction back toward balance by giving the buyer a professional representing his or her interests.

And the help you get is not just about the money. Seller's agents will do everything within the bounds of the law to get you to buy a house. There's nothing wrong with that. In fact, it's their job. But that also means that every home they sell will be a "flawless gem in mint condition." A buyer's agent will help you get a more realistic picture of the home, the neighborhood, and the price you should pay.

Not so fast
Sounds great, right? But before you put a buyer's agent in charge of your homebuying decisions, keep in mind what this professional cannot do.

A buyer's agent can help you get a fair price, but he or she cannot promise you a bargain. Often, the buyer's agent has just as much a stake in the price of the home you buy, since he or she typically gets paid a percentage of the sale proceeds, just as the seller's agent does. That doesn't automatically create a conflict of interest, but it does mean that your agent really wants you to buy a house.

If you want to avoid this situation, try to negotiate a flat fee that you pay yourself. You may also find that different agents use different commission structures that may be more appealing to you.

Be responsible
A buyer's agent cannot absolve you of the responsibility of understanding your mortgage and buying an affordable house. Agents will often defer to lenders' decisions about the amount of money you can borrow and the monthly payment you can afford. In the worst case, an agent will take advantage of that information to sell you a home at your maximum price, with monthly payments that you can afford now but not later, when the mortgage rate adjusts.

It's up to you to make sure you're comfortable with your mortgage's current and future monthly payments. Just because you can buy a million-dollar home -- just because the bank will lend you the money -- doesn't mean you have to. You're the expert in your personal finances. After all, you pay the bills, not your agent.

A buyer's broker also cannot promise that if you take a less-than-optimal mortgage to get into a home, you'll be able to refinance later. That decision's up to the lenders.

Overall, having a buyer's agent can be very helpful. As long as you understand what a buyer's agent can and can't do for you, you'll feel more comfortable about the process -- and potentially get a better deal in the end.

For more on buying and selling a home, read about:

Read/Post Comments (2) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 06, 2008, at 1:11 AM, wdbarrett wrote:

    Laws vary from state-to-state on making a home purchase. Most states require some level of disclosure from the seller on the true condition of the home. A good buyer's agent will let you know what disclosures are required and what they mean. They will also advise you to get a professional home inspection.

    I would urge caution to any buyer attempting to negotiate a compensation agreement with a buyer's agent. In most cases, the buyer's agent is given a portion of the commission paid to the listing agent. The agreement to pay commission to the listing agent, and the agreement to share the commission is independent of any agreement between the buyer and the buyer's agent. I would not advise a buyer to attempt to pay a buyer's agent a flat fee without fully understanding how the buyer's agent may share in the listing agent's commission.

  • Report this Comment On March 22, 2016, at 3:51 PM, PaulKLangley wrote:

    This is some really great information for anyone planning on buying a home in the near future. I never knew there was a sort of "real estate agent" for the buyer, in order to balance the scales a little bit. But it does definitely sound beneficial to have someone on your side representing you to bring the cost down when possible. Thanks so much for writing!

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