Homebuyers have a variety of digital tools to help them hone in on a dream abode, but even tech-savvy house hunters hire real estate agents. The plethora of real estate websites, house-hunting apps, and universal multiple listing service (MLS) accessibility have yet to replace agents, even though research shows that buyers usually search the internet before searching for an agent. Finding the right real estate agent is a key part of the home-buying process, and it typically begins online.
Homebuyers Use Digital Media to Make up Their Minds
Home shoppers typically search for homes on their own, even when they have rockstar real estate agents. Perhaps they fear their agent will overlook a good home, or their agent isn't sending them homes frequently or fast enough. And sometimes, buyers simply like looking at real estate online. With the ability to view panoramic and aerial shots of a neighborhood, take a virtual tour of property, and access public records of comparable homes, looking up real estate online is faster, easier and more fun than ever before.
A 2012 Google and National Association of Realtors study showed how home shoppers implemented digital media in the buying process. The study found that much like consumers for other goods, home shoppers first go online to gather the information to support their house-hunting decisions. They use YouTube "how-to" videos, read reviews, look up specific brands on search engines, and do much of this research from a smartphone or tablet while on the go.
The Google and NAR study also found that about 90 percent of homebuyers used the internet to start their home search, most often to find:
- General home information
- Directions to view homes
- Comparable home prices
- Comparable home features
- Real estate brokerages
Buyers Still Want Agents to Walk Them Through Home and Process
But digital tools and free access to property information, which used to only be reserved for industry professionals, haven't necessarily undermined the need for real estate agents. Even with all of the real estate resources at homebuyers' fingertips, the majority of them –around 90 percent – still hire agents. This is largely due to the fact that buyers are busy and inexperienced in the real estate landscape. A good buyer's agent can do three important things that an app or computer can't do:
- Help them draft the right offer
- Advocate and play hardball for the buyer when needed
- Oversee the entire buying process
Once a home is located and a deal is made, buyers face piles of paperwork from the seller, escrow company, title company and their mortgage lender. They also have inspections, an appraisal and other property investigations to complete, all within a limited amount of time – usually only a few weeks. A good agent breaks down the process and keeps buyers on task so they meet their timelines and don't jeopardize the deal. They also can address basic escrow and title questions – in plain English – all while looking out for the buyer to ensure they get their home under the best possible terms.
Pros and Cons of Hiring Agents
But in exchange for the time and efforts of a professional, a buyer will need to make a commitment to an agent via a contract known as a buyer-broker agreement. By signing this agreement, the buyer basically promises to work exclusively with the real estate agent for a set period of time, meaning no going around them to buy directly from a seller or to deal with a seller's listing agent. It also prevents buyers from employing multiple agents to do the legwork and bidding on their behalf, only to go with one in the end.
A buyer who searches and views homes solo and negotiates directly with a seller or the seller's agent, should tread lightly and have experience in buying homes. Buyers who make deals without any agent involvement, that is, directly with a "For Sale by Owner," or FSBO, where no listing agent is involved, must be especially aware of the risks. There are mandatory seller disclosures which can vary by state and others that are required under the federal Real Estate Settlement and Procedures Act, or RESPA.
A homebuyer who chooses to represent themselves in a purchase forgoes the help, advice and expertise of a knowledgeable real estate agent. They also may not save money, which is usually the biggest motivating factor for the DIY buyer. Unless a buyer skillfully negotiates a lower price based on the fact that there is no buyer's agent, the buyer won't save money on the home price. That's because sellers typically pay both the listing agent and the buyer's agent out of the proceeds of the home sale. This amount is usually 5 percent to 6 percent of the home price, and split evenly or nearly evenly between the two agents. Commissions are put in writing when the listing agreement is made and are already worked into the home's asking price. The commission doesn't automatically come off if the buyer arrives without an agent, but an agreement may allow the listing agent to charge a percent or two less if they act as dual agent for both the seller and buyer. A listing agent who isn't acting as a dual agent generally must take on more work anyway, overseeing both sides of the transaction to ensure a smooth closing, a heftier task they likely will want to be compensated for.