Buying a home is the biggest investment most people will ever make, but not all real estate agents are equal. Find out how the experience and training of a Realtor® can help you get into your dream home.
1. What Exactly Is a Realtor?
Not every salesperson with a license to sell real estate is a Realtor. Here are the reasons why you should know the difference.
A REALTOR® is a licensed real estate salesperson who belongs to the National Association of REALTORS®, the largest trade group in the country.
Every agent is not a REALTOR®, but most are. If you’re unsure, you can ask your agent if they’re a licensed REALTOR®.
REALTORS® are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.
Some REALTORS® are brokers, while some are agents. Unfortunately, people use the term interchangeably: there are some differences.
Brokers are usually managers. They run an agency and have agents working under them as salespeople. They might own a real estate brokerage or manage a franchise operation. They must take additional courses and pay additional fees to maintain their state-issued broker license.
An agent, on the other hand, is a salesperson selling on behalf of the broker.
Agents are also state licensed and must pass a written test before legally acting as a real estate agent. Each state has its own licensing laws and standards.
The Typical Broker REALTOR®
There is a stereotype of the typical REALTOR® that must be dispelled: the stereotypical agent works a few hours a day and makes millions of dollars a year. Reality TV shows perpetuate this myth.
On television, buyers find the perfect house after visiting just three homes—and write an offer that is accepted immediately. The next thing you know, they’re moving in!
Nothing could be further from the truth.
The typical buyer searches with a REALTOR® for about 12 weeks and looks at about 10 properties before selecting a home, according to the National Association of REALTORS®. They then wait about 30 days—on average—or the deal to close. The agent is only paid once the deal closes.
If the buyer decides to sign another lease—or not to buy—that agent is not compensated. The same is true of listings. If the listing does not sell, the agent is not paid.
The average agent earned $47,700 in 2013, according to the National Association of REALTORS® Member Profile 2014.
Selling real estate is a commission-only business. That means an agent can work with a buyer for months without ever making a commission—because deals fall through and not every listing sells. It’s a business run on trust and faith.
Also, many people see the commission check at the closing table and have no idea how that money is split. They think their agent walks away with all of it—that’s just not true.
Remember, agents work for brokers. The commission check is made payable to the brokerage which then cuts a check to the listing agent and the selling agent. Both agents also must pay a percentage of their earnings to their broker.
Generally, agents also are responsible for paying their own federal and state income taxes, social security tax, and health insurance.
2. Why You Should Use a Realtor
Buying a home is the largest investment most people will make. Work with a Realtor to get the best professional advice out there.
It’s a slow Sunday morning. You’ve just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.
You’re DIYing this real estate thing, and you think you’re doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.
Dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn’t. This is likely the biggest financial decision of your entire life, and you need a Realtor® if you want to do it right. Here’s why.
1. They have loads of expertise
Want to check the MLS for a 4B/2B with an EIK and a W/D? Real estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.
Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.
2. They have turbocharged searching power
The Internet is awesome. You can find almost anything—anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, anytime you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.
Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it’s just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.
3. They have bullish negotiating chops
Anytime you buy or sell a home, you’re going to encounter negotiations—and as today’s housing market heats up, those negotiations are more likely than ever to get a little heated.
You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don’t you want a savvy and professional negotiator on your side to seal the best deal for you?
And it’s not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.
4. They’re connected to everyone
Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they’re all in your Realtor’s network. Use them.
5. They adhere to a strict code of ethics
Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors®, the largest trade group in the country.
What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.
6. They’re your sage parent/data analyst/therapist—all rolled into one
The thing about Realtors: They wear a lot of different hats. Sure, they’re salespeople, but they actually do a whole heck of a lot to earn their commission. They’re constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you’re selling). They’re researching comps to make sure you’re getting the best deal.
And, of course, they’re working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn’t a responsibility Realtors take lightly.
3. The Real Estate Commission Explained
The real estate commission is the agent’s fee for service. It is a percent of the sale price negotiated at the time of the listing. Every seller has the right to negotiate the commission, just as every agent as the option to hold fast to their fee.
Full-service agents charge more than fee-based, or flat-fee, agents. Know what you expect and want from your agent before attempting to discount the commission.
Agents with an in-depth knowledge of the market, a team of associates and assistants, a full marketing plan and a syndicated listing schedule will always charge more than an agent who merely adds your house to the MLS and wishes you luck with your sale.
In traditional home sales, sellers always pay the commission—but there are exceptions. Auctions usually charge buyers a 5% “premium”, or commission, for instance.
There is a tendency for some buyers to think they can negotiate the commission. They cannot. The listing agreement specifies the commission. It is a contract between the seller and the brokerage. It details the terms under which a commission is paid and the total commission to be paid.
Based on the type of listing agreement the seller agrees to—Exclusive, Variable, Non-Exclusive—the commission can change. For instance, in a variable listing agreement, the agent could make more or less depending on who represents the buyer or who procures the buyer. Again, the seller specifies this up front.
The buyer, therefore, can only negotiate the purchase price and terms of the sale, with the seller’s agreement. The buyer’s agent is paid by the seller because the listing agent is sharing a percentage of the commission. Sharing the commission is called cooperating, or a co-op commission.
And remember, the real estate commission—along with most costs associated with buying and selling a home—is tax-deductible.
4. Buyer Agents: Working for You Free of Charge
Homebuyers should always have their own agent to represent their interests. Buyer agents are free to you, so why not use one?
Homebuyers should always have their own agent. Buyer agents work to negotiate the best terms and price for the buyer. Best of all, the buyer agent’s services are free to the buyer.
Most people think they have to pay a sales commission. The truth is this: only the seller pays the commission.
Whether a buyer uses an agent or not, the seller still pays the commission.
Most buyer agents will have their clients sign an agency agreement, an Exclusive Buyer Agency Agreement. It outlines their services, how they are compensated, and how the two parties will work together.
The home buying process is stressful enough without worrying about who you can and cannot trust. Your buyer’s agent is your trusted advocate.
Buyer Agents and the Agreements
According to most buyer agency agreements, the buyer’s agent must do these things:
- Protect their client’s financial information
- Negotiate the best possible price for the buyer
- Must disclose to the buyer if they are working with another buyer interested in the same property
- Show all properties the buyer is interested in that fits their criteria and budget
- Connect you with the service providers—inspectors, lenders, home warranty companies—to best suit your needs
The buyer also has some responsibilities to their buyer’s agent:
- Buyers must work with their buyer’s agent exclusively
- Buyers should never give personal information to any other agent
- Buyers should not call other agents to see properties, even if they think they are saving their agent some time and effort
- Buyers should clearly define their must haves and deal breakers to help their agent streamline the showing process
Homebuyers are at a premium in today’s housing market. Buyers should interview agents just as seller’s interview listing agents.
Make sure the buyer’s agent you select is familiar with the type of property you want to purchase, the area you want to purchase in and the particulars of your situation. An agent is only as effective as the information they are given. Clients relocating from one city to another require a different set of skills from a client moving within the same area, for example.
Buying real estate is a big decision. The best advice is to find a REALTOR® who will guide you through the local market conditions.
5. Listing Agent vs. Buyer Agent: Who Works for You?
It is perfectly logical to call the agent on the yard sign while driving around your dream neighborhood searching for your next house.
The sign might have a QR code or text code to allow you to quickly access more information.
Sellers and agents have a written contractual agreement outlining their relationship. It’s called the Exclusive Listing Agreement. It outlines the role of the listing agent, how they will market the party, the commission and the terms of the listing.
Listing Agents Wear Many Hats
There are many facets to a listing agent’s job. They work closely with the seller and provide a bevy of services. Here is a sample of what most listing agents do for each seller client:
- Create a marketing plan for the house
- Have professional photos taken of the house
- Advise the seller about the best ways to stage the house for sale
- Generate Comparative Market Analysis reports suggesting the best selling price
- Recommend contractors and vendors to help prepare the home for the market
- Evangelize the benefits of the house and neighborhood to potential buyers
- Coordinate showings with buyer agents and unrepresented buyers
- “Broker Opens” to get as many potential buyer agents into the house for feedback and to attract buyers
- Make the house easily accessible for showings
- Provide showing feedback
- Communicate market activity to the seller with weekly updates/reports
- Present and advice sellers of all offers
- Negotiate the highest possible selling price
- Coordinate the purchase process with inspectors, attorneys, appraisers, title company agents and others
- Verify buyer eligibility to purchase
- Make the home selling process as easy for the seller as possible
The listing agent is the homeowner’s biggest advocate.
6. How to Find a Realtor
Before placing a home on the market or setting out to find the perfect new home, you should identify REALTORS® who can assist with the sale.
Why Use a REALTOR®?
More than two million people nationwide have licenses to sell real estate, of which more than one million belong to the National Association of REALTORS®. Only N.A.R. members are entitled to use the term REALTOR®.
N.A.R. members must adhere to a strict code of ethics. By joining N.A.R., individuals have access to a wide range of classes, seminars and certification opportunities. Local REALTOR® groups are active in community service, economic development, local politics, and other neighborhood organizations.
In essence, local REALTORS® are community experts. They track real estate trends, share neighborhood concerns and participate in local matters. They’re good neighbors who are in the business of helping others buy and sell homes.
How Do You Choose a REALTOR®?
Whether you’re a first-time seller or someone who is looking to buy your first home, there are several ways to find a local REALTOR®:
- Get recommendations from friends and family members who have bought or sold their properties recently.
- Look for REALTOR® signs in your community.
- Attend open houses and see if you connect with a REALTOR®.
Buyers and sellers have different needs. In some cases, sellers elect to meet with one REALTOR®, while a buyer might elect to test a couple of agents before deciding to work with one exclusively.
Whatever your preference, there will be a number of questions you will want to ask:
- What services do you offer?
- What type of representation do you provide?
- There are various forms of representation in different states. Some brokers represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases, different salespeople in a single firm may represent different parties within a transaction.
- What experience do you have in my immediate area?
- How long are homes in this neighborhood typically on the market?
- Be aware that because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including list price, changing interest rates and local economic trends.
- How would you price my home?
- Ask about recent home sales and comparable properties currently on the market.
- Request a written Comparative Market Analysis (CMA), as well.
- How will you market my home?
- At listing presentations, brokers will provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home.
- What is your fee?
- Brokerage fees are established in the marketplace and not set by law or regulation. The commission is the agent’s rate to handle your transaction. Ask if there are other fees you will have to pay such as an early cancelation fee, marketing fee, MLS fee or any other cost that is not included in the commission rate.
- What disclosures should you receive?
- State rules require brokers to provide extensive agency disclosure information, usually at the first sit-down meeting with an owner or buyer.
What Should You Expect When Working With a REALTOR®?
Once your home is listed with a REALTOR®, he or she will immediately begin to market your home according to the most appropriate conventions for your community. A REALTOR® keeps you informed as the marketing process unfolds and as expressions of interest are received.
Be sure to specify how you would like to communicate. Some clients prefer emails while others only want to be called or have in-person meetings. Whatever your preference, it is best to outline those expectations upfront so everyone is working with clearly-defined objectives.
The same is true for buyers. Because buyers are constantly meeting with their agent to see properties and give feedback on the properties they’ve already seen, communication is important. If you like to communicate via text message, let your agent know. All forms of communication are not acceptable to everyone. Make sure you have an agent who communicates with you in a way you find acceptable.
Every client should expect professionalism. That means a REALTOR® will always expect you to be on-time, and you should expect likewise from a REALTOR®.
Remember, the REALTOR® is your advocate in the transaction, whether you are buying or selling. Once you have signed up with an agent to represent you, he or she is your face, your voice and your defense against all involved in the multi-layered home buying or home selling process.
Yes, a good REALTOR® will do all that for you.
A good REALTOR®… like me.
Yes, Choosing The Right Licensed Broker Associate DOES Make a Difference.