A buyer's agent is a real estate agent who is working exclusively for you, the homebuyer. A regular real estate agent becomes a buyer's agent by signing a contract with the buyer. The contract stipulates that the agent will work to negotiate the best price, ensure the property is inspected, and represent your interests throughout the entire process. What you tell a buyer's agent, like the maximum you can afford to pay, remains confidential. Using a buyer's agent also means that you will be shown homes that are For Sale By Owner (FSBO).
How do you find a buyer's agent? Shop around. Meet with different real estate agents and have them show you a few houses. Look for someone who really understands you and your particular needs. A good place to start is by asking friends and neighbors for recommendations.
Will you pay more for a buyer's agent? Not usually. In most cases, the buyer's agent splits the sales commission with the seller's agent and you don't pay anything. You could argue that this arrangement still favors the seller, since even the buyer's agent will want the highest commission possible. Buyer's agents counter that the difference in commission is usually so small that it doesn't affect their loyalty to the buyer. For example, if the total commission on a $150,000 is six percent, then the buyer's agent takes home half, or $4,500. If the agent negotiates the price down to $140,000, his take is only $300 less.
Pay close attention to the contract you sign with a buyer's agent. A limited agency agreement may stipulate, specifically, for what the agent will be paid. For example, the agreement might state that if you find a home on your own, then no commission will be paid.
Here are some other types of contracts you should understand when working with an agent:
- Dual agency: This means that one agent — or two agents from the same company — represents both the buyer and the seller. Although this seems to present a conflict of interest, it is still common practice. In a dual agency situation, no privileged information can be shared unless you agree to it.
- Neglecting to specify: Unless you sign a buyer's agent contract with a real estate agent, it is assumed that he is working for the seller. If, however, the agent is the listing agent for a house you want to buy, then the relationship automatically becomes that of a "dual agency."
- Buyer's agency clause: This clause states that the buyer's agent will receive a commission on any sale, even if you find the home without her help.
- Release clause: This allows you to cancel the contract with the buyer's agent at any time.
Once you settle on a real estate agent, it's time to start house hunting!