I’m buying a new construction condo. Should I get a buyer’s agent, or will skipping an agent save me money?
I replied to this question on wired new york today, and I’ve gotten good feedback on my answer, so here’s the reprint:
Buyers’ agents will tell you that having an agent gives you someone to shepherd the process — your lawyer is your advocate, but at $1,500 or so per transaction, they’re not going to be able to spend that much time chasing around the pieces of your deal and still make money. I do think that’s the service an agent performs — getting you through the closing — and that it’s valuable. The more complicated question is what that service costs you.
Argument #1 is that buyer’s representation is free. I had a senior Stribling agent tell me the other day that he hooked a lot of buyers by explaining that the developer expected to pay out a brokerage commission anyway, so that as long as it was built into the deal his services to his buyers were free. Now, “look at what you get for free” is one of the great sales propositions of all time, so it’s no wonder that this guy was wearing a Brioni suit.
Argument #2 is that buyer’s representation costs money. Obviously, if skipping an agent gives you a sliver of negotiability on the deal, then your agent “costs” you whatever percentage of negotiability you would get back. If you are buying into a building that is offering 2.5% to buyers’ agents, and you could recapture that premium if you didn’t have an agent, then the decision to use a buyer’s agent costs you 2.5%, and you might, or might not, decide those services are worth it.
Now here’s the tough part: No one alive knows whether argument #1 or #2 is right. There’s no control group — no one has done the same real estate deal both with and without an agent, and reported back on whether they had different experiences and different pricing.
My best attempt at trying to size up whether you need a buyer’s agent is that if you’re looking at a hot building, where you know other people haven’t gotten pricing concessions, and you’re a less experienced buyer, and you’re a terribly busy person, you probably want an agent. If you’re looking at a building which is a little less in demand, where you know other buyers have gotten pricing concessions, you’re a more experienced buyer, and you have a little more time to dedicate to the deal, you probably don’t want an agent.
I know that’s kind of like saying that light is both a wave and a particle but unfortunately, that’s true.