Sunday, February 19, 2006

The Best Deal in Real Estate?

by Osman Parvez


In addition to speaking Jedi (very cool), fellow Blogger Ardell of Seattle's Rain City Guide believes Buyer's Agency is all smoke and mirrors. Perhaps it's our fault as agents for not being clear and consistent about the services we provide, the different types of agency, and how to get the most value.

Are You Getting Value for Your Money?
Getting value starts by knowing how to choose your real estate agent. We believe that the same standards used to select an attorney or CPA should apply to finding a real estate agent, and that agents needs to raise the standard for service. Raising the bar through uncompromising service and dedication to our clients is the core mission of the Realty Unique Team .

Is Buyer Agency Free?
The services of a buyer's agent are NOT free but is the buyer really paying for it? It's a matter of perspective. Ask a seller, they'll tell you THEY pay the commission.

The seller is probably right, at least from a contractual point of view. In Colorado, the seller usually pays commission to the listing agent who in turn compensates a buyer's agent or transaction broker* who brings forth a buyer. See §18 of Colorado's Realtor Board Approved Listing Contract. Of course, no buyer no sale... right?

Is it a Deal?
As I've said before, for most people a Buyers Agent is the best deal in real estate. There are usually no upfront fees and in most cases the seller has already negotiated, established, and will eventually pay your agent's compensation*. If you've chosen your agent carefully, you get full service, expert advice, and representation.

What's Full Service? A Buyer's Agent works solely on behalf of the interests of the buyer. Sometimes it's the usual agent role of taking clients to see homes. In other cases, there is much more involved. For example, during the past few months I've been working with a client who is visually impaired. In addition to helping her get a sense of the market, look at many properties, and sniff out a very good deal, I've also spent many hours carefully reading to her, explaining contracts, disclosures, and other related documents. After renting for 20 years, she's a first time buyer who is nervous about buying a home and as her buyers agent, I'm walking her through every step of the process.

The alternative (in Colorado) is typically where the listing agent works as a transaction broker.

Most buyers start their search online, looking at properties in places like my website. Eventually they may call for more details. If they call the listing agent and the caller buys the house they inquired about (rare), the listing agent will nearly always act as a transaction broker and collect both the listing agent and transaction broker/buyers agent commission. This is called "double ending" the deal. If the caller doesn't buy that particular listing, the listing agent has an opportunity to act as a buyers agent for the caller for other properties. This is why listings, even when they don't sell for long periods, are valuable to an agent.

At the current time, Buyers Agents or Transaction Brokers in Colorado are nearly always offered 2.8% for their services by the listing agent (the "co-op"). Most FSBOs also offer a "co-op," but if you happen to call one without an agent, it's unlikely the owner will rush to discount the asking price. Afterall, they want the money for themselves. Meanwhile, as I noted previously in my blog, some listing agents have started to offer buyers agents higher incentives and even Plasma TV's, while on certain high end properties the commission sometimes drops to 2.5%.

For reference, look here for the definitions of working relationships in the state of Colorado.

If you are considering buying a home in Colorado, we recommend the services of experienced buyers agents with an uncompromising approach to service.

*Note: Check your contract because there are alternative compensation compensation structures. With a buyer's agent, you may be responsible for paying a commission. See §8 of the Exclusive Right to Buy Contract on DORA's website.


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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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