I like to compare buying or selling a home to filing taxes. You don’t do it very often and chances are, when you do, you rely completely on someone else to help guide you through the process and you pray that they know what they’re doing. Unless you understand the IRS tax codes inside and out, there’s really no way for you to know if your ‘tax professional’ is getting you the best (or correct) outcome. And as great as praying for the best outcome for your taxes can be, one of the greatest financial transactions of your life shouldn’t be left to hoping the big man upstairs has your back.
Instead, you need a Realtor who has your back. Someone who knows their stuff, behaves ethically and can provide you the most opportunities possible. Just like tax time, unless you really understand what’s going on, how do you know if your Realtor is providing you the most options or the best outcome?
This article is designed to address just that, and help make you a savvy home buyer or seller. So here’s some shit that most agents won’t tell you, and that you need to know:
You don’t need an agent to sell your home or buy one.
Agents love whipping out statistics that prove sellers do better when they list with an agent, but those statistics are drastically misleading and they’re manipulated to convince sellers to use an agent (surprising – huh?). There is certainly value in hiring an agent, though – especially if you hire a good one. But if you’ve got a solid grasp on the market, the process involved with a transaction and can remain objective during a transaction then there’s really no reason why you can’t sell your own home or represent yourself when buying one. In fact, you can save a lot of money this way.
You’re not obligated to work with anyone until there’s a contract in place.
Worried about calling a Realtor to show you a home because you’re not ready to work with one yet? Don’t worry. There’s no obligation to work with a Realtor until you’ve signed a contract with them. For sellers, this means signing a listing contract (of which there are multiple types). For buyers, this means signing a buyer-broker agreement. Rarely will an agent list your home without a listing contract in place. But buyer’s agents often work without a buyer-broker agreement in place. If the agent who’s been showing you houses for a month turns out to be a crazy person and you’re no longer comfortable with them you can simply cease that relationship and find another agent.
Everything is negotiable – including commissions.
Commissions, like everything else in real estate, are negotiable. There’s no ‘standard’ commission – agents (or their brokers) are free to establish whatever number floats their boat. The vast majority use 5%. There are discount brokers who charge less, and there are brokers who charge more. Like anything in life, just be sure you understand what your commission rate gets you. Is the agent who takes pictures of your home using their iPhone charging you the same as the agent who hires a professional photographer and then invests heavily in an optimized online marketing campaign. And if so…then why?!
Lots of agents don’t do very much.
When it comes to selling, lots (in fact, most) agents rely solely on the Multiple Listing System (MLS) to sell your home. They take pictures (hopefully they hire a professional), write a description (hopefully it’s a good one) and upload it to the MLS, which then automatically syndicates your listing across thousands of real estate search engines. Sometimes they put together fliers and they’ll hold an open house or two.
When it comes to buying, most agents again depend on the MLS and for their buyers to ‘bring’ properties to their attention, which they then show. In both cases, their objective is to close the deal as quickly as possible. After all, that’s how agents get paid. Ask your agent what they’ll do for you. If they start rattling off things like, ‘Oh, I’m going to place your listing on thousands of websites,’ it really means they’re going to put it on the MLS. When they say they’re going to have fliers prepared, ask them if that means professionally designed and prepared or if they’re going to use WordArt. Ask the tough questions until you’re satisfied that your agent actually does work.
There are more houses for sale than what your agent is showing you.
Remember the MLS – the tool that Realtors love using? It’s a great platform. It’s more accurate than any real estate search engine and it offers a lot more information. But it typically only ever has about 85% of active listings. That means there’s another 15% out there that you’re not getting exposed to if your agent hasn’t educated you on using more than just the MLS (and actually – it should be your agent doing this work – not you). Strong agents know how to bring you more opportunities. Weak agents follow the cookie-cutter processes that get them paid quicker.
Home Inspections Are Worthless (Kinda)
Home inspections are an important part of your due diligence when buying a home. Most agents always recommend you get one. The problem is that most agents always recommend you get one and then fail to mention the myriad of other inspections you should consider getting. General home inspectors are not specialized. They’re skilled enough to be able to walk through a house, visually identify potential issues and then tell you in their report that you should have those potential issues inspected by a licensed professional. For the most part, general home inspection reports are 30 pages of pictures and notes authored by Mr. Obvious of things that you can see with your own eyes.
What about your sewer lines? Does the HVAC system have the old refrigerant or new stuff? How about a chimney inspection? Did your agent check against any insurance claims or review any building permits? Inspections are a huge part of buying a home. They’re how you protect your investment and ensure you’re not buying a lemon. General home inspections are helpful, but only slightly. Some agents are afraid to thoroughly dig through a property for fear something ugly may pop its head up and jeopardize the transaction. Some simply don’t know any better than to recommend a general home inspection. A strong agent will educate you on how to kick the shit out of the proverbial tires of the home to ensure you’re not walking into a mess.
Any Lender Your Realtor Refers You To Is Probably Giving Them A Kick Back
Lots of agents ‘partner’ with a lender and send their buyers to that particular lender for their financing needs. In return, these lenders typically assist the agents with marketing costs, open house fliers or other items. There isn’t necessarily anything wrong with this as long as the lender your agent is referring you to is the best lender for your situation and needs.
Lenders, like agents, are a dime a dozen. Chances are your agent has worked with several and found one that they like for various reasons and that’s who they’re referring. Just like finding the right agent, you need to do your due diligence in finding the right lender. Each lender (individual or institution) can offer something different.
I hope this article helped you learn a bit more about the ins and outs of real estate and working with an agent. If you have any questions, please don’t hesitate to contact me at: 949.705.7676.