What is a Buyer's Agent?

This is one of the most frequently asked questions I get. I decided it would be a good idea to explain what buyer's agency is, under the RI law, and to dispel any myths or misconceptions about the services buyer's agents provide.

What the law says.
According to the RI General Statute, an "agent" is a person licensed as a real estate broker or salesperson and who acts in a fiduciary capacity on behalf of another party in a real estate transaction. A "Buyer's Agent," then, is an agent who contracts to locate property for a buyer or who finds a buyer for a property for which no listing exists and presents an offer to purchase to the seller and negotiates on behalf of the buyer.

"Fiduciary" is a fancy legal term that basically describes a formal relationship between an agent and a client. COALD is an acronym that is routinely used to describe the parts of this relationship. Every agent acting in a fuduciary capacity on behalf of another owes that other party the following: Care; Obedience; Accountability; Loyalty; Disclosure. This is similar to the relationship between a lawyer and her client.

The bottomline: Buyer's Agents do what is in the best interest of the BUYER--Not the seller. Not the listing agent. Not the mortgage company.

Myth#1. I'll get a better deal if I go it alone.
The truth is you're less likely to get a better deal if you go it alone. A popular misconception is that if a buyer approaches a seller and negotiates on her own, then the seller will cut the buyer a deal. For instance, instead of paying the Buyer's Agent a 2% commission, the seller will credit the buyer 2% or reduce the selling price by 2%. First of all, this simply doesn't happen. Ask yourself, "Why would the seller pass this discount along to me?" "Why wouldn't she just keep the money for herself?" The only person who "saves" in this scenario is the seller--assuming this is a For Sale By Owner. If her property is listed with a brokerage, then she still owes the listing agent the pre-determined commission. And take it from a practicing real estate agent: If you come to closing with no buyer's agent, the listing agent is NOT going to split his/her commission with you! (The bottomline: You "save" nothing by going it alone.)

A Buyer's Agent will negotiate on the behalf of the buyer to make sure she gets the best possible price and terms. The Buyer's Agent will also notice tell-tale signs of problems that could exist with a property. The Buyer's Agent can also help you make sense of the mountains of paperwork that come with purchasing a home. How unfortunate would it be for you to lose your deposit because you missed a deadline by one day and the offer you submitted was void? Finally, a Buyer's Agent is an objective outsider who can keep you grounded when the emotions of the process get overwhelming.

Myth #2. I have to pay the Buyer's Agent a commission.
In a typical real estate transaction this simply is not true. Commissions are paid by the seller to the Listing Broker/Agent. The Listing Agent and the Buyer's Agent work out a split of this commission in advance. Most listing agents split their commission 50/50. For instance, let's say you're working with a Buyer's Agent and you settle on a house you like. The seller has already negotiated a commission with the Listing Agent prior to the home going on the market. Let's say that commission is 5%. When the home is sold and the transaction closes, the Listing Agent is compensated at 5% of the selling price by the seller. Your Buyer's Agent, in turn, gets 2.5% (or 50% of the total commission paid by the seller), for his/her part in the transaction. You, the buyer, never pay a commission to either the Listing Agent or the Buyer's Agent. There are no tricks or hidden fees. The fact is, a Buyer's Agent also makes the Listing Agent's job easier. The Listing Agent has one objective: Get his/her client's home sold. Buyer's Agents help make this goal easier to accomplish--and they are compensated for that help by the Listing Agent after the closing.

The only time a buyer pays a fee to a Buyer's Agent is by agreement.