Finding a real estate agent is often the key to success in the home buying process. The right REALTOR® will move mountains for you as you make your way toward homeownership. With over 2 Million people in this country who have a real estate license, how do you know who the right agent is for you?
Before you start your interview process, it’s important to know the difference between a buyer’s agent and a seller’s agent. A seller’s agent (also called the “listing agent”) represents the seller, while the buyer’s agent (also called the “selling agent”) represents the buyer. The difference becomes murky, however, when real estate agents try to play both sides by representing both the buyer and the seller in the same transaction, which would earn the agent both sides of the commision in the deal (this is called dual agency or ‘double-ending’ a transaction).
Here are five things that you can ask a prospective buyer’s agent when you are going through your interview process.
As noted, some REALTORS® play both sides, and understandably so, since the entire sales commission is up for grabs. However, only a REALTOR® who exclusively works as a buyer’s agent will truly have your best interests in mind and your complete satisfaction as a consumer as their foremost goal. An exclusive buyer’s agent is not tied to a specific property - he or she will help you find the right home, no matter how many properties you have to view.
Sometimes, in competitive markets, there can be an advantage to the buyer by working directly with the listing agent. Since the listing agent will have inside knowledge of what the seller is thinking, this could give the buyer an edge to win the bidding contest. There is an added incentive to the listing agent to work with the buyer so that the agent can capture the full commission. Buyers who choose to work directly with a listing agent should be fully aware of what they are doing and that there could be some conflicts of interest, but who may not care if they ultimately end up winning the house.
Here are a few questions to ask to a prospective agent around exclusivity::
- Do you list properties as well?
- Do your partners list properties?
- Are you exclusively a buyer’s agent?
- May I see your portfolio?
Some agents require something in exchange for exclusivity. They may request the buyer to sign an exclusive contract (more info below), and they may want a letter of pre-qualification from a lender in cases where the buyer will need financing.
This may be quite important to the agent who offers exclusive services, and rightly so, since they may need proof to show others that you are serious about purchasing and that an actual sale will occur.
2. Transparency of Contract
Some agents and companies that advertise as buyer’s agents or agencies still try to formulate their contracts to access the seller’s market as well. To understand why, imagine a property for sale with a 6% commission (of the home price) to the agents. If an agent lists the home and finds the buyer, they would collect the entire commission.
However, if one agent represents the seller while the other brings the buyer to the table, the commission would have to be split 50/50. Therefore, many agents structure their contracts to allow for them to become both the buyer’s agent and the seller’s agent.
This may sound beneficial. Having one agent, particularly one you like, conduct both ends of the sale sounds like it works in your favor. However, in this case, the agent would now be working for both the buyer and the seller, and they no longer have your best interests exclusively at heart.
They may even use information you disclose in confidence to empower the seller, which often does not benefit you! Examine the contract to ensure that the buyer’s agent will be wholly devoted to working for your best interests.
There are two basic types of contracts:
- Exclusive: This means that you commit to working with a specific agent for a fixed period of time, perhaps six months or a year. It also means that the terms for the commission are outlined in the exclusive contract, and if the seller does not pay it, the agreement may place the responsibility on the buyer. This type of contract is perfectly acceptable, so long as the buyer pays attention to the terms.
- Non-exclusive: This type of agreement means that while you agree to work with a specific agent, you are also free to work with other agents, provided you inform the agent with whom you signed the contract. Whichever agent introduces you as the buyer is entitled to the commission. Again, pay attention to the terms of the agreement regarding the commission.
Even if you feel that you’ve found a good buyer’s agent, what if the relationship doesn’t work out? The contract should stipulate the terms of such a separation. Make sure there is a way out that’s not too painful.
One strategy is to make the agreement short-term for an initial period with an option to extend it as long as both parties agree. This provides you a way out in case you'd like to pursue other options as the buyer.
3. Experience and References
A trustworthy agent will willingly supply you with proof of their experience and references from satisfied customers. Feedback from their previous relationships can be valuable when assessing how knowledgeable they are about the area, how adept they are at negotiating, how skilled they are at communicating, and how satisfied previous customers are.
It also helps to know how they are regarded by listing agents in the area since they will be representing you to these agents. As a picture emerges, you should get an idea of how much time and personal attention they will direct toward your needs as the consumer. It’s in your best interests to:
- Ask for references.
- Ask them how many offers they’ve won and lost in bidding contests.
- Ask them for their strategy on how to win in a competitive housing market.
- Ask if them how well they know other listing agents in the area (this helps to get inside information on the various homes)
- Ask about their experience with similar buyers.
Armed with this information, you should be able to navigate the issue of how to find a REALTOR® who will make your best interests their primary concern.
4. Communication and Negotiation
The hallmarks of a devoted and capable agent are their communication and negotiation skills. A good REALTOR® prepares offers, canvases local markets, requests inspections, provides advice, and possibly even deals with lenders on your behalf.
Balanced negotiations will not only assure the buyer of the best deal at the best terms, but will also maintain healthy, respectful relations with sellers and others involved in the industry. As you embark on your quest to find the right REALTOR®, here are some things to think about:
- Are they full-time agents?
- Do they understand exactly what you're looking for?
- How do they communicate? Text, phone, email?
- Do they work well with other real estate agents?
- What do their references say about them?
Also, consider this: Will they personally handle all aspects of communication and negotiation? Or will they delegate it to their staff? This is important to consider because you interview them — not their team — to decide if the relationship has potential. If they simply pass you on to their staff, you’re not really getting the service you researched.
Granted, all agents may delegate certain mundane tasks to their staff, and that is reasonable to expect, but remember, you interviewed agents to find the REALTOR® that will mesh well with you. Shouldn’t it be assumed that this agent will personally give you their full attention and work to your satisfaction?
5. The Right Fee
So what is the right fee for a buyer’s agent? None. No, this doesn’t mean they work for free. Rather, they earn a percentage of the commission. In most real estate transactions, the seller pays the entire commission from the proceeds of the sale. So if the commission is 6%, then typically, the listing agent should split this commission with the buyer’s agent after the sale.
However, not all sales fall into the bracket of “typical.” For example, what if the home for sale is a “For Sale by Owner” (FSBO)? In that case, there is no contract or commission. To protect themselves in such a scenario, a buyer’s agent’s contract may have a written clause that requires the buyer to pay the commission if the seller refuses.
Also, negotiations for a desired price or terms could include negotiation regarding which party will pay the commission. In any case, make sure you are familiar with all the terms of the contract regarding fees and commissions.
Advantages to Finding a Buyer’s Agent
There are many advantages to being represented by a buyer’s agent when embarking on a real estate venture, whether it is a business investment or your first home. Some are as follows:
- Access to inventory. An experienced agent knows the area well and is already familiar with the listings of local agents. Once they have in mind what you are looking for, they can reduce time by narrowing down the available listings to those that fit your budget, terms, and desires.
- Invaluable experience. Through the many phases of seeking and purchasing a property, an experienced agent will directly affect the outcome. Finding a REALTOR® with experience in dealing with other industry players, inspectors, lenders, etc., will be of irreplaceable value to you as the buyer.
- Skillful negotiations. A good negotiator is invaluable in assessing current market value, making an offer, and concluding a sale with the best possible terms. Every buyer should have a professional negotiator in their corner.
- Trustworthy recommendations. The agent may not be the only professional you need to make the purchase. You may also require the services of an inspector, a lender, an escrow officer, and an attorney. However, you may not know who to trust. If you’ve found a reliable agent, then you can also trust their recommendations for other local professionals and associates.
- Proper paperwork. There may be quite a bit of paperwork involved in the process, including making an offer, closing the sale, and much more. Finding an agent familiar with local and state laws and regulations and the terms of the sale can make the process smooth and worry-free for the buyer.
- Problem-solving. During the process — perhaps after receiving an appraisal or inspection report — issues may come to light that will threaten to stagnate or even derail the purchase. Negotiations can even become hostile. In such cases, a professional buyer’s agent can be invaluable in calming the situation down and providing practical solutions.
The process of buying a home can be a lot more complex than one may initially think. Considering the advantages of having an experienced agent on your side, it is worth the time it takes to do your homework and conduct your interviews.
Finding the Right Agent for You
There’s no question that having a buyer’s agent on your side is advantageous. Do your due diligence, and you will find a real estate agent you can trust to focus on your wants and needs and protect you as the buyer. Their success as a reliable agent depends largely on good reviews, so they want the relationship to work as much as you do.
During interviews, ask the agent to explain the whole process of locating and purchasing a home. That way, you’ll be able to gauge their knowledge of the process and the area. Finding the right agent is no different than hiring the right lawyer or investing with the right bank.
After all, finding the right buyer’s agent may also mean finding the right home at the right price with the right terms, so keep these tips in mind and find the right agent for you.