JavaScript must be turned on in order for this site to display properly.
What Can DCU Save You?

About Real Estate Agents

Homebuying and Mortgages

Homebuying
  • Summary
  • Article

About real estate agents

Real estate agents are people licensed to bring buyers and sellers of real estate together and facilitate the sale of property. They are the salespeople for the largest purchase most of us will ever make. Whether you buy or sell a home, a real estate agent is likely to be involved.

While most real estate agents are decent, honest, hardworking people who earn their commissions, there are agents that don't. And it can be difficult to determine what category your next agent will fall into. This portion of StreetWise is designed to give you guidelines for using real estate agents, how to select an agent, and how to protect your interests.

When you are buying a home

When most people are in the market for a home, they typically will hire a real estate agent to help them shop and facilitate the purchase. Before you do so, here are some things to consider...

  • How should I select a real estate agent when buying?

    Gathering unbiased recommendations from family or friends is a good way to start. Interview two or three. Make sure you feel comfortable that they understand the real estate market, are professional, and are service-oriented. Check references. Talk to the state consumer protection agency (usually part of the Attorney General's office) or the local Better Business Bureau to see if there are any outstanding complaints. It helps if you like their personality, too. You'll be spending a lot of time with them during the process.

  • Who does the real estate agent work for?

    Real estate transactions generally involve two real estate agents. The listing agent directly represents the seller. The agent you use as a buyer also represents the seller as a sub-agent to the listing agent – even if they work at different agencies. They are both obligated to tell the seller anything they know about you that might benefit the seller in the transaction.

    If you have signed a Buyer Agency Agreement with an agent, the agent is contractually works for you. Since both agents are paid a commission on the sale by the seller, they split a percentage of the final selling price of the home. The higher the selling price, the more each agent makes. For both agents, their priority is to complete the sale. In most instances, they are only paid if that happens.

  • Should this affect how you work with your agent?

    Yes. Work with your agent this way and you should avoid most problems...

    • Insist on a signed Buyer Agency Agreement – Before you start shopping with the agent, get them to sign an agreement obligating them to represent you and not the seller. Make sure you read and understand it. Consider choosing a different agent if they won't sign an agreement satisfactory to you.

    • Seek unbiased advice – It's okay to ask your agent's opinion about the transaction or the negotiations, but remember they have a vested interest in the purchase price and in making the sale happen (even when it may be in your best interests to walk away from a deal). For unbiased information, get opinions from other people who won't benefit from the sale. This is true when selecting a home inspection service, finding a lender, determining how much home you can afford, or making an offer.

    • Make your own decisions in private – Especially during the negotiating phase of the transaction, decide what is best for you in private and instruct your agent to represent your wishes to the seller's agent. Don't share key information such as the maximum price you are willing to pay.

    • Avoid dual agency situations – When the same real estate agent or two agents in the same agency represent both seller and buyer, one individual or agency receives the entire commission. Even though it's not always true, you should act as though everything you say to the agent will get back to the seller. If you are also selling your home, avoid situations where your agent represents the other seller as well. We know of cases where the agent used information gathered in one relationship to their advantage in the other. Also be aware that, to maximize their commission, some listing agents will attempt to give preference to buyers they may also represent.

  • Should I consider a real estate attorney?

    Most real estate transactions occur without the buyer using an attorney, but how often do you make such a large purchase and sign so many contracts? Real estate attorneys represent your interests exclusively. They are paid based on their time, not on the sale price. They can review contracts for you and offer advice on the process and negotiations. Still, you must make your own decisions. Before you choose an attorney, get unbiased recommendations from family or friends. Ask about fees and what you can expect before hiring an attorney.

  • Read and understand every document before you sign

    The homebuying process involves a mountain of paper. You'll be given documents to sign when you start shopping, when you make offers and counter offers for a home, as you apply for a mortgage, prior to closing, and at closing. Make sure you thoroughly read and understand every document before you sign. Don't allow yourself to be rushed. Get unbiased legal advice if you need it. Once you've signed, you'll have to live with it.

  • Get all agreements and contingencies in writing

    Too often the home purchase process gets unpleasant when verbal understandings about what is included or excluded in the home sale or contingencies don't make it into the documents. The only way to be sure there are no misunderstandings is to get everything in writing and have it signed by the buyer and seller. Make sure your agent does this for you. Common things you should look for...

    • Itemized list of what is included/excluded with the home – If you think the refrigerator, plants, shed in the back yard, above-ground pool, curtain rods, and fancy brass chandelier you saw at the open house are included in the sale, you may be mistaken. Have your agent get this in writing. This can be made part of the Purchase and Sale Agreement or a separate contract with the seller. In some states, there are regulations on what the sellers must leave behind.

    • Include the contingencies you need – Contingencies are clauses in your Purchase and Sales Agreement that allow you to escape the contract if certain things happen or don't happen. Include only the contingencies you really need. In a hot real estate market or when the seller must sell the home you want before they buy another, the offer with the highest price, fewest contingencies, and fastest closing date is most likely to be accepted. However, if you give up all your contingencies to win the bidding war, you could end up buying big problems with no chance of escape. Common contingencies you may want to insist your real estate agent include in your Purchase and Sale Agreement include these:

      • Mortgage financing – If you'll need a mortgage to buy the home, you should make the purchase contingent upon securing financing. Otherwise, you'll be legally obligated to complete the purchase even if you can't get a loan. A maximum financing rate clause may be included. This gives you an out if rates jump above what you can afford.

      • Sale of your current home – A contingent sale clause is used if you must sell your own home to make the down payment on the new one.

      • Professional inspection – No matter how hot the real estate market may be, you should have this contingency. Repairs to correct serious structural problems can cost thousands. If the heating system is dying, the well is contaminated, the septic drainage field is saturated, or the house is being eaten by termites, you'll want to be able to cancel the sale if the sellers won't make or pay for needed repairs.

      • Appraisal and title – With most lenders, a mortgage pre-qualification will be conditional on the property being acceptable to the lender. This usually means the appraisal is in line with the purchase price and there is a good title report. If the house appraises low and you don't have an appraisal contingency, you may need to increase your down payment to get your mortgage.

When you are selling a home

When most people are selling their home, they typically will hire a real estate agent to place their home on the market, find potential buyers, and facilitate the sale. Before you do so, here are some things to consider...

  • Should I hire an agent or sell my home myself?

    There is no clear cut answer. You must weigh the costs of using an agent versus the time, effort, and expertise required to sell yourself. Real estate agents are involved with four out of every five home sales each year. Agents typically receive a commission of 5% to 7% of the purchase price. This is something you can negotiate when you hire your agent. In exchange for that commission, a good agent will...

    • advise you how to make your home more marketable (they may suggest a home inspection before you put the home on the market),

    • provide information to help you set a competitive price,

    • place signs and advertise your home online, in newspapers, and real estate publications,

    • coordinate and run an open house for prospective buyers and other agents,

    • show your home to prospective buyers,

    • add your home to the MLS (Multiple Listing Service) database so agents at any agency can find, show, and sell your home,

    • explain your responsibilities as a seller to you,

    • represent your interests to prospective buyers and their agents,

    • bring you offers from prospective buyers and help you evaluate them,

    • and facilitate the sale.

    However, if you sell your home yourself, you can save money on commissions – particularly if the buyer does not use an agent. It means you need to understand all the legalities involved, research the process, market your home, and use your private time to show it. It's a major commitment of time. If you are considering taking this route, read some up-to-date books on selling your own home first.

  • How should I select a real estate agent when selling?

    In many states, it's easy to get a license to sell real estate – take a simple course and pass a test. You may even know people that sell real estate part time to supplement their income. But remember, when you hire an agent, you are hiring a salesperson. A salesperson that knows how to market a home and is always available to prospective buyers and their agents is more likely to sell your home quickly at the best possible price. You'll want someone who is good at selling and has a track record of success.

    Just as when selecting a buyer's agent, start by gathering unbiased recommendations from family or friends. Interview two or three at your home. Make sure you feel comfortable that they understand the real estate market, are professional, and are service-oriented. Ask them what you should do to your home to make it more marketable. Check references. Negotiate the commission. If the real estate market is hot and you expect to sell fast, the agent won't have to work as hard to market your home. In such instances you may be able to negotiate a smaller one.

    When you narrow your choice to two or three agents, interview them. Ask each one how they plan to market your home. What advertising will they do? Ask who pays for the advertising. In some agencies, the agent pays out of their commission. In others, the agency pays. This could make a difference in the commission you negotiate.

    Talk to the state consumer protection agency (usually part of the Attorney General's office) or the local Better Business Bureau to see if there are any outstanding complaints. It helps if you like their personality, too, but a track record of selling success is more important.

  • Should I consider a real estate attorney when selling?

    Most real estate transactions occur without the seller using an attorney. The real estate agent is obligated to be acting in your interests. But remember, the selling process involves many contracts, including the one with your real estate agent to sell your home. An agent is not qualified to give legal advice. When in doubt, consider hiring an attorney.

  • Read and understand every document before you sign

    The homebuying process involves a mountain of paper for sellers as well as buyers. The first contract you'll sign will be the agreement with your agent to sell your home. Make sure you read and thoroughly understand all the provisions before you sign. Typically this agreement will give the agent a time limit to bring you a qualified buyer before you can choose another agent. It also establishes the commission. Be serious about selling your home before you sign, too. In most agreements you are obligated to pay the commission if you reject a qualified buyer willing to pay your asking price.

    Understand the details of each Purchase and Sale Agreement submitted by prospective buyers – particularly contingencies, who's responsible for what expenses, and items included with the sale. You may reject any offer if you don't like the terms. You can counter-offer with terms that are acceptable to you. For any agreement, don't allow yourself to be rushed. Get unbiased legal advice if you need it. Once you've sign, you'll have to live with it.

  • Get all agreements and contingencies in writing

    This goes for sellers as well as buyers. Don't rely on verbal understandings. Get everything in writing and have it signed by the buyer and seller. Your agent should help you do this. Common things you should look for...

    • Itemized list of what is included/excluded with the home – If there are appliances, plants, or fixtures you want to take with you when you move, make sure you have an exclusion list added to the Purchase and Sale Agreement or in a separate contract signed by the buyer. If there are furnishings not typically part of a home sale the buyer agrees to purchase from you, you can also add these to the agreement. Your agent should advise you what fixtures you are legally required to leave behind.

    • Include the contingencies you need – Contingencies are clauses in your Purchase and Sales Agreement that allow you to escape the contract if certain things happen or don't happen. Though most contingencies protect the buyer, sellers can have them as well. Sometimes sellers will make the sale contingent on them securing their next home.

Consider DCU Realty

Several years ago, DCU started its own real estate agency to give our members in Massachusetts and New Hampshire the best possible value when buying or selling a home. Visit DCU Realty for more information.