Tips for Shopping with Real Estate Agents for Your New Home Purchase
When you are ready to begin shopping for a property, there are many ways to go about this task. You can drive around the neighborhood in which you are interested and search for “For Sale” signs. Unfortunately, many communities have banned or severely limited such signs, in order to protect their area from possible property value decreases.
The jury is still out on the effectiveness of such measures. However, this tactic of driving around the neighborhoods is time-consuming, less effective and very expensive.
Another method is to scan the real estate section of your local newspaper. Most publications with real estate sales sections will usually separate such classified ads according to geographic area, making it more convenient for you. This is still time-consuming, but it has the added benefit of providing buyers with a review of current asking prices for certain homes in specific areas.
Probably the best way to shop for a home in most urban and suburban markets is to use a real estate agent. The fact is that the real estate agent provides the homebuyer, especially the first-time homebuyer, with distinct advantages.
First of all, their services are usually free to the buyer. But more than that, they are useful guides for homebuyers. Similar to sherpas assisting mountain climbers in the Himalayas, a good real estate agent will guide the homebuyer away from possible pitfalls and along the safest and most convenient route to their goal of homeownership.
This article will introduce you to real estate agents and their role in the process:
- Advantages and disadvantages
- How to select the right agent
- How to work effectively with real estate agents
- Real estate agent options
Advantages and Disadvantages of Real Estate Agents
The most common and recommended method for buying a home is to use a real estate agent. In some areas, you will also find Realtors and real estate brokers. Realtors are real estate agents who are certified members of the Board of Realtors.
Real estate agents and Realtors can eventually become brokers through experience and subsequent certification and licensing.
It is possible to buy a property without employing a real estate agent, although it will usually be to your disadvantage. Most sellers will employ a real estate agent of their own and often must use those agents, even when the buyer locates the seller independently.
Although real estate agents are not necessary, they are highly recommended for the home-buyer because their benefits typically outweigh any disadvantages:
- Free for the buyers
- Access to listing services
- Experience with process and property
- Homebuyer resources
Free for the Buyers
Real estate agents are normally paid, on commission, by the seller. The typical home seller must pay 4% to 7% commission on the sale of their home. When the sales transaction is closed, the seller’s real estate agent shares that commission with the buyer’s real estate agent.
The seller’s real estate agent is sometimes called the listing agent. This listing agent is responsible for marketing the home. The listing agent will conduct open houses, advertise the property and, most importantly, “list” the property for sale through a listing service.
Access to Listing Services
Your real estate agent will access a listing service or MLS (multiple listing service) to obtain a roster of available properties for you. Today, most MLS databases are computerized, so that your agent can quickly locate those properties that meet your selected criteria.
For example, if you were looking for a three-bedroom, ranch-style home in a certain neighborhood with a limited price range of $120,000 to $160,000, your real estate agent can immediately access the MLS database. Within a few minutes, the listing service can provide and print out all available information on those properties that meet your requirements.
The buyer’s real estate agent can then schedule visits to those homes. If you have questions about the purchase, your agent can draw from their experience and required training to provide you with direction.
Experience with Process and Property
For most first-time and even some repeat homebuyers, the process can be very complex, time-consuming and difficult. The professional real estate agent will help you in making the process simpler, quicker and easier.
Real estate agents know how the home-buying process operates and will guide you each step of the way. With all of the legal requirements involved with a real estate purchase, this becomes an invaluable service.
Real estate agents also have experience with the properties of their locale. This experience allows them to anticipate potential problems and issues that may arise with a certain type of home or with a particular neighborhood. It also allows them to more easily spot bargains and money traps.
Homebuyer Resources
Because of the demands and requirements of their industry and specific clients, real estate agents are also resource providers for the homebuyer. Whether you are searching for a reputable attorney, efficient mortgage lender or inexpensive real estate inspector, your agent will have a list of recommended agents ready.
The real estate agent will also be able to provide statistical information about certain communities, neighborhoods and properties. Again, the real estate agent’s services normally are free to the homebuyer, so not using a real estate agent can be a waste of a valuable resource in and of itself.
Selecting A Real Estate Agent
Finding a real estate agent is not difficult. With the relative ease of entering the field and the flexible hours, becoming a real estate agent is a relatively easy career move. Becoming and remaining a professional real estate agent, however, is more of a challenge.
When selecting a real estate agent, you should find one who will be the best guide for your home-buying venture. As you compare possible real estate agents, look for three important characteristics:
- Full-time commitment
- Experience & Knowledge
- Professionalism
Full-Time Commitment
Whenever possible, you should avoid part-time agents, or real estate agents who are unwilling or unable to provide you full-time service. Part-time agents may sometimes place their buying clients in second priority behind their primary jobs and commitments. Full-time agents depend on a successful sale for their current income and future referrals.
The bulk of all real estate sold in the country are transacted by a small percentage of all available real estate agents. It is the handful of full-time, hard-working real estate agents that account for the most sales, because they are the most committed to guiding you to a successful purchase.
Experienced & Knowledgeable
These two elements tend to go hand-in-hand. The knowledgeable and well-trained real estate agent is usually the one who will remain in the industry for the long-term. It is also the long-term agent who develops the experience.
This is not a slam on new real estate agents, however. In fact, many homebuyers are equally successful with new real estate agents—especially if those new agents work for an experienced office or with an experienced real estate broker or senior agent. Most homebuyers will find that successful real estate offices groom their new agents by having them work with more experienced agents, so as to gain that experience.
This trait may not seem so important with smaller, simpler purchases. However, this will be one of your most expensive investments. Finding an experienced and knowledgeable agent will make the experience less confusing, hectic and expensive.
If you have a particular area in mind, you may also want to seek out real estate agents who are knowledgeable or experienced with that specific area or neighborhood. Such knowledge is useful in finding bargains and avoiding potential problem areas or issues.
With the advent of computerized listing services and databases, this type of agent criteria is not as crucial—but it can still prove helpful.
Professionalism
The professionalism trait is more a sense of value, attitude and client commitment. Professionalism is the way in which the real estate agent approaches the task at hand and clients before him or her.
In more practical terms, professional agents are those who are committed to promptly returning your calls, providing you with the right answers or resources for your questions, and seeing you as a valuable, long-term relationship (rather than a quick commission).
The professional real estate agent is one who understands why you worry and ask so many questions, and provides you with explanations to clarify the home-buying process.
Working With A Real Estate Agent
Once you’ve selected a real estate agent, you will start with a preliminary interview. The agent will try to understand your goals and preferences, and then provide you with a list of available homes that meet those requirements.
You can then drive by these available properties to examine the exterior and review the neighborhood. The real estate agent can also provide a list of open houses, which you can visit (usually during the weekends) in a more open, public setting. [Note: open houses are advantageous to sellers, because they have an opportunity to create a perception, if not a reality, of competition among the shoppers.]
Once you have selected a few favorites, the real estate agent can then arrange visits to the property, so that you can examine the interior.
Once you’ve finalized your decision on a property, the real estate agent will then work with you in determining and proposing an opening offer to the seller. The agent will then guide you through the negotiating process, as well as into the agreement, mortgage finalization and eventual closing.
Real Estate Agent Options
You have all the power, control and options when working with real estate agents. In most cases, you are not restricted to simply one real estate agent. You can have several agents working to find the right property.
However, you will find it more efficient and convenient to find a good real estate agent, and work exclusively with that agent for the duration. As you begin working with an agent, you should consider a couple of potential issues about real estate agents:
- Double broker
- Buyer’s broker
Selecting a real estate agent normally does not prohibit you from employing other means to shop for a home. If you wish to shop For-Sale-By-Owner (FSBO) properties, or any other alternative purchasing strategies where no real estate agents are involved, you are free to do so.
Note, however, that if you elect NOT to use a real estate agent, it is crucial that you at least employ an experienced real estate attorney. You should always have at least one experienced agent protecting your interests and guiding you through the buying process.
Double Broker
Sometimes your real estate agent and the seller’s listing agent are one and the same person. This usually occurs when the house that the buyer decides to purchase is actually a property that your agent is also currently marketing.
Unfortunately, it sometimes happens that the real estate agent steers the homebuyer towards the agent’s own listings—so that the listing agent does not have to share the commission with a buyer’s agent.
This is legal in many states and locales, especially when an area is serviced by only a few real estate agents. However, it does present a problematic situation for the buyer and the real estate agent. The real estate agent is usually required to disclose such double-brokerage relationships to both the buyer and the seller.
In such cases, the agent’s primary responsibility is with the seller, as the seller’s listing agent… and not you. You can still work with that agent in such situations, but you should demand as much impartiality as possible. Also, you should inform the attorney of the situation, so that the attorney can be extra vigilant with your concerns.
Buyer’s Broker
In most areas, the real estate agent’s primary responsibility is to the seller. This applies, as odd as it may seem, to the buyer’s real estate agent.
To reiterate, your real estate agent legally serves the seller first. It may sound strange, but it’s true because of one simple fact: it is the seller’s commission paying both agents. Because the seller pays the commission, even your agent may have a primary responsibility to the seller.
Most real estate agents, especially as they are tied to the listing service, serve the seller. Although they may help the buyer along, their primary agency relationship is to the seller.
Consider the analogy of a store. Even though the sales staff bends over backward to help the buying customer, their primary allegiance is to the seller, the store. Most real estate agents are simply sales agents representing the seller, regardless of whether they have ever met the seller.
If you want an agent who is fully and exclusively serving your interest, there is the alternative of a buyer’s broker. With a buyer’s broker, the buyer pays commission to the agent to find a suitable property purchase. Because of this buyer-paid commission, the buying broker’s allegiance is to the buyer—not the seller.
For homebuyers seeking a special type of home and who are willing to make this additional investment for the guarantee of true representation, this is an increasingly attractive option.
A buying broker also allows the buyer to sometimes locate properties not sold through listing services. Since, the buyer’s broker is paid by the buyer, that broker will not steer the buyer away from seller’s who are offering little or no commission to participating real estate agents.
