Ask anyone who's ever sold a home, and they'll tell you how seriously they took the process of selecting a real estate agent to represent them. It's likely they also took a proactive role in ensuring that the agent worked hard to market their home. When it comes to home buyers however, the number of people who end up with a real estate agent by accident is amazing. The person who helps you find and buy your house is integral to the success of the process, which is why buyers ought to put the same effort into finding an agent as home sellers would.
Who's who in real estate agents
To find the right real estate agent, it helps to understand the difference between a broker, a Realtor, a buyer, and a listing agent. Brokers occupy the top of the real estate totem pole. Some are easy to identify especially in the case of small firms, because it's usually their name on the "For Sale" sign outside the house. The broker is the person licensed by the state to buy and sell houses. An agent can't do business without a broker, which is why agents part with a percentage of their commissions. Brokers may also be agents themselves, active in both sales and administration, but generally they provide the management blanket under which agents operate.
A Realtor is a broker or agent who is a member of the Board of Realtors, an organization that follows a code of ethics beyond state license laws. It is realtors who sponsor the Multiple Listing Service to which every real estate agent in the country is beholden for listing or searching prospects.
Once upon a time, all real estate agents worked for the seller. Now they tend to specialize into listing agents, buyer's agents, and dual agents. A listing agent puts a home for sale on the Multiple Listing Service, and works primarily with the home seller. A true buyer's agent does not list homes for sale very often and works primarily for buyers. While many agents focus on either listing or buying, there are also agents who split their time between buyers and sellers. These are dual agents. If you are in the market for a house, any type of agent can do the job. The question is which one is most likely to look out for your interests. If you approach the listing agent who represents the property you most desire, for example, working solely through him or her could give rise to a conflict of interest.
Shopping for a real estate agent should be no different from searching for any other professional, like a lawyer or an accountant. If you know someone in the business - such as an escrow officer, title representative, or homeowners' insurance salesperson - ask for a recommendation. You could even cold-call real estate offices and ask the manager to steer you toward someone from another office. It may take some sales dodging, because the person you ask will effectively be passing up a commission, but when you finally get a name it'll likely be a respected competitor.
Kyle Bradshaw, who has owned his own independent realty serving Beverly Hills since 1969, believes "It all comes down to the neighborhood. If you know where you want to live, then you need a specialist in that area. Drive around, see who's handling the properties you like the best, and start there."
Be sure to shop for an agent
When interviewing prospective agents, ask questions about the local market and expect informed answers on the spot. If they have to call you back after they check the listings, it could be they're not doing due diligence.
According to Bradshaw, "You need someone who knows the neighborhood very well, is out there previewing houses, staying on top of what goes on in the community. A smart agent will likely grill you about your financial situation to gauge whether you're thinking in the proper price range. Agents have a responsibility to their clients, their colleagues, and themselves. They must know for sure that a buyer actually can buy the house they're viewing when it comes time to make an offer. You can't waste a seller's time like that - it could send them into financial difficulty, even foreclosure."
Above all, you want an agent who will give it to you straight instead of sweet-talking his or her way to a quick commission. Referrals might be a good way to go if a friend or family member recently bought a house in the same community and had a good experience, but certainly not just if they know somebody who knows somebody.
Almost always, it is the seller of the house who pays the real estate commissions. The buyer should receive, and is highly entitled to, top-notch service because she or he is the most important element in the equation. No buyer equals no sale, no commission. In most markets, 6 percent of the selling price is split between the listing agent and the buyer's agent, who then split a share with their brokers. Even if the agent you are working with has signed a buyer brokerage agreement with you, the seller still pays the commission unless a separate (and fairly unusual) transaction has been negotiated with you, the buyer.
In an ideal world, if you have a buyer's agency agreement with a real estate agent, you should trust that anything you disclose is confidential and, above all, will be withheld from the listing agent. Ideally too, this agent will make an exhaustive search of all properties that match your wish list and will do a thorough checking of each property to discard any that fall short, before wasting your time. Then, the agent will have the keys or make arrangements to be able to gain access to the very best properties at times that suit your schedule. Finally, the agent should guide you through the whole paperwork process, from offer to the close of escrow. That is in an ideal world.
As with salary negotiations, guard your numbers
From how-to books to online real estate guides, experts strongly caution a buyer to beware about disclosing too much vital information to an agent, even if you have a buyer's agency agreement. Should the listing Realtor know how much you are willing to pay for the home, or even the loan amount for which you have been qualified, that information could work to your disadvantage in the negotiations.
"Even though agents are keen to close the deal, most work with great integrity," said Bradshaw. "They won't give up critical information that could harm their client, whether they represent the buyer or the seller."
Agents have great incentive to get the best price for their clients because they want repeat business from referrals. Some of the best agents don't even need to market themselves because they have such a good pipeline of satisfied customers. That is precisely why a prospective buyer should do the homework to find the right referral.