Within the span of 5 months, we bought two houses. The first was a summer vacation property and the other is our main family home. For the first, we did not hire a real estate agent. We worked with the seller’s agent. For the second purchase we did hire a real estate agent. Both purchases went through just fine but after the first purchase we decided that we definitely wanted to hire an agent for the second purchase. Below are the reasons why we wanted to and did hire a real estate agent for buying a house.
1. Pocket listings = Private, Fast Purchase
This is huge, especially in a hot real estate market. We wanted to buy both houses in very specific areas. The first house was publicly listed. Because it was a boat access property it didn’t sell instantly. However, residential houses in the neighborhood we wanted sell within days, many after a bidding war. We had heard that a great house had sold privately and had heard of other instances where houses in our neighborhood were selling before they ever became publicly listed.
Having a real estate agent who is active in a particular neighborhood increases the odds of learning about upcoming listings which offers the chance to make an offer before the listing is public improving chances of actually buying a home. In fact, this is exactly how we came to buy a darn near perfect family home in our desired neighborhood.
We contacted the agent who was the seller’s agent for our vacation property purchase asking him to represent us for the second home purchase. He immediately agreed. Moreover, he said he had some clients who are about to sell their home. That was music to our ears, although we wanted to see it first. We’re a bit particular about the house features we wanted, size and precise location. Our agent set up a private viewing. We knew then and there it was perfect. We made an offer on the spot. The offer was accepted. We had purchased our second house without all the drama of a bidding war and waiting for open houses, etc.
2. Arrange private viewings
I’m not just talking about arranging private viewings for you but also for the inspector and/or appraiser hired by a bank. Of course, private viewings are great especially if it leads to a private, fast purchase but it’s much easier to have a real estate agent arrange for home inspector and appraisal access.
3. Pulse on the market and access to data for pricing guidance
Real estate agents have access to historical sale price data to help with how much to offer. These are called comps. While this data is available to the public in some jurisdictions, it’s not in ours (British Columbia, Canada). Without access to recent sale price info in the same neighborhood for comparable homes, it’s hard for buyers to know how much to offer. This is doubly true in a hot market. It sucks to lose out in a bidding situation especially if you could have bid more than you did.
That’s not to say having a real estate agent guarantees you’ll make the right offer. You never know how high another buyer might go. A realtor can only give their best advice. We were outbid on a vacation property a couple of years ago. We never faulted the real estate agent. The property had been on the market for over a year with no offers. We put in an offer below the asking price. All of a sudden, out of the blue another buyer swooped in and offered the list price. We were scooped. It was very unexpected. It turned out good in the end because we ended up with a vacation property that much better suits us.
4. Good source of info for suggesting a law firm, mortgage broker, insurance broker and house inspector
If it’s your first home purchase or it’s been a while or you’re buying in a new area, you probably have no idea which law firm to hire, which insurance broker to use, which mortgage broker to talk to and/or house inspector to hire. It’s a lot to take on in a very short amount of time. Most realtors have such professionals they refer clients to. I’m not sure kickbacks are happening (I don’t know if this is legal or whether it happens) but I can’t help but think a realtor wouldn’t continually refer clients to these professionals if they dropped the ball for previous clients.
Interestingly, for our vacation property purchase we went with everyone the agent recommended except the law firm. The law firm he recommended was slammed with too much work and wanted double the fee to squeeze us in. We found another law firm. The other law firm was fine but they made a mistake near the end that nearly quashed the deal. It was very disappointing. Fortunately, the real estate agent stepped in and solved the problem. The problem stemmed over whether the insurance policy obtained was sufficient. It was, but for some reason the law firm which also acted for the bank, advised the bank’s underwriting department that the insurance was inadequate and to decline final mortgage approval at the eleventh hour. It turned out the insurance was perfectly fine and the law firm changed its advice.
5. Prepare and advise on all the paperwork and legalities
There’s a lot of paperwork involved when buying a property. There’s the purchase contract to start. Addendums and changes may be needed along the way. By the time the purchase is completed, buyers and sellers end up signing a ton of stuff. If I were to do it on my own, I would have no idea whether to sign. In fact, when we did the first purchase, it was scary signing the documents because we weren’t entirely sure what it all meant. We didn’t have time to get legal advice because the market was so hot.
6. Step in to solve problems that arise with financing, insurance, etc.
Above, I mentioned how the real estate agent stepped in at the 11th hour to fix a hold up with our first purchase (vacation home). He got in touch with the law firm, insurance broker and bank and cleared up all miscommunications and misunderstandings. The deal was finalized within minutes after that.
Before the real estate agent jumped in, I tried explaining to the bank and law firm that the insurance policy was fine. The insurance broker told me the policy was more than adequate. For some strange reason the bank refused to listen to me. The lawyers didn’t really know what was going on. The realtor cleared it all up.
All kinds of problems can arise during a property purchase and it’s good to have a capable, knowledgeable realtor
7. Protect your interests
With our first purchase, we didn’t have our own realtor and we knew the agent’s obligation was to the seller. In the end, we believed the agent treated us very fairly without compromising his client’s position but it might not always end up like that. If you’re on your own dealing with an agent whose duty is to the other party, you may not be treated fairly and you may not even know it. That’s where having your own agent solves the problem; you have a professional who has your back.
8. Provide an escrow account for purchase deposit
Many purchase contracts require that the buyer pay a deposit at some point along the way before completion. If it’s 5% of a $1 million home, that’s $50,000. You definitely don’t want to just hand that to the seller. Lawyers may not be involved at this stage. What you need is an escrow or trust account that the money can be held until the purchase completes. Most realtors have an escrow account for this very purpose. It protects you as the buyer… but also helps the seller who knows that money has been paid toward the purchase signalling that the buyer is serious.
9. Alert you to any problems or unique aspects of the property
With our vacation property purchase, because it was waterfront, there were definitely some unique considerations such as clean drinking water access, licensed dock and various off-the grid aspects of the property. Interestingly, the seller’s real estate agent lived in a nearby boat access house so he knew a ton about these boat access properties. That’s why he proved so helpful. In fact, even though he wasn’t our agent technically, I suspect he offered more salient advice than our own agent who didn’t live in a boat access house could. That said, it would have been good to have our own agent for that purchase nevertheless… but as I said, it happened so fast.
Regular residential houses can have unique considerations and important legal aspects to know as well. Consider easements, structural issues, permitting issues, etc. You never know and as some regular person, you may never know unless you have an agent to bring it to your attention.
10. Come up with win/win solutions when hiccups arise
This is also huge. For our second home purchase, our agent came up with a couple of solutions that were win/win. The first was selling us as the right buyer to the seller to wrap up the deal before listing publicly. The agent did this because he knew the sellers wanted several months (up to 6 months) after the sale to find their new place. Most buyers can’t offer this. Usually there’s a chain reaction where buyers are out of their house that sold and need to move in after that.
In our case, we could offer 6 months flexibility after the sale which was something the sellers really wanted. We could move in 30 days or 180 days. It didn’t matter to us so the realtor structured the deal where the house was sold to us but completion would be 6 months out with the sellers having the option to move it up in the event they found a new place and wanted to move.
Another smart solution the agent came up with, and you have to remember we bought both properties in a sellers’ market (i.e. red hot market) was that the sellers, once the contract was signed and the deal done, to have a sizeable portion of the deposit paid out to them rather than sit in escrow until we took possession. We agreed to this because at the end of the day we have protections in place and would have a good legal claim in the event the sellers backed out. Getting the private sale was critically important. I’m not saying bidding would necessarily have resulted in a higher price than what we paid but it could have. It also could have resulted in a lower price. It’s always a risk going to the market. What’s the saying… a bird in the hand is worth two in the bush. At the end of the day we paid what the sellers asked for which was likely based on their agent’s advice.
Another example is that because it was over the Christmas holidays and many folks involved with processing the transaction were on holiday, the bank couldn’t get the appraisal completed before the subject removal deadline. That could have ruined the deal which we didn’t want to happen. The realtor explained to the sellers that the hold up was indeed the appraisal and not us having cold feet. To demonstrate our good faith in fulfilling the purchase, the agent suggested we sign off on all subject removals except the subjects that pertained to the bank’s appraisal. The sellers were happy with that and thus agreed to an extension for the appraisal to be completed.
These are just three examples from our experience. I’m sure real estate agents come up with clever solutions all the time to help massage a deal to completion. After all, real estate agents work for commission so they are highly incentivized to see that deals in the works actually complete. Starting over just means more work for the same commission.
11. Costs the buyer nothing
Real estate agents’ commissions come out of the sale proceeds. That means buyers don’t pay out of pocket for all that help. It’d kind of a no-brainer for the buyer IMO. Okay, that’s a bit of a fiction because arguably, house prices are generally higher because of the commissions which mean the buyer is actually paying for the commission. This is a big reason many sellers opt not to hire an agent. They believe they’ll get the same price without handing over tens of thousands in commission.
In our view, in both of our purchases, the sellers’ agent earned their commission. In the first case, he had the boat to ferry prospective buyers to the house. Had he not been able to get us up to the house, we wouldn’t be able to see it and then make an offer. We didn’t own a boat at that point… but we did buy a boat shortly after buying that property.
With our second house purchase, the sellers’ agent, who was also the agent we hired (although he wasn’t our agent technically for the purchase but he would have been had the private sale not gone through) managed to get the house sold in days. He knew we were looking in the neighborhood. He knew our budget. He made the deal happen very fast with pretty much no friction and hassle on the part of the sellers. I have no doubt that he secured a great deal for the sellers and us. A real win/win that IMO was a commission well earned.
Why didn’t we hire a real estate agent for the first home purchase?
It happened so fast. For years we had looked for a summer vacation house on the water but hadn’t pursued it seriously for the last year or so due to widespread forest fires in the lake region in our province. In fact, that prompted us to one day consider buying an oceanfront home closer to us and not so proximate to the annual forest fires. The only snag was that the properties we could afford were boat access. Anyway, we jumped online once we opened up to the idea of a boat-access oceanfront cabin and found the perfect place listed for sale. The price was in our budget. We immediately contacted the listing agent. He had a boat, which is probably why he was able to be the listing agent. He boated us up to take a look. We made an offer then and there. The offer was accepted and we plowed the purchase through. There never was time to hire an agent. It just happened so fast.
However, while the seller’s agent was very good to us (so good he’s the agent we hired for house purchase number two) he technically wasn’t our agent. He stepped us through what we needed to do and proved super helpful. Buying a home is not the simplest transaction and so we realized having an agent of our own is helpful.