With the real estate market entering the spring buying season, it’s good to be both a buyer and a seller. Mortgage rates are still low and property values are rising. While competition abounds, there is plenty of opportunity on both sides of the real estate transaction.
Real estate can be complicated. It’s the reason most home buyers and sellers use a real estate agent to represent their needs. An agent is a valuable source but they don’t always have your best interests in mind. Sometimes their actions are based on relationships or the potential for future business. Even the smallest details could cost you money — from the mortgage rate you pay to how long a property sits on the market. With that in mind, here’s a look at six secrets real estate agents usually keep close to the vest.
Real estate is a relationship business. Agents have a network of mortgage brokers, home inspectors and appraisers they work with and send business to. Those professionals reciprocate, referring home buyers and sellers to the agents they do business with. That could benefit you if you get access to properties that aren’t on the market yet. However, it can also harm you if they steer you toward a service provider that's not the best option for you.
Take a mortgage broker for one example. The agent may refer you to one or two lenders but they may not offer the best interest rates. It's okay to consult with the brokers or lenders your agent recommends as long as you shop around, as well. You’ll pay your mortgage for years, so you want to ensure that you're getting the best rate and paying the lowest possible amount in closing costs.
Choose a lender that's focused on meeting your needs and not someone who's merely interested in selling you a particular mortgage or doing business with your agent.
Open houses used to be the most effective way to sell a home. The foot traffic was enough to get multiple offers during the real estate boom. But the Internet and smartphones changed all that. Now, you can tour homes from your computer or smartphone. Detailed pictures, digital layouts, and satellite images have lessened the need to get off the couch when searching for a home.
Nevertheless, many real estate agents will insist on hosting open houses for their clients. They argue that it's a great way to drum up interest in a property and shine the best light on it. But the reality is, some realtors are using the open house for marketing purposes instead of selling purposes. Buyers who walk through the door may not have an agent, which means potential new business for your realtor.
For homeowners, open houses are time-consuming and cost money. You have to spend cash to have your home showroom ready, and then you’re required to disappear for an entire weekend. It can a big waste of time if you only net three visitors.
If your agent pushes open houses, think twice about it. Suggest creating a virtual tour through a website like Matterport or posting high-quality pictures on the Internet. If he or she won’t budge, it may be time to consider a different real estate professional.
Whether you're buying a home or selling one, the end goal is to complete the transaction quickly. To meet that end, you may choose to work with a real estate agent or firm that has been there and done that a lot. They know the ins and outs of the market, can price your home properly and will show you properties that buyers haven’t seen.
But it doesn’t always work out that way. If you sign on with a wildly successful agent, they may not be the one to assist you. Oftentimes, your account is passed off to a junior associate. Be sure to inquire about this before making your final decision on an agent. You don’t want to get frustrated during the buying process because you can’t get in touch with your agent or are stuck working with a less-seasoned professional.
There’s no question real estate can be complicated. Emotions come into play, particularly if you’re selling a home you grew up in or raised your children in. But it's not something you can’t do alone. The "for sale by owner" market is exploding thanks in part to the digital startups that walk homebuyers through the process. Long gone are the days when only real estate agents can suggest the right price to list a home. The Internet has a treasure trove of data and services that can empower you to sell on your own. There are even downloadable contracts and legal advice you can access on the cheap.
Marketing your home is also made easier thanks to the Internet and social media. A listing on Facebook can be more effective than a listing on an agent’s Website. Not to mention, you'll save on the commission. As it stands, the standard commission is 6%. Forgo an agent and you could save thousands of dollars.
A real estate agent is in the business to make money. They are going to discourage you from selling on your own, touting their connections and experience. But don’t let them get into your head. If you have the time and desire, taking the "for sale by owner" route is a realistic option.
Everyone wants to make the most they can in the sale of their home. That drives some to price their property at the high-end, adding value to their belongings and memories. That can be problematic to everyone involved. Price your property wrong and it can languish on the market, costing both you and the agent time and money.
Some agents will be honest with their clients if they think the house is overpriced. If the seller doesn’t take the advice into account, the agent may not decline the job. There are also those agents that won’t tell you if it's priced too high and will continue going through the process even if they know it won’t sell.
A real estate sale is a business transaction and should remain that way. Emotion shouldn’t be in the equation. You want an agent who understands that and will be brutally honest. They won’t give you an exact price to sell your home for an accurate range. If your agent isn’t willing to be honest, it may be time for a change in strategy.
A big cost associated with purchasing or selling a home is the commission that goes to the real estate agent. The standard is 6% of the purchase price. For instance, if you’re purchasing or selling a home for $300,000, the real estate agent gets $18,000. The 6% rate is the standard, but it's not etched in stone. It is negotiable.
How much you can shave off depends on what the real estate agent is willing to make from the transaction. If it's a $1 million-plus home, the agent could lose a percentage point and still earn a nice commission. If it's a $150,000 home, they might not be as willing to reduce the commission.
Keep in mind that the real estate agent doesn’t get the entire 6%. There are plenty of other expenses, including listing fees and advertising costs, as well as a portion that goes directly to the agency. In some cases, the agent's cut can be less than half of the commission fee. Be sure to take this into account before trying to talk the agent down too low.
Buying or selling a home is an exciting but scary time in your life. A lot of money is involved, and if you get it wrong it can have costly ramifications. When you’re ready to make a move, you’ll have to choose a real estate agent. Understanding how the process works and their motivations behind some of the decisions will empower you to make a sound choice. Whether you're selling or buying, choosing an effective agent can make all the difference.
Have you worked with a realtor to buy or sell a home? How was your experience?
Meredith Brown is a freelance writer and marketing professional. She writes about lifestyle and personal finance topics for multiple platforms. She lives in San Francisco, California.