I'm in the process of buying my first home, and it's been hugely helpful to have an agent. Services include:
- Tours of homes; seeing something online and seeing something in person is an impressive difference. Some houses look amazing online and terrible in person, or vice versa. Cannot possibly overstate the value of this.
- Negotiation; he's a professional negotiator, and he has years of experience negotiating in the exact market that we're buying in.
- Documentation; there's a RIDICULOUS amount of paperwork to file, and all I have to do is read/sign it.
- Inspections; he has handymen and inspectors on file, and knows that they're trustworthy.
- Knowledge; he's done this dozens/hundreds of times. He knows about how long things take, he has reasonable estimates of how much things will cost, and he has the patience to answer all of my questions.
The highest producing agents are indifferent negotiators, but work hard to convince you they got you a great deal. They are trying to get you to buy quickly. Every hour they spend showing you more houses dilutes their commission on an hourly basis. Plus if you think you got a great deal you will refer your friends.
Moreover, there is a moral hazard in negotiating. The higher the sale price and the quicker the negotiation is over, the more and more quickly the agent gets paid. The agents I worked with generally did not give off the vibe that they were phased by this. I think at the scale of what a normal person can afford real-estate-wise, the difference is not huge. My latest agent in fact insisted that I go see more properties before making offers when I said I was ready to go. During this time I found the property I finally purchased, and it was about $50k cheaper than the original property I was interested in.
My experience with my agent was that she picked the home inspector with the worst Yelp ratings. Most reviewers said the inspector was not thorough at all, which of course works in favor or closing the sale quickly and without any issues, so we decided to choose our own inspector, and she threw a fit. I'm disgusted by the whole real estate agent system in California, where the incentives are all set against the client, yet there is no easy way to bypass the system.
Talk to a real-estate lawyer if you want to do some negotiation. They are sharks compared to agent, incredibly vicious sharks. The agents both want the deal to happen and get paid very nearly the same regardless of the negotiation, you may very well find yourself in a situation when your agent is encouraging you to take an offer rather than beating an extra couple percent out of the other guys.
I'm also in the process of buying a home for the first time, and did some search on Trulia/Zillow. It was OK, but the data gets really stale. One home was sold already before it was taken down. I did find out that Houston has a really nice site, har.com that lets you do basically everything Trulia & Zillow does. Realtors have other interface(s) into the same data, which lets them do different things like N sided polygons instead of just squares for map searches.
Tours vs images is definitely an issue. Some people are just bad photographers, some only have 6 images (Houston MLS requires 6 images for a posting). Some are good photographers, that make things look bigger than in person.
Experience is hugely variable though. I called 2 agent offices, and got stuck with their most inexperienced Buyer's Agent. The more experienced people are doing sales of homes or commercial, and getting a cut of the commissions of the people under them. Some Googling led me to roughly a 60/40 split between agent & office, along with the agent paying a desk fee (~$50/monthly). Since the principal is still getting paid, you can involve them if needed for second opinions or more nuanced explanations. Agents are getting roughly 3% of the sales price.
Still read all your documents. I've caught things that slipped past my realtor, and also brought up questions for her to answer.
Inspections are a mixed bag. They have a preferred list, and should also provide you a legal document stating their incentives for any recommended providers (including home warranty companies). I ended up going with one of my realtor's preferred inspectors, but only after calling all 5 on their list, and several more listed on Yelp.
Knowledge goes back to experience. My agent was basically bowled over by 2 of the new home builders in the area. It was so bad I considered buying the Realtor's Residential Construction Certification program (1 day course, ~$300, they'll sell to anyone) and going through it myself if I went with new construction.
Another point about knowledge is that even with experience, you can come up with stuff they don't know. Neither my agent or the broker (my agent's boss) had worked with anyone that negotiated their lender origination fees. I got $500 off one lender and $1000 off another.
You can do polygons on har.com map search, their new map search with neighborhood boundaries is very nice too. Given the existence and utility of HAR, I've had a hard time justifying using zillow/trulia when searching. Heck, both times in recent years I've bought a house, I set up a saved search in HAR and my partner and I would browse listings at night. Effectively, all our agents had to do during the showing process was schedule visits to our top properties.
In the US, agents get roughly 6% of the sales price. The sellers's agent gets 3%, and the buyer's agent gets 3%.
In the UK, agents get roughly 1.6% of the sales price. The seller's agent gets 1%-2.5%, and there is no buyer's agent. There are other costs (survey and lawyer fees) but these are not large either, and aren't related to the price of the property.
Regarding the US, I think the typical deal is that the seller's agent and broker each get 1.5%, and the same for the buyer's agent. Some agents are their own brokers, but I believe that's rare.
This split is about how the realtor splits their commission with their employer and/or the umbrella company which provides marketing, access to MLS etc., right?
Yes. The broker is the one who is "really" doing the transaction. A broker can handle a deal on their own; an agent must use a broker as well. Wikipedia's not-entirely-clear description is here: http://en.wikipedia.org/wiki/Real_estate_broker#The_differen...
We had this trouble as well. Our Realtor helped us find a nice infill development by a very flexible builder. He knew we were FTHB that needed hand holding. He dumped us on them and didn't show up until the deal almost fell apart. We did ok on the functional upgrades but botched the design. We're now faced with doing a full house remodel of a brand new house :(
Interesting how the division works in other markets. In the UK people generally do their own negotiation, the tours are arranged by calling the seller's agent, the surveys are arranged to the standards of the mortgage company (and in Scotland, rolled into the "home report" at the seller's expense). Once you've selected a property you hire a conveyancer who handles title search and almost all the paperwork.
It's slightly different in Scotland further still. Here almost all estate agency is conducted by solicitors (lawyers). I've just bought a flat in Edinburgh and for a flat rate I had an experienced solicitor advising me on the process, giving me advice on each property I was considering - such as what to look for as warning signs when you're buying a 130 year old flat.
Because they're lawyers they are regulated (which is why gazumping doesn't happen nearly as much in Scotland) so standards of client servicing are much higher.
The moral hazard is removed by them not taking a fee on the buy side, they're aiming on you continuing to use their services for all future legal matters.
Agents usually split the commission. So, the seller will pay their agent 6%, but the buyer's agent takes half, or 3%. If you don't have an agent, and put in a bid on a hot property, the seller's agent will have a much stronger incentive to push your offer through, since they will make substantially more money. Alternatively, you might be able to get away with a slightly lower bid since the seller and seller's agent could eat some of the cost.
My brother just bought a house in the San Francisco Bay Area. Given that he was relocating from severe hundred miles away, his real estate agent was very helpful him shop from a distance. I helped out by doing a final walkthrough of the house with the agent, and saw the stack of paperwork the agent had to deal with. OMG, there were so many forms. A real estate agent who knows how to navigate all of that would be worth it to me.
- Tours of homes; seeing something online and seeing something in person is an impressive difference. Some houses look amazing online and terrible in person, or vice versa. Cannot possibly overstate the value of this.
- Negotiation; he's a professional negotiator, and he has years of experience negotiating in the exact market that we're buying in.
- Documentation; there's a RIDICULOUS amount of paperwork to file, and all I have to do is read/sign it.
- Inspections; he has handymen and inspectors on file, and knows that they're trustworthy.
- Knowledge; he's done this dozens/hundreds of times. He knows about how long things take, he has reasonable estimates of how much things will cost, and he has the patience to answer all of my questions.