How to Pick the Right Real Estate Agent
The proliferation of online real estate information makes it easier than ever to be an informed consumer when buying or selling a home. Yet the digital revolution has done little to lessen the importance of choosing the right real estate agent to work with you.
The right agent can help you buy your dream house or sell your existing home quickly. The wrong agent can botch the transaction, leaving you with egg on your face and nowhere to call home.
Despite the high stakes, many buyers and sellers give little thought to choosing an agent, whether they’re buying or selling. Everyone knows at least a few realtors, but do they know the RIGHT one?
Real estate relationships are like dating. It’s a longtime, intimate, trusting relationship. Often your house if the most expensive single transaction you will ever do, so emotions will be running high. If it doesn’t start out feeling good at the beginning, it’s probably not going to get any better.
Get recommendations from friends and relatives, and see which agents are buying and selling the most homes in your neighborhood. Read online reviews, but realize they don’t tell the whole story, since most clients, satisfied or dissatisfied, don’t write reviews. Interview three or four agents to find the one who is the best fit for you.
Most real estate agents are independent contractors who are paid a commission based on the number of homes they sell. The commission, paid from the sales proceeds, is usually split equally between the listing agent and the selling agent. Once the deal is closed, each of those agents usually has to pay a share to the broker who owns the office where he or she is affiliated.
It’s not necessarily the realtor with the large billboards, or the one who has been in real estate for 20 years. Instead it’s about the specialist for what you are specifically looking for.
Don’t be afraid to ask questions about how many listings the agent has, how many homes he/she has sold in your area, how often he/she will communicate with you – and in what format – and who he/she will represent in the transaction.
If you’re a seller, ask how the agent will market your home, who the target buyer is and how he will get your home in front of those preferred buyers. No one marketing approach works for all the different types of real estate, yet often realtors only have one or two methods that they try to apply to all the transactions. Find the one who custom tailors the approach to your specific situation.
If you’re a buyer, ask how often the agent will send you listings and whether he has worked with other buyers in your situation. A transaction involving a large holding property, for example, includes some steps that aren't required for a conventional transaction. Some buyers may want to sign a buyer-broker agreement, agreeing to pay a share of the commission if the agent shows them homes where the seller won’t pay a commission, such as for-sale-by-owner houses or new construction properties. While on the surface this causes apprehension, remember that you get what you pay for and good realtors are worth the rates without discount.
Here are some important considerations when choosing a real estate agent:
The agent suggests the highest price for your house. If you’re selling your house, it’s not just about the listing price. Presentation of the property counts for a lot in the marketing equation. Find out the comparables for your area. If the agent suggests the highest listing price and you are an average house… it likely won’t sell. The agents are all looking at the same data, so the suggested listing price should be close. If you’re too high for the market, buyers will not even look at it because they know you’re not realistic. The longer your property sits on the market, the more people are going to think there’s something wrong with it and that results in lower offers.
The agent does real estate on the side, part time. Whether you’re a buyer or seller, you want to choose an agent who is actively following the market every day. If you’re buying, you want an agent who can jump on new listings and show them to you immediately. If you’re the seller, you want an agent who is always available to show your home to prospective buyers. Full time realtors are more familiar with the market as they have seen the inside of more houses. They also know more of the players in the industry, giving you a leg up in the negotiation phase.
The agent is a relative. Unless your relative is a crackerjack full-time agent who specializes in your neighborhood, he or she is unlikely to do as good of a job as another agent. That can breed resentment, as well as derail your transaction. Adding in large sums of money and family dynamics can cause issues for years, so avoid it.
The agent doesn’t know the real estate landscape in your neighborhood. Finding a neighborhood expert is especially important in areas where moving a block can raise or lower the value of a home by $100,000. An agent who specializes in a neighborhood may also be in touch with buyers who are looking for a home just like yours or sellers who haven’t put their home on the market yet.
If you are an investor, make sure your realtor understands investing. They are a transaction specialist, but most cannot explain to you how to evaluate returns, cap rate and discounted cash flow. Intimate knowledge of the transaction is what leads to effective negotiations. If they can’t show the math for why your offer is lower but fair to the other side, they lose effectiveness.
The agent charges a lower commission. In most areas, commissions are traditionally 7% on the first $100,000 and 3.5% on the remaining balance, split between the buying and selling agent. If the commission on your house is lower, fewer agents will show it. This is not supposed to happen but human nature dictates that your agent will put in less effort on a house paying a 0.5% commission versus a similar one paying 7%/3.5%. It may seem like you are saving money listing with these discount brokerages, but days on market cause people to lose faith in your property, hurting what is offered. This doesn’t mean you can’t negotiate a slightly lower commission if one agent ends up both listing and selling the house. Some newer companies rebate part of the commission to the buyer or seller, but don’t use that as the sole reason to choose an agent. That’s only a bargain if the agent is otherwise a good fit.
The agent’s face shows up with online listings. The agents’ faces are there because they paid to be there. They may or may not be the best choice for you. Don’t accept the online portal’s assertion that the agent is a neighborhood expert. Interview him or her yourself and find out.
The agent doesn’t usually deal with your type of property. If you’re buying or selling a condominium, don’t pick an agent who rarely sells condos. If you’re looking for investment property, find an agent who traditionally works with investors. Many agents have multiple specialties, but you want to make sure the agent is well-versed in the type of transaction you’re doing. Ask questions.
The agent doesn’t usually work with buyers in your price range. Some agents specialize in homes of all types in a specific area. But if you’re a first-time buyer looking for a $200,000 entry-level home, you are unlikely to get much attention from an agent who mostly handles $10 million luxury listings. Even if that agent has an amazing track record of sales they may not be the best fir for you as a time priority.
The agent is a poor negotiator or fails to keep up with details of the transaction. In many cases, the most important work of an agent is not to find the home but to make sure the sale closes. That includes making sure the buyer is preapproved for a mortgage, the home is free of liens before it goes on the market, the appraisal is accurate and issues raised by the home inspection are resolved. If the agent doesn’t give you the feeling that they have a back bone, they likely will be less effective during the negotiation part. If you are a new buyer, this is especially important as you need someone who can confidently lead you through all the administrative hoops and mitigate the doubt that you will have, and trust me, you will have doubts at some point in the transaction.