What is a Buyer’s Agent?

Key Takeaways

• The role of buyer’s agents is to help real estate purchasers navigate what can be a complex real estate market. 

• The buyer’s agent will counsel clients as to what price to offer the seller’s agent, negotiate for them, and craft their contracts.

• While an Accredited Buyer’s Representative (ABR) designation is not necessarily needed to purchase a property, those who have it have been specially trained to be a homebuyer’s advocate.

It is important for real estate investors, particularly novices or first-time buyers, to know about buyer’s agents since such individuals can potentially make or break deals. A buyer’s agent can help those who seek to purchase real estate help find the right property, and, if need be, guide them on their journey. But just what is a buyer’s agent? Here is that and more.

What is a Buyer’s Agent?

The process of finding and buying a home can be complex, stressful, and taxing. Enter buyer’s agents, whose role is to specifically help real estate purchasers navigate the real estate market. 

Such an agent is legally obligated to protect the buyer’s interest and help them gain, in a real estate transaction, the best deal possible. They are there to guide, advise, and steer the buyer through the property-buying process, leveraging their expertise and licenses. The buyer’s agent basically advocates for the buyer’s best interests in the sale.

Overall, an effective agent represents the purchaser’s interests and can help render finding a property, presenting offers, negotiating favorable terms, and ultimately closing the deal a more positive, smooth experience.

Buyer’s Agent: Roles and Responsibilities

Buyer’s agents have a number of key roles and responsibilities when working with home buyers, including: 

• Assisting with property search and scheduling showings. Once they have determined what their client is seeking and how much property they can afford, the agent will line up appointments to see homes that fit those specifications. Because they know the ropes, the agent can explain the ins and outs of different properties and communities so that their client can make the right decisions.
• Evaluating market conditions. For buyer’s agents, remaining atop market conditions is one of their key roles. They can provide knowledge about a market well beyond what a buyer may be able to learn online and may even have specific training in market analysis.

Other agent responsibilities can include:

• Helping the buyer determine what they are looking for in a property.
• Arranging visits to the property.
• Going over the inspection report with the buyer.
• Handling much of the home offer paperwork.
• Assuring that escrow timeline deadlines are met.
• If needed, assisting with the loan application process.

Benefits of Hiring a Buyer’s Agent

There are key benefits to hiring a buyer’s agent to help with the buying process, namely:

• Expertise. A buyer’s agent will possess specific skills and bring a level of expertise that will help smooth out the whole buying process, from beginning to end. They are able to provide additional information on the area’s school district, for example, or local commuting options.
• Access to listings. Buying agents as well as listings agents may access what is called a multiple listing service (MLS), which is a database of listings within an area. The agent also has access to municipal records and historical property sales and can communicate with the listing agent to gain more information.
• Negotiation skills. The buyer’s agent will counsel clients as to what price to offer the seller’s agent, negotiate for them, and craft their contracts. The agent’s negotiating skills can potentially save the buyer money and help them skirt pitfalls such as buying real estate that will likely be more trouble than it is worth.  If negotiations take a heated turn, it is good to have a professional in one’s corner who can remain calm and steady and offer constructive solutions.

How to Find a Buyer’s Agent

There are various ways to find a buyer’s agent, including online and through referrals.  

• Referrals. Those looking for a house to buy can cast about for recommendations among friends and area business owners.
• Online. Property seekers can look online for agents who have successfully closed sales where they are looking to buy.
• Check experience. Ask the agent how long they have had that title. It is preferable to have a buyer’s agent with at least a couple of years of experience and a proven track record closing deals.

Buyer’s Agent vs. Realtor

A real estate agent has a state-issued professional license to purchase, sell, or rent properties. For that license, individuals must undergo pre-licensing training. Once training is completed, the aspiring agent must take a written licensing exam which includes general real estate principles and federal and state-specific real estate laws. If they pass the test, they are licensed. A realtor must be a member of the trade association, the National Association of Realtors (NAR).

A buyer’s agent’s role is a bit different in that the professional works closely with buyers each step of the way, from finding the appropriate property to negotiating an offer, recommending other professionals, and troubleshooting problems such as appraisal issues or home inspection.

The initials ABR after a realtor’s name stands for Accredited Buyer’s Representative, which is a special certification given by NAR. While an ABR designation is not necessarily needed to purchase a property, those who have it have been specially trained to be a homebuyer’s advocate. 

Note that the seller typically absorbs the commission from the listing agent’s fee for both the seller’s and buyer’s agent.

Hiring a Buyer’s Agent: Legal Considerations

There are multiple legal considerations when it comes to hiring a buyer’s agent, including:

Contract agreements between the agent and buyer. Such agreements essentially define how the parties will work together. They are intended to establish expectations and protect the two parties should one of them not uphold their end of the deal.

Typically, the buyer’s agent agreement will include:

• Term length. Usually around 90 days, term length is the time period the contract is effective. The agreement may also include instructions for what occurs when the contract is up, and the right property was not found.
• Termination rights. If for whatever reason one of the parties wishes to end the professional relationship, the termination rights specify how the break up should occur. There will likely be provisional language about grounds for termination, the amount of pay, if any, the agent receives, and how much notice should be given.  
• Buyer exclusivity and representation. With this provision, the buyer commits to work exclusively with the agent they are signed with.
• Compensation. Yes, the property seller typically compensates both the agent’s and seller’s pay. However, that does not mean that pay can be left out of the contract. It is essential for the buyer to understand what they will be financially responsible for if a seller balks at paying, or agreement terms are breached.
• Property description. This is to establish expectations and provides something to refer to if the agent falls short when they show their client properties or in any other respect.
• Agent responsibilities. Somewhere in the agreement will usually be a description of agent duties such as finding and showing prospective properties, crafting, and negotiating offers, and ensuring that everything occurs within their contract’s terms. This section is an opportunity to agree on expectations about the property-buying experience.

The confidentiality pact. Another legal consideration is the confidentiality pact to which the agent must agree. A buyer’s agent must keep their client’s data confidential unless they have explicit permission to the contrary. An agent is generally prohibited from using information confidentially given for their own purposes, or in a manner that would hurt the buyer’s interests.

Is a Buyer’s Agent Necessary When Investing in Real Estate?

A buyer’s agent is good to have when buying a property but is not completely necessary when investing in real estate.

Consider the real estate offerings of leading alternative investment platform Yieldstreet, which include both private and commercial opportunities — neither of which call for an agent. To date, Yieldstreet has closed more than $900 million in commercial real estate transactions. The company’s Growth & Income Real Estate Investment Trust (REIT), which seeks to make debt and equity investments in a range of commercial real estate properties across U.S. markets and property types, does not involve agents, either.

Meanwhile private real estate has historically outperformed the S&P 500 and provided a shield against inflation. Typically, rental income and property values rise during inflationary periods. Yieldstreet’s highly curated offerings come pre-vetted, obviating the need for a buyer’s agent.

As an alternative investment – basically any asset class other than stocks and bonds — real estate also serves another important purpose: portfolio diversification. Diversifying one’s portfolio helps to mitigate risk, which is necessary for successful investing over the long term.  

Alternative investments can be a good way to help accomplish this. Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings. 

Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk. 

In some cases, this risk can be greater than that of traditional investments.

This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million.  These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform.

However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. 

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

Summary

An effective buyer’s agent can help investors and others find the right property for them, negotiate for a fair price, and help them navigate any snags in the buying process.

Remember, too, that there are ways to invest in real estate in which a buyer’s agent is unnecessary – and can potentially provide steady income while diversifying portfolios.