Have you ever used the services of a real estate agent? Several years ago my wife and I attempted to sell our home ourselves. What made it tough was that I was working at another job several states away and my wife was still in the throes of mother-hood — three kids, soccer practice, ballet, school, homework. Selling our home ourselves was a project designed to fail and fail we did. Eventually, we contacted the top real estate agent in the area and sold our home just 4 weeks later, though admittedly at a lower price than we hoped.
Even though you’re not required to use a real estate agent when buying a home, a good agent will make the process much easier for you (and a great one will make you more money). Just always remember, a real estate agent’s services usually are free for the home buyer — it’s actually the seller who pays all broker fees after all is said and done. The exception to that rule is for anyone using a “buyer’s agent.”
What Real Estate Agents Do
A real estate agent’s job is to make your life easier. You should expect your agent to:
- Develop a profile of your property needs, covering specifics such as number of bathrooms, square footage, location, and so on.
- Provide a list of available properties, with photos and descriptive details.
- Contact the listing agent (the seller’s real estate agent) to set up showings for properties you like.
- Escort you through each property, explaining its pluses and minuses.
- Provide you with a list of comparables (“comps”) showing the prices of similar, recently sold properties in the area.
- Advise you during negotiations with the seller.
- Draw up, gather together, and explain the contracts and paperwork that pile up once you make an offer that the seller accepts.
- Guide you through the pre-closing process, including setting up inspections and walkthroughs.
- Arrange and attend the closing and help resolve any last-minute questions or issues that might arise.
Agent / Buyer Conflicts of Interest
There are built-in conflicts of interest between real estate agent and buyer that you should be aware of as you step into the world of real estate.
- Legal conflicts: In some states, the buyer’s real estate agent actually is legally bound to try to get the best possible deal for the seller. Before getting a real estate agent in any state, research your state’s laws to find out whose side the buyer’s agent is really on.
- Financial conflicts: Even in states where the real estate agent is legally bound to represent your best interests, a conflict of interest still exists because real estate agents get paid by commission. When a home sells, the seller pays both the seller’s agent and the buyer’s agent a percentage (usually about 4–6% combined) of the purchase price. Though this arrangement allows the real estate agent to provide services to you free of charge, it also creates a situation in which it’s in the agent’s financial interest to get you to spend as much as possible.
To address these types of conflict of interest, you can agree to pay your agent a flat fee yourself, as long as the laws in your state allow this. If you’re not willing to make that sort of extra payment — most people aren’t — you can reduce the influence of conflicts of interest by never wavering from your initial price range and by finding an agent with a reputation for integrity, including references to back it up.
How to Find and Hire a Real Estate Agent
The best way to find an agent is through a reference from a friend or associate you trust. Rather than focus on one agent at first, come up with a list of a few who sound promising. Once you’ve got that list, approach each agent and request an interview, making it clear to the agent that he or she is not the only one you’ll be interviewing.
The Agent Interview
Each agent interview should last at least a half hour. You can interview over the phone or in person, though in-person interviews are generally more informative. During the interview, make sure the agent is state-licensed, works full-time in real estate, has at least five years’ experience, and is a member of a realtors’ trade association—preferably the National Association of Realtors (NAR). Always ask for references from previous clients and follow up on them. Finally, ask the agent to bring to the interview a list of all the deals he or she has handled in the last year, including the following information:
- The general area the agent works. Look for multiple sales in the area you want to buy.
- The types of properties the agent generally lists and sells. Make sure the agent is experienced buying and selling the property type you’re interested in.
- The price range of the properties the agent generally deals with. You don’t want an agent accustomed to selling or listing homes outside of your price range. There could be a bias one way or the other. Agents who deal with high-end homes generally don’t understand less expensive housing needs and vice-versa.
- The times of year the agent is most successful. If your agent is most successful in the summertime and it’s October, you might want to look for a different agent.
Your agent will likely ask you to sign an exclusivity agreement stating that you will work only with him or her. Though this is standard practice, you may want to negotiate the length of the exclusivity. Many agents will ask for six months, but you’re better off insisting on no more than three, just in case the agent fails to meet your expectations and you wish to switch.
Should You Use a Real Estate Agent?
That ultimately is a personal decision but there are several factors you might consider:
- Time — do you have the time to devote to being your own agent? Showing the home, staging the home, setting up the viewing appointments, handling the paperwork, and handling the negotiations without allowing emotions to take over, etc.
- Energy — selling your home can be an exhausting process to squeeze into the rest of your life.
- Pressures — in my personal case, I needed to sell my home … and quickly. Using a very good agent just made good sense since I needed to get my family moved and my new home purchased.
Ultimately, it’s a personal decision, but hopefully one you’re now better prepared to make! Just always realize that real estate agents don’t understand finance and you’ll probably be okay.