All You Need to Know About Working With a Buyer’s Agent in Greater Chicago
While the process of buying a home is complex, time consuming and stressful for all the parties involved, it can be daunting particularly for buyers because for them the process begins right from day they start deciding their budget, shopping for a mortgage and looking at. It can take several weeks, even months just to zero in on the home you want to buy. And imagine the level of stress when you come to know that your perfect home has already received multiple offers and you are right in the middle of a bidding war.
Many buyers rely on real estate agents to make their home purchase hassle free, but often make the mistake of hiring one without knowing what to expect. You will hear of listing agents, seller’s agents and buyer’s agents. Since you are a buyer, it makes sense to work with a buyer’s agent.
What Do The Illinois Laws Say About Representation for Buyers?
A listing agent lists a home for sale after determining its asking price. The listing agent also feed the details of the property such as its floor plan, asking price and location into the area’s Multiple Listing Service (MLS) – MRED. Quite obviously, her or his primary duty is to sell the home fast and for top dollar. The seller signs a “listing agreement” with this agent giving her or him the right to market and sell the property.
As per Illinois laws, a listing agent who is marketing and handling the sale of a home cannot equally and fully represent the person buying the same house for the obvious reason that it will cause a conflict of interest.
Some buyers still choose not to hire their own agent. They work with the listing agents to handle all the legal and financial obligations on their behalf. The listing agent ends up working as a “dual agent”, representing both – the seller and the buyer. But in these cases, she or he will not fully and equally represent both the parties since it’s unlawful in Illinois. In this case, the buyer and seller must each act on their own behalf in negotiating the terms of a purchase agreement.
But if you hire your own agent, her or his sole duty will be to protect your interests. In Illinois, agencies are legally required to give buyers a written acknowledgement of a buyer’s agency, specifying all the duties that a buyer’s agent will perform on your behalf.
Types of Agreements You Can Sign With a Buyer’s Agent
A buyer’s agent will drive your around the neighborhood and show you as many homes as you want. She or he will negotiate on your behalf with the seller and his agent and can potentially save you thousands of dollars on the negotiation table. The buyer’s agent will manage the transaction through to the closing.
Once you decide who you want to work with, you can enter into different types of agreements with the agent:
Exclusive Buyer Agency Agreement: As per the standard practice in Illinois, the buyer signs a contract called an Exclusive Buyer Agency Agreement with the buyer’s agent. The agreement specifies the compensation for the agent and the length of the agreement period.
Non-exclusive Buyer Agency Agreement: You and your agent can also agree to sign a Non-exclusive Buyer Agency Agreement. Under this agreement, the agent will show you properties and come up with comparable sales in a neighborhood to help you determine the offer price. But you will sign an Exclusive Buyer Agency Agreement when you decide to buy any of the homes that you found with this agent’s help.
You and your agent can also negotiate the terms of representation agreement and customize them to suit your needs.
- Length of the agreement period: Most agents ask for a 90-day agreement during which you can not work with another agent, but you can shorten this agreement period.
- You can request the agent to work with you for a while without entering into an agreement. It can help you ensure that you are comfortable working with her or him.
- You can also put a price range and names of the neighborhoods in the agreement. It will allow you to work with a different agent for homes in different price range and other neighborhoods.
Some buyers are wary of signing an agreement with an agent. These customized terms will enable you to back out in specified circumstances.
The common commission of a real estate agent in a transaction is 5% – 6% of the property’s value. If not otherwise negotiated, the seller will typically pay the commission for the buyers’ agent as well as the listing agent. Both the agents will split the commission evenly.
What to Expect From a Buyer’s Agent
While we have discussed in brief what a buyer’s agent will do for you, here is a detailed description of all the duties you can expect her or him to perform:
- Prep you for home buying: A buyer’s agent can help you determine your budget. She or he can get you in touch with a mortgage broker or banks to get you pre-approved for a home loan. The agent will go through MLS data to find listings that fit in your budget and also schedule appointments with listing agents to visit homes.
- Offer price: Your agent will determine the offer price for the property after doing a study of comps or comparable homes (similar in size, condition and location that were sold in the past six months or so). She or he can potentially save you thousands of dollars by coming up with the right offer price. She or he will write an offer to the seller.
- Negotiation: She or he will determine the competition on the property and prepare a negotiation strategy accordingly. Once your offer is accepted, she or he will help you prepare a purchase contract and write up necessary contingencies such as home inspection and financing. These contingencies will protect you in case something goes wrong. She or he will also guide you about the earnest money deposit that you will make at the time of singing the contract.
- Closing: Problem may rear their ugly head at every step even after you have signed a purchase contract. A home inspection may come up with unexpected defects with the property. A low appraisal can affect your mortgage application. Your agent will guide you how to proceed in these situations.
Hiring a buyer’s agent is one of the smartest decisions you will make on your way to homeownership. As already mentioned, the process of buying a home is very complicated. A small misstep can cost you thousands of dollars and even land you in legal troubles.
Also, do you due diligence before hiring an agent. The agent should be an expert in representing buyers in the area you are planning to purchase a home and have at least a couple of years of experience.