Other than personalities and experience, aren’t all agents the same?
Absolutely not! The bane of our existence is how poorly this is understood by the general public.
Agents are “fiduciary representatives,” which is a fancy way of saying they are REQUIRED to serve the best interest of their clients. (BTW, if you know about an agent who is doing things that serve their own interests better than their clients’, you should report them to your state real estate commission, so we can get the bad eggs out of the business.)
Here’s the important part to know: WHO DOES THE AGENT YOU’RE TALKING TO REPRESENT? If you called the listing agent, their job is to represent the seller, not you. If you called an agent who works for the company that has the listing, same thing. As an associate of that company, s/he also works for the seller, not you.
There are, however, agents who work with companies that never accept listings. These agents are dedicated to buyers and protecting them at every stage of the home buying process. They’re called Exclusive Buyers Agents and they are the only type of agents that can guarantee you that they will never have to stop advocating on your behalf.
Be aware that, because most agents want the opportunity to “work both sides” of real estate (good for them, not so much for you), you will not be able to find an Exclusive Buyers Agent in every market. However, it is possible to find agents who 1. Work mostly with buyers AND 2. Are affiliated with companies that do not have the lion’s share of listings in that area (which greatly reduces your chances of getting caught in a situation where you and the seller are both represented by the same company.)
How do real estate agents get paid?
Real estate agents are paid one of two ways.
- Directly by their client. Sellers usually pay their agents directly. Sometimes buyers, also, pay their agents directly, however, buyers agents are most often paid indirectly by the listing company or an unrepresented seller.
- Indirectly by the listing company. Nearly all listing companies agree to pay the buyer’s agent fee when an agent brings a buyer to a transaction that closes successfully. NOTE: This doesn’t mean that your agent is working for the listing company. Your written agency agreement guarantees your buyer’s agent is obligated to work in your best interest.
Why are real estate agents paid so much?
- They are only paid “so much” when their client has a successful closing. The rest of the time, they are working for free. It’s not unusual for an agent to spend weeks with a client who later decides not to buy. Similarly, agents devote large amounts of time to putting together offers and caring for all the details and, many times, the financing is denied or there are irresolvable issues with needed repairs and the deal falls apart. It is a rare agent who doesn’t spend the majority of his/her time working for free. That’s one reason why, when they do get paid, they are paid well.
- There’s a lot on the line. Your home purchase is likely the most expensive one of your lifetime (until the next one!) If it goes poorly, it will be expensive. There is considerable value in having a seasoned professional looking out for you. (If you doubt your agent will provide you with all the information you need to make solid, well-informed decisions about your purchase, you need to find another agent before it’s too late.)
- There’s a lot of liability. In our sue-happy society, agents can and are sued for all sorts of things. Some for which they are responsible. Some for which they’re not. The rewards need to make it worth the risk.
- It’s not as much as you think it is. Most people do only the first set of calculations: the purchase price times the commission rate. That’s not what your agent gets. The total commission is first split (usually in half) between the listing company and the buyer’s agent’s company. Then the companies split that with the agents. Because the agents are independent contractors, he then has to pay all the income, social security and Medicare taxes, as well as his health insurance from his portion of the proceeds.
Won’t I save money if I call the listing agent directly?
- No. In fact, it’s likely to cost you more. That’s because the amount of commission the sellers will pay the listing company is set when the listing agreement is signed. That agreement says the listing company will share its commission with the agent who brings a buyer to the deal. If you work directly with the listing agent, then he is the agent who bought a buyer to the deal. He keeps the portion that could have gone to a buyer’s agent who could have helped you get a better deal. So, no savings for you and, now, you’re working with the agent who is legally obligated to get the best terms for his client, the seller.
What exactly will an agent do for me?
A good agent will…
- Listen closely to your home buying goals, including how much you feel comfortable spending and the details of the home that fits your needs.
- Connect you with at least a couple lenders who can offer you a financing program that works best for your situation. (This is often the place where a savvy agent can save you thousands of dollars.)
- Provide general market information so you are knowledgeable about how fast/slow homes are typically selling and whether they are selling at a discount or a premium in your area.
- Assist in the search for homes by monitoring the market and arranging for you to get an automated noticed whenever an appropriate home becomes available.
- Arranging prompt access to view the homes that most interest you.
- Point out both the positive and negative features of homes.
- Help you compare and evaluate your choices.
- Provide specific information about recent sales of homes similar to the one you wish to purchase.
- Develop a negotiating strategy to maximize the odds of a positive result.
- Help you determine and prioritize the various terms of your offer. (It’s about much more than just the purchase price.)
- Prepare the offer to purchase and any needed addenda.
- Submit and negotiate the offer.
- Recommend a closing agent (attorney or escrow company.)
- If the offer is accepted, provide signed copies of the contract to you, your lender and your closing agent.
- Recommend inspectors and arrange for inspections. May include:
- General home inspection
- Wood destroying insect (i.e. termite) inspection
- HVAC inspection
- Well inspection
- Septic inspection
- Pool inspection
- Elevator inspection
- Roof inspection
- Radon inspection
- Mold inspection
- Help secure information about the neighborhood HOA (home owners association.)
- Set up surveys, if required or desired.
- Schedule closing with an attorney or escrow company.
- Research current title insurance policy holder.
- Attend inspections.
- Offer advice on which steps to take after inspections.
- Prepare and negotiate a formal request for specific repairs or credits.
- Obtain receipts and invoices verifying repair work was completed.
- Schedule home inspector(s) to do a re-inspection.
- Confirm lender orders appraisal in timely manner.
- Monitor progress of financing to help head off potential problems.
- Give you contact info of reputable insurance agents familiar with local risks.
- Provide utility information so you can make arrangements to transfer service.
- Schedule and attend your final walk-through.
- Review closing statement to insure accuracy.
- Attend closing with you.
- Deliver keys after deed records.
- Assist with resolving post-closing issues, if any.
What if I make an offer using the listing agent and then want my own agent?
You will be out of luck unless the listing agent is willing to share their compensation with your new agent or you are willing to pay your new agent out of your pocket or the new agent is willing to work for free.
What do all the letters behind their names mean?
Each is an acronym for a certification or designation that agent has earned through continuing education. The more letters, the more education your agent has. For more info, refer to this list of certifications and designations.
Aren’t real estate agents and REALTORS the same thing?
All REALTORS are licensed real estate agents, however, not all licensed real estate agents are REALTORS. RELATORS belong to the National Association of Realtors (NAR). The primary difference for consumers is members of NAR must abide by the REALTORS Code of Ethics. Those who do not, are subject to disciplinary actions.
If you have a question about real estate agents that hasn’t been answered here, send an email to questions@BuyersWire.com. We’ll get right back to you and then, if it’s a general question, we’ll add it to this list.