How much does it cost to hire a Realtor when buying a home?

I’m cheap. I don’t like spending money. I’m always looking for a way to save a buck or two.  I cut my own hair because I don’t want to pay a barber. When I was in college I purchased my books for the next semester by waiting in the book “sell back line.”  If I couldn’t find it there, I wouldn’t buy it until it was absolutely needed for an assignment. In one class I made it through the class without ever buying a book.  I rarely go to a doctor, because I don’t want to pay for their services, I can diagnose my own ailments.  Isn’t that what the internet is for?

So when buying a house, of course I could find one on my own. I could save 3% by not using a Realtor right?

That’s what I probably would have thought had I not been a Realtor, and not known how the process works.

However, real estate is a different boat. The way we sell real estate in the world today nearly defies the laws of economics. The sale of real estate is different than almost any other product or service. Here is a brief explanation of how the usual modern real estate transaction works:

A homeowner needs to sell their home so they hire a Realtor. This “listing agent” is hired to market their home, represent the seller in the negotiation of offers, and ensure the protection of the seller in the event that complications arise in the real estate transaction. At the time of the listing, a formal, binding contract is signed that states the length of the listing agreement, and the commission amount (usually 5-6%). Part of this commission will be given to another agent, if another agent represents the buyer. If  the listing agent can sell the house because of their own marketing efforts, then they are entitled to get both sides of the real estate commission.

So what does it cost to hire a buyers agent?

Nothing. $0. Nada. The buyers agent commission almost always comes from the split the listing agent has already contracted.

Also by hiring a buyers agent, a home buyer also gets:

  • Convenience: Rather than having to try and get hold of multiple real estate agents, and scheduling home showing appointments for times that will work with all the involved parties, a buyer needs to contact only one person, the buyers agent who takes care of everything.
  • Representation: The listing agent has a legal contract with the seller to represent them. They have a fiduciary duty to help them get the most money possible out of their home. They cannot reveal anything that would compromise their negotiating position. By hiring a buyers agent, your buyers agent has a fiduciary duty to represent YOU. They will use their resources to dig up as much information as they can to help you buy a home for the best price possible.
  • Expert Knowledge: A good buyers agent shows lots of houses. They know what is on the market, and can easily spot deals. By working with you, they can get a feel for your likes and interests and can use their knowledge to help you find a home best suited for your needs and desires.
  • Protection: Because your buyers agent represents you, and you alone, they are going to do all they can too protect your rights as a home buyer, and your earnest money. They will be on top of things to make sure you get your earnest money back in the event that you are not satisfied with the home inspection, or cannot obtain financing. They will help write up your purchase offer in a way where you are protected.
  • Money Saved: A buyers agent uses their skills to negotiate the best deal possible. In addition, their knowledge can help you locate the most ideal property for the price. Buyers agents can also help connect you up with the best and most affordable mortgage lenders, home inspectors, and title companies, which will also save you thousands of dollars.

Buying a new home costs several years worth of salary.   This is one transaction where it is good to do what you can to get the best deal possible. The best way to get the best deal, is to hire a buyers agent.

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