There is no law in California requiring people to use the services of a real estate agent. Furthermore, anybody with a decent understanding of California real estate laws and practices can probably get themselves through a typical transaction and do just fine. There are countless resources available for learning about real estate including the Internet and print publications. If you read every article on my website you may learn more about real estate than many agents know. And of course, there is the "school of hard knocks" which you may have attended in previously buying or selling a home in California.
Some people like to change their own motor-oil or act as their own lawyer in a law suit. If you are a “do-it-yourself” kind of person, you will find invaluable information on this website to help you with your real estate transaction. If you are not sure if you want to use a real estate agent to buy a house in Santa Rosa, Windsor or the surrounding area, you will find lots of information on this website to help you with this decision. So the question isn’t really "Must I use a real estate agent to buy a home?" so much as "Do I want to use a real estate agent to buy a home?” Well, here are some things to consider;
The main reason a buyer might hesitate to use a real estate agent to buy a home is cost. Some people believe that using an agent will cost them more than NOT using one. In most cases, this is not true. The vast majority of homes for sale in Santa Rosa, Windsor and the surrounding area are listed through a licensed real estate broker. According to the National Association of Realtors, 93% of all open market real estate transactions were done with the use of a real estate agent. The real estate listing agent typically has an agreement with the seller that once the property is sold, the real estate listing agent will pay a percentage of their commission to the buyer’s-agent.
The key point is that with almost every real estate transaction involving a buyers-agent, the seller (not the buyer) pays the buyer’s-agent commission. Since the seller has already agreed to pay for the buyer’s real estate agent, you could argue that there's very little motivation for a buyer NOT to have their OWN real estate agent to represent them. Remember; 93% of the houses you might consider buying, have a real estate agent working for the SELLER. This agent is working hard to get the best deal possible FOR THE SELLER. You can leverage this situation and have the Seller’s agent pay for you to have your own agent who should work just as hard getting YOU the best deal possible.
A note of clarification: I am not talking about a buyer using the listing agent to represent them (this is Dual Agency, which I have warned against in other articles). I am talking about a buyer that wants to act without an agent, or to act as their “Own” agent.
Many real estate agents would like you to think this is true, but in my opinion, it is somewhat deceptive. While it is a “chicken-and-egg” kind of topic, I believe that a more honest perspective is that ALL the funds that drive the real estate transaction come from the buyer. In effect, the buyer is really paying their real estate agent’s fee through the seller. For this reason, a buyer (acting as their OWN agent) could theoretically create an offer to buy, asking the seller to reduce the sales price of the home by the amount the Seller would have paid the buyer’s-agent. Buyers without a real estate agent are sometimes successful in getting a small reduction in the price, but they are typically very disappointed in the amount the seller is willing to reduce the price. This is because the seller usually wants to keep a most of this unpaid agent fee for themselves; and they actually have good reason to do so. This is because BOTH the seller and the seller’s agent (the listing agent) receive great benefits from having another agent involved in the transaction. Read on…
The seller of a property certainly gets some benefit from a buyer who is represented by a real estate agent. A good buyers-agent is an educator and tremendous reassurance to their client throughout the entire purchase-and-escrow process. The service the buyer’s-agent provides to their client dramatically reduces the chance the buyer will walk away from the transaction due to a misunderstanding or ignorance on real estate issues. Statistics show that buyers without an agent have a MUCH higher failure rate than do buyers with representation. Most listing agents will discuss this situation with the seller when reviewing an offer from a buyer without a real estate agent. Because a buyer without a real estate agent represents greater risk to the seller, the seller will retain part of the un-paid real estate agent fee for taking this risk. The extreme of this is evident in a strong sellers market when many sellers will simply avoid the potential problems created by an unrepresented buyer and will wait for a buyer who IS represented to come along. And they do so quickly.
Another reason the seller is usually unwilling to reduce the price for a buyer without an agent is because the listing agent also benefits from having a buyer’s-real estate agent involved. The listing agent knows that because the buyer has no agent, the listing agent will be forced to do most of the work that would normally be done by the buyer’s real estate agent. The listing agent now has to keep track of BOTH seller and buyer and do double communication and double the work. In addition to the extra work, a buyer without a buyer’s real estate agent represents greater liability to the real estate listing agent. Even when the buyer declines “Dual Agency” the listing agent could still be sued by the buyer for anything the buyer felt was misrepresented. In fact, the chances for a lawsuit against the real estate listing agent are statistically much greater when the buyer is working without their own real estate agent. This increased workload and increased risk require additional effort and liability for the listing broker and for this reason, they want to keep a portion (or frequently all) of the money set-aside to pay the buyer’s real estate agent.
So far, all I have written about are the benefits the buyer’s real estate agent provides to the seller and the seller’s agent. The greatest value a buyer’s-agent provides is to the BUYER! The fact is that even “if” you could get some small portion of the buyer’s-agent fee rebated back to you by NOT using a buyer’s-agent, a good real estate agent will reduce the over-all cost of purchasing a home and improve the quality of purchase many times more than the amount a buyer could save buying on their own. This is because there are huge benefits to the BUYER for using a buyer’s agent and the following paragraphs describe just a few of the ways this can happen.
A good buyer’s agent gives you immediate access to every property listed in the MLS. Looking at properties in Sonoma County without the benefit of a buyer's-agent forces you to be at the mercy of other people’s time constraints. If you identify a hot new listing in Santa Rosa or Windsor and you want to go look at that property (without your own real estate agent) you'll have to make an appointment with the real estate listing agent. For the seller’s security and liability protection, either the listing agent or the buyer’s real estate agent must be present during a property tour. You can’t just call the seller directly and ask to come over. The seller will give you their real estate agent’s phone number to schedule a tour; after-all, that’s what they pay the agent to do!
First of all, how does the real estate agent know you are not just a curious neighbor wanting to stroll through the property? Maybe they live in Sebastopol and only “visit” Santa Rosa once a week? They often suspect that if you really were a SERIOUS buyer, you would have your own agent and Realtor would help you tour the home. Perhaps the listing agent is busy working for their OWN clients (of which you are not one). There are countless reasons why other people’s real estate agents do not see you as their first priority. In most cases, they will eventually return your phone call and will be happy to show you the property (at their convenience). The problem is the whole time you are waiting for this to happen, other buyers with their own agents are walking through the property and preparing an offer. Even in a slow market, the very best deals go fast.
Remember the golden rule: "The seller always knows more about the property than the buyer does". Personally, I prefer to believe that people are basically honest and will disclose every piece of relevant information to anyone purchasing their property. But you do not want to rely on other people's “good intentions” for the largest transaction in your life. Undisclosed problems are only part of the reason that the Home Inspection industry in Santa Rosa or Windsor and the surrounding area has become such a big deal in recent years. They ALWAYS find stuff and often these are things the seller forgot were there.
In a strong buyer's market, sellers seem to be even more reluctant to disclose every last detail. Perhaps they are simply trying to get rid of a property that they cannot afford, or feel that the reduction in the value of their home due to market conditions somehow justifies less than full disclosure. In Sonoma County, a buyer’s real estate agent is required by law to perform an inspection for the benefit of their client, and an experienced Realtor can make a huge difference in helping identify problems.
Once a potential property is identified, and prior to an offer, a thorough analysis needs to be completed to determine the value of the property. In Sonoma County there is an abundance of property data available through the Multiple Listing Service (MLS) and on the Internet, but remember it is only data. In fact, it is OLD data. It only tells us what has happened, what properties have sold for, not what future properties WILL sell for. What you are trying to find is a predictor of future values. Data without an educated (sometimes artful) interpretation doesn't mean much. A good buyer’s Realtor will combine the statistical data with their experiences and professional knowledge to create an estimate of future pricing for the property. Sometimes a Seller is just plain asking too much for the home. Presenting a well-done property analysis with your offer to prove that your offer-price is fair, goes a lot farther with the Seller than simply saying “You are asking too much”. One of the big problems in real estate is sellers feeling like their property is worth more than it really is. Many listing agents actually rely on buyer agents to “prove” to the seller the true market value of the home and thereby reduce the price to a proper amount.
A good buyer’s-agent has been through many different real estate transactions and has been involved in more real estate negotiations in a single year than most people will in a lifetime. Their understanding of California real estate, real estate law and local processes, and the local market provides powerful tools to leverage in a negotiation. I personally have been negotiating legal agreements for over 20 years and I can always find another tool or another perspective to improve my client’s position. Negotiating an agreement with maximum value for my clients, while at the same time meeting the needs of the other party, is an artful skill that I'm quite proud of.
For example, buyers often think that the most important part of the "offer to purchase" is the dollar amount of the offer. Often the price of the home is truly foremost in the mind of the seller the day they list the property for sale. This frequently changes when the seller actually has an offer to buy the property in their hand, and they realize that if they accept the offer, they are homeless!! It just hits them like a ton of bricks. All of a sudden, the price they are getting becomes secondary to the amount of time they have available to find a replacement property and the overwhelming task of tying-up all of their loose ends. A conversation with the real estate listing agent can alert me to this possibility and I can then help my buyer-client structure their offer with trade-offs between purchase price and close of escrow date. There is ALWAYS something to use for negotiations, and there is certainly an art to doing it successfully. I am pretty good at this.
California law requires all real estate transactions to be a written agreement between the parties. The California Association of realtors has developed over 150 different legal forms to be used in a real estate transaction, and these just cover the most common situations. A good buyer’s-agent in Santa Rosa and the surrounding area is familiar with these forms, knows which form to use, and understands the language of the forms. There is a mountain of paperwork involved in the transfer of real estate and the proper use of the correct legal documents can dramatically help to protect a buyer’s investment in the property.
The paperwork transfer between buyer, seller, escrow and lender can be overwhelming at times and there are many deadlines, all of which are critical. A good buyer’s agent is familiar with the flow of paperwork and the inspections required for an effective property transfer, and can counsel their client on how to proceed with each of these.
Frequently both the buyer and seller find the escrow process to be confusing and overwhelming. A good buyer’s real estate agent is familiar with this process and will guide their client along every step of the way with knowledgeable explanations and recommendations on how to proceed. In many cases, the Realtor will have good contacts and a working relationship with several local title companies which can greatly assist the Buyer in this process. Many problems and additional costs can be avoided with the help from a good agent.
In every real estate transaction there are the inevitable glitches and problems that occur. Sometimes these are minor, sometimes they are major but in most cases a good buyer’s real estate agent has been there before and is ready with a solution. A good buyers-agent will work to create a long-term relationship with the customer because a huge percentage of successful real estate agents business comes from referrals and repeat clients. Honestly, a good real estate agent believes that the commission involved in a particular transaction is truly secondary to a successful outcome of the transaction. They believe this because the client's satisfaction will mean future business for the agent, not only from the client but from referrals.
Statistics show that Buyers who use the services of a Buyer’s agent find a home in less time and pay a lower price for the home than Buyers that do not use a real estate agent. Sometimes you can save money by fixing your own car, representing yourself in a lawsuit, or buying a home without a real estate agent. Most people who buy a home without a real estate agent leave far more money on the table or get a lower quality investment many times greater than the money they might have saved. And it was a heck of a lot of work.
In my opinion, when using a good buyer’s agent, the money saved and problems avoided far outweigh any cost of using the agent. The talents a good agent brings to the table are substantial; Market knowledge, Negotiation skills, Understanding of the process, Market analysis, Business relationships, Impartial opinion, all combined into a professional relationship that works hard to get maximum value and satisfaction for the client. The old saying "you don't know what you don't know" becomes very clear the first time you work with a great real estate agent.
Word of caution: Remember, in California if a seller lists their home with a real estate broker, and you decide to buy the property without a buyers-agent, by default the seller's real estate agent becomes your agent (Dual Agency). Not only did you not buy the property “without an agent”, the real estate agent you used was really somebody else's agent! (See my article on “Dual Agency Dangers”).