You May Save Big Bucks by Hiring a Buyer-Broker

If it's been a while since you went house hunting or if you're new at the game, you may not have heard of buyer-brokers. A relatively new phenomenon, and still a tiny slice of the real estate business, buyer-brokers work for the owner-to-be. That's a marked switch from traditional real estate agents who show you houses but whose legal duty is to the seller, who pays them a percentage of the sales price. Confide to a traditional real estate broker that you're prepared to bid as much as $150,000 on a house, and the broker will tip off the seller. Tell a buyer-broker, and the seller will never know.

A buyer-broker generally charges an initial retainer of $200 to $500, which will be deducted from the final bill. Then the broker either splits the commission on a home with the selling agent, charges a flat rate ($500 to $5,000) or gets paid by the hour (commonly about $200).

Geochemist Susan Gunn used a buyer-broker in her recent move to the Washington, D.C. area. Instead of receiving the standard 3% commission of $8,550 on Gunn's $285,000 Great Falls, VA. House, buyer-broker Stephen Israel got paid $200 an hour. Gunn's total bill: $5,000. Israel, president of Buyer's Edge in Bethesda, Md., says that by negotiating a lower selling price, he typically saves his clients about 8% of what they'd otherwise pay for their houses. What's more, buyer-brokers are more apt to point out any flaws they see in the homes they show. "Sometimes we'd pull up to a house and Stephen wouldn't even let me get out of the car because he could tell there was a structural problem," says Gunn. "I really got the feeling he was working for me."

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Source: Money Magazine, June, 1996, Claire Poole