Should You Hire a Buyer's Broker in NYC?
If you are buying a home in NYC, should you hire an agent or broker to represent you? The quick answer is yes. While you may not have had a great experience with rental agents, buyer’s brokers are not the same as rental agents. So, if it is tempting to go it alone, you should be very wary. Here’s why.
Beware of Dual Agency
Listings in New York City are (almost always) exclusive to the listing agent, which means sellers’ agents have strict control over the marketing and scheduling of showings for a property. And, given the competitive nature of the market, buyers may believe that dealing directly with the sellers’ agent can streamline the process. Also, it’s no secret that listing agents in NYC prefer to schedule showings for buyers who don’t have an exclusive buyer’s agent. This paves the way for the listing agent to collect the commission on the sell and buy side of the transaction.
Buyers who get in to view a property alone and then seek information from and, perhaps, even make a contract offer through the seller’s agent are called “direct buyers.”
But, buyer beware: When the same agent represents both you and the seller, this is called dual agency, and does not guarantee that the listing agent will equally represent the buyer’s best interests. Dual agency is such a slippery slope, in fact, that New York state law requires that the seller’s agent reveal this to both the seller and the buyer and each party must sign a disclosure agreement, which formalizes that each party understands the consequences of the agreement. This disclosure agreement is required despite New York state requiring attorney representation for both the buyer and seller in order to close a real estate transaction.
It can be tempting for NYC buyers to go this route, especially for listings in co-op buildings where getting approved by the co-op board is part of the process. But, this model presents buyers with an issue. Without an agent whose only role is to represent the buyer in the home-buying process, there’s very little way to eliminate what can be the inevitable doubt that your interests are the first and foremost consideration.
Benefits of a Buyer’s Agent
Given the high-stakes nature of buying NYC real estate, anything a buyer can do to maintain the highest level of trust in the process will help tamp down the anxiety inherent in the buying process. The benefits to having a buyer’s agent work for you:
- Unbiased representation
- Negotiation expertise tailored to buyers’ needs
- Neighborhood or building experience with knowledge of comps, availability, neighborhood data, market values
- Time-saving aspect, since an exclusive buyer’s agent has a vested interest in moving mortgage, insurance and inspection paperwork along
These are sound arguments advanced by Gea Elika, principal broker at Elika Real Estate, a New York City firm that exclusively represents buyers.
“An exclusive buyer’s agent does not have a vested interest in any one particular property and therefore provides unbiased advice to a buyer. That includes bringing meaning to the numbers and informing buyers whether a property is fairly, under or overpriced. I think of the buyers’ agent as the soldier who is on the front line for the buyer, who is the general,’’ said Elika, who is also the current director of the National Association of Exclusive Buyers Agents.
“Would you use the same attorney as your spouse in a divorce and pay for it?’’ Elika said.
“Each property has a commission that is baked into the sales price. Thus the buyer is paying and when [they’re] not being represented is paying for a service he or she is not receiving — if working with the sellers agent whose fiduciary responsibility is to the seller only. Why pay for something you do not receive?’’
Elika said that in today’s market, a buyer can easily be misinformed through marketing materials or inaccurate data, in addition to being emotionally swayed.
“It is important to have a dedicated knowledgeable and experienced buyer’s agent by your side to decipher the information and protect and act on your behalf to achieve the best result possible,’’ he said.
That said, buyers should be careful when choosing a buyer’s agent. Before signing a contract with an exclusive buyer’s agent, prospective home buyers must perform due diligence: Interview several agents; check their references; call the state agency that regulates the real estate industry to make sure no pattern of fraud or complaints have been filed.