Using A Buyer's Agent for Oahu Real Estate: Really, a No-Brainer

Accredited Buyers Representative on OahuOahu real estate transactions involve one of the biggest financial investments of most people’s lifetime. Oahu real estate transactions often exceed $500,000 and can go up to tens of millions. If you had a $500,000 income tax problem, would you attempt to deal with it without the help of a certified professional accountant? If you had a $500,000 legal question, would you deal with it without the help of an attorney? Considering the zero or small upside cost and the large downside risk, it is always wise to work with a professional REALTOR^** when you are buying a home. And even among REALTORS, when buying, it is always best to use an Accredited Buyers Representative (denoted by the ABR designation), an elite group of REALTORS who are specially trained and committed to representing a Buyer’s best interests.

It is a common MYTH that buyers who do not use a Oahu Buyer’s Agent will save the amount of Buyer’s Agent commission on the price of the house. This is simply untrue. In addition, any Oahu Listing Agent that indicates somehow that you will save money on purchasing a Hawaii home by not using an agent at all or using them as a Dual Agent may be lying or acting unethically. Why is this?

HOW IT WORKS

When an Oahu Listing Agent takes a listing, the Seller makes a WRITTEN, BINDING LISTING CONTRACT with the Listing Brokerage to pay a certain amount of commission, usually around 5-7% of the total purchase price. The Listing Brokerage then puts the home in the MLS and offers a Cooperating Broker (the Buyer’s Broker) a commission. Often, but not always, this is half of the total commission, and it is usually between 2.5 to 3.5% of the total purchase price. The Cooperating Broker commission is is paid by the Listing Broker, at their discretion and according to their terms, and typically, NOT AT THE DISCRETION OF THE SELLER or even the Listing Agent. 

Buying With a Buyers’ Agent. If a Buyer comes in to purchase a home with a Buyer’s Agent and the sale closes, the Buyer’s Broker will receive the Cooperating Broker’s commission of 2.5-3.5%. Then, the Buyer’s Broker will take their split and pay the Buyer’s Agent the balance. During the transaction, the Buyer will recieve full and exclusive fiduciary representation from the Buyer’s Brokerage/Agent, which includes the duties of undivided loyalty, full disclosure, and confidentiality, and all of the BUYER AGENT SERVICES listed further below.

Buying Without a Buyers’ Agent. If a Buyer comes in to purchase a home without a Buyer’s Agent, the Listing Agents are often very eager to get the Buyer to either: (1) remain unrepresented, as a Customer, or (2) to use the Listing Agent also as a Buyer’s Agent (this is called Dual Agency).

Why is This?  In both of these situations, with Buyer as a Customer or Buyer Dual Agency, the Buyer’s Brokerage will receive the entire commission on the sale (typically, 5-7% - though in some cases, Sellers will negotiate a slightly lesser amount for dual agency - this does not typically occur with any large national franchise Brokerage). In essence, BOTH sides of the transaction are payable to the Listing Brokerage/Agent. No wonder some Listing Agents are on you like glue, trying to discourage you from using another agent or not use one at all. They usually get paid double in this situation!

What does the Buyer get when the Listing Agent writes the contract?

As a Customer. If their offer is written so that they are a CUSTOMER, Buyers get absolutely nothing in representation (no fiduciary obligation, no undivided loyalty and no confidentiality). Anything the Buyer says to the Listing Agent can and must be disclosed to the Seller. The Listing Agent is not obligated to the Buyer. There is also no price savings for not using an agent. REMEMBER the only one here saving the Buyer’s Agent commission is the LISTING BROKER. The Seller is obligated to pay the full amount of commission pursuant to the Listing Agreement, whether or not the Buyer is represented and whether of not the Buyer is a Customer.

With Dual Agency. If the offer is written so that there is DUAL AGENCY, the Buyer get the services of a real estate agent that is also representing the Seller and the Seller’s interests. NOTE: THIS IS TOTALLY ETHICAL, so long as there is full disclosure to the Buyer, and a full understanding by the Buyer of the fiduciary duties that are lost, BECAUSE, by definition, the Dual Agent has NO obligation of UNDIVIDED LOYALTY, and again, by definition, there cannot be FULL DISCLOSURE (because of the problem of confidentiality).  You can and should expect full CONFIDENTIALITY.

So the Buyer does not receive the same level of fiducuary service with dual representation. And again, there is no cost savings, the Listing Brokerage still gets both sides full commission pursuant to the Listing Agreement with the Seller.  

Dual Agency can be fine for Buyers, and even preferrable in certain situations (e.g., your Buyers’ Agent gets a new listing that is perfect for you, or you find a tricky property with sale that requires a lot of coordination between agents), so long as there is full disclosure and understanding —— but it will NOT typically save you any money.

WHAT A BUYERS’ AGENT DOES FOR YOU

So, does not having your OWN Buyers’ Agent make sense to you, as a Buyer?  These are some of the things that Buyers’ Agents do for their Clients:

• Your Oahu Buyers’ Agent will represent you as a fiduciary, including the duties of Undivided Loyalty, Confidentiality and Full Disclosure - all at no cost to you as Buyer. All of the Buyer’s agent fees are paid by the Listing Brokerage in a transaction. There is NO cost savings to not using a Buyers Realtor. It may be in fact more COSTLY to go unrepresented.
• Your Oahu Buyers’ Agent can help you determine your buying power and can help identify sources for loans - that is, your financial reserves plus your borrowing capacity. If you give a REALTOR some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders - banks and mortgage companies - offer limited choices. This is especially important in the current, shrinking mortgage market.
• Your Oahu Buyers’ Agent has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties. Sometimes, your REALTOR will have access to property information from his office or other networks that are not yet listed on MLS. With a REALTOR, you may have an opportunity to get the first shot at certain properties.
• Your Oahu Buyers’ Agent can assist you in the selection process by providing objective information about each property.  Agents who are REALTORS have access to a variety of informational resources. They will provide you comps (information about recent sales) and give you a reasonable estimated value of the property beased on the sales, and a recommended price, based on sales and market conditions.  REALTORS can provide local community information on utilities, zoning, schools, etc. There are two basic things you’ll want to know: First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
• Your Oahu Buyers Agent can help you with negotiations and inspections. There are many negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or appliances. The Purchase Contract should allow time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required. Your realtor can also help with contract amendments, if necessary as you go through the escrow period.
• Your Oahu Buyers Agent helps you complete your due diligence during the property evaluation. On Oahu, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and other tests, just to name a few. Your REALTOR can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports.
  You will also want to see a Preliminary Title Report on the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access, and liens on the property. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR, title search company or attorney can help you resolve issues that might cause problems at a later date. Conducting a survey to check for encroachments may also be warranted. A realtor will help you will this, as well.
• Your Oahu Buyers Agent guide you through the escrow and closing process and make sure everything flows together smoothly. This might include reviewing your HUD Closing Statement, making sense of your GFE (Good Faith Estimate) from your lender, and other details of getting to the point of signing on the dotted line. A great realtor can help with all of this.

In summary, Accredited Buyers’ Agents and REALTORS, such as those at Home Shoppe Hawaii, are essential to help get the best results from your home buying process. Going without a Buyers agent does not save a Buyer money and can in fact, be costly. As Accredited Buyers Agents and REALTORS, we can help you understand everything you need to know about the home buying process and at no charge to you. And considering the investment, it may be one of the best decisions you will ever make.

Please Contact Home Shoppe Hawaii if you are looking to Buy a Home on Oahu or Investment on Oahu.

** Not all real estate licensees are the same; only those who are members of the NATIONAL ASSOCIATION OF REALTORS are properly called REALTORS. We can proudly display the REALTOR trademark on our business cards and other marketing and sales literature. As REALTORS we are committed to treat all parties to a transaction honestly. REALTORS subscribe to a strict Code of Ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reported that 84% of home buyers would use the same REALTOR again.