How Do Billionaires Buy Real Estate?
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Buyer agency can help you buy real estate just like the billionaires buy real estate
When a billionaire purchases a property, you don't think he goes it all alone, do you? He's got a team of experts and lawyers poring over agreements and advising him on every aspect of those big deals, while he's busy doing whatever it is he regularly does.
So why not have your own experts? OK, perhaps you can't afford the bevy of lawyers, but it can pay huge dividends if you have an exclusive buyer's agent on your side.
It doesn't cost you anything additional to have a buyer agent, and it can save you thousands of dollars.
The principal difference between a buyer's agent and all other agents is that a buyer's agent must help the home buyer get the lowest price and the best possible terms. All other agents have a legal obligation to get the highest price and best terms for the seller of the property, but not for the buyer.
That's the simple concept of buyer agency — having your own agent in your corner to protect you throughout the process and to help you save time and money, instead of using an agent who is working for the seller.
What you gain by having a buyer agent.
An agent is a fiduciary, like a trustee or guardian with an allegiance to the person he is representing. When the agent is a seller's agent (like most agents), that allegiance is to the seller.
When an agent is truly working for the buyer, his loyalty, confidentiality and disclosure obligations are owed only to the buyer, and that can make a huge difference in what you end up paying for your home.
If you had access to a team of experts — something a billionaire has every day — wouldn't you use it? Unfortunately, most people don't use the experts that are available to them.
All buyer agents are not created equal. There are two substantially different types of buyer agents, and your not knowing the difference can be costly. Some buyer agents work for real estate companies that also take property listings and who have obligations to try to sell those homes for the highest price. There are many problems that can arise from making a poor choice when seeking a buyer's agent, but the most damaging is associated with the conflicts of interest that can arise when a real estate company represents both buyers and sellers.
In fact, these and other conflicts can strip you of the three most important reasons for having a buyer's agent in the first place: advice, advocacy and full loyalty to you as the buyer.
You can easily avoid these conflicts by using an Exclusive Buyer's Agent (EBA). They do not ever represent sellers' interests, so you can rest assured that you won't ever see your representation compromised as a result of the conflict between your desire to get the lowest price for a home and the seller's desire to get the highest price. Best of all, it costs you nothing more to use an EBA than it does to use any other type of agent.
What a buyer agent can do for you:
- Negotiate the lowest price and best terms in favor of the buyer. It is unwise to trust these negotiations to someone working for the seller.
- Provide confidentiality: A traditional agent is supposed to, and most certainly will, pass on the buyer's confidential financial information and motivation to the seller, undermining the buyer's negotiating position.
- Provide access to more property: In addition to all the properties listed by all real estate companies, a buyer agent can help you to buy unlisted properties such as "for sale by owners" and foreclosures.
- Always put the buyer's interest first, especially when it means pointing out reasons not to buy.
- Recommend a competent home inspector; a seller's agent is prohibited by law from doing so.
- Negotiate home inspection repairs in favor of the buyer.
If you had access to a team of experts, something a billionaire has every day, wouldn't you use it? Unfortunately, most people don't use the experts that are available to them. That's why Ralph Nader quotes the Consumer Federation of America's study saying that home buyers overspend by $10 billion each year because of poor representation.
The best thing a buyer can do is to be fully aware of what type of agent he is working with before he buys a home, and always negotiate from a position of strength.
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If you have questions about agency representation, or anything else, feel free to ask them here.
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