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A real estate agent is a great asset as he or she has the access to the Multiple Listing Service (MLS) and can show you houses listed for sale. It is efficient to have someone who has the expertise do the search for you and guide you through the process. A real estate agent's commission is usually paid by the seller, and therefore it usually does not cost you to use one. There are exceptions, however, as in the case of For Sale By Owner (FSBO), which will be discussed later.
How do you know who meets your requirements? Interview real estate agents on the phone and in person. Ask your friends, coworkers, and family for referrals. Make sure you ask what makes the referred agent stand out. Go to free house-buying seminars or a community training class. Make a list of the names you get and start calling them. Look for experience, familiarity with the area, availability, training/education, and professionalism. Each of these factors is discussed below:
Knowledge and Experience : You are making a major investment. Don't leave it in the hands of someone who still is learning about the real estate market. Knowledge and experience are two different things. There are agents who understand the real estate business very well, just lack the years of practice. Then there are real estate agents who have been at the job for years, but know nothing more than showing the house, filling out a contract form and escorting you to the closing. The number of years an agent is in the real estate business may not say much about his or her qualification as your agent. It is ideal to work with someone who is both knowledgeable and experienced. If not, find one that is willing to work with you, understands you needs and is honest. This can't be emphasized enough. You need to find someone that you can trust with what is probably the largest purchase of your life.
Availability : While many good agents work part-time, you may want to work with someone who is available to show you a new listing during the week or on the weekend. With multiple offers being the norm in the last few years, the longer you wait to see that new listing, the less chance you have to put in an offer. A particular house may be gone by the time your part-time agent finds the time to show it to you. This also applies to top agents. What good is it if the agent can't find the time to show you a house and spend as much time as necessary with you? You are better off to work with someone not on the A-list but has the time for you. This is not to say that part-time agents are not worth considering. Due to a smaller number of clients they may give you more attention and better customer service.
Training/education : This tells you about the agent's commitment to his/her profession. Those who earn a GRI (Graduate, REALTORS® Institute) designation have to go through some modules and exams. Another professional designation you may want to look for is the ABR (Accredited Buyer Representative®). Those with ABR designation specialize in representing buyers. Agents who do not have ABR designation still can represent you. Having all of these abbreviations behind ones' name does not make him or her the best real estate agent, however. Interview more than one agent to find one that meets your needs. To some people it comes down to personality compatibility.
Professionalism : Look for someone who takes his or her job seriously, respects you as a client, and listens to your needs. The ability to listen is critical. While you turn to the agent for professional assistance and advice, the house must meet your needs. Watch out for those who are too pushy and don't take "no" for an answer. The ability to follow up is very important. That is how things get done. Good organization skills are pluses. Sloppiness is a concern. While interviewing agents, ask about any additional, related skills. Many agents start out in the construction, home inspection or loan business. Know your agent's many strengths and tap into them.
Buyer Agent
In the past, it was common for the same agent to represent both the seller and the buyer. The agent listed a house for the seller and tried to sell it to buyers. This is called "dual agency". If this sounds wrong, you are on to something. How can one agent stay neutral and act in both parties’ best interest? For example, trying to get the best price for the seller would obviously conflict with the buyer’s interests. Regardless of what the contract terms, "dual agency" does not give you the best service.
Recognizing the problem of "dual agency," many real estate agents are dedicated solely to buyers and serve as "buyer agents." If you prefer to work with a buyer agent, look for one with ABR (Accredited Buyer Representative) designation. These agents will represent you, the buyer, and are obligated to act on your best interest. Buyer agents will want you to sign a buyer agency contract. Before you sign a contract, ask if you can go out with the agent to look for a few houses. This will give you a chance to see how the agent works and whether his/her experience and expertise suit your needs. When you feel comfortable enough to sign the contract, sign it for the shortest amount of time possible. You can always renew the contract, but you should give yourself an option to get out of it should you become dissatisfied with the agent.
Read the contract very carefully. Ask questions about fees and how the agent is paid. Some agencies charge the buyer a couple of hundreds dollars for administrative fee to cover the costs of paper work and driving the buyer around to see houses. See if you can have this fee waived. In many ways, this should be the cost of doing business, and you should not be asked to pay for it. As discussed above, most of the time, the buyer agent is paid by the seller, i.e., the commission is split between the seller agent who lists the house and the buyer agent who finds a buyer. It is tricky in a For Sale By Owner (FSBO) situation if the seller does not pay commission to an agent. Ask up front how this will be handled. You may need to have a special section in the buyer agency contract to address it. One option is to have a "transaction agency" addendum or contract under which the agent will help you with sales information and writing a contract but is not obligated to showing you a house.
Real estate agents come in all shapes and sizes. Interview them, ask questions, spend some time to get to know them. Find one that you are confortable with, who is open and honest. Integrity has no substitute.
Other Alternatives
As in most businesses, the Internet has become a great tool to improve efficiency and effectiveness in real estate. Your agent probably won't need to show you every new listing in a particular location to find you a house. Besides the traditional features of the listing such as number of beds and baths, many real estate web sites also list the address of the property. Buyers usually know the area well enough to decide whether they want to see the house, or they can just drive by sometime. As a result, real estate agents spend less time than they used to showing houses (although they may spend more time consulting clients).
Those who take advantage of the Internet realize that if they spend less time showing houses, they can serve more clients. Giving buyers a cash back, i.e., splitting some of the commission with the buyers, can attract more buyers to the business. You can search for a real estate agent by entering the zip code. The search results will show you the names of the agents, their qualifications and their specialties. Remember that regardless of how you find a real estate agent, you need to interview him or her as you would a "traditional" agent.
For those of you who are Internet and business savvy, this is not a bad approach. You can save hundreds or thousands of dollars toward your closing costs. If you take an active role in the process, you will probably do some of the work yourself anyway. So why not make your real estate agent compensate you for your time? Beware that this method of house-buying is relatively new and is not for everyone. Some agents from these "start ups" may not have the knowledge and experience of "traditional" agents.
If you don't know any real estate agents to start with, ask your family, friends, coworkers or attend homebuying seminars or classess. Or you can search on the Internet. There are some web sites that allow you to search for a real estate agent. You can specify the type of house you are looking for, the price range, and other requirements. Agents who are interested in your bid will contact you with their information and qualifications.
The companies below offer real estate agent search and cash-back programs for homebuyers.
ZipRealty.com
ZipRealty provides a list of real estate agents specific to neighborhoods in a city or county. You can check for the agents' experience, neighborhoods covered and credentials before contacting them. ZipRealty also gives cash back to buyers if they close the house with a ZipRealty agent. Once on their home page, click on "Meet Our Agents" to check out their agent database. For now, ZipRealty only provides services in a few states.
HomeGain.com
Based on the criteria that you provide on your request form, HomeGain will find Real Estate Agents in your area that match your criteria. The Real Estate Agents will contact you with their background and commissions. You can compare their proposals without any obligation.
Contract and Negotiation
Buying a house is a business transaction, so treat it as such. Do not let your emotions cloud your ability to make sound decisions in negotiating the price and terms. A cover letter to the seller adds a personal and professional touch at the same time. If you are a first-time homebuyer who will take pride in owning and maintaining good care of your home, say so. Houses have personal value to many people, and they will want to see their houses well cared for in the future.
In theory, your agent or broker will check out the comp sales (sales of comparable houses) to assist you with the offer price. In this tight market, comp sales do not mean as much. The next house in the same neighborhood usually goes for more than the last house sold, and multiple bids are the norm. Escalation clauses have become popular.
An escalation clause is a contract provision or addendum that stipulates an increase in price should there be a higher offer, up to a specified amount. For example, imagine the asking price is $278,500; it is a hot market, and you know there will be multiple offers. You make an offer for $279,000, and put in an escalation clause that will increase the price by $500 above the highest offer, up to the amount of $285,000. Then, if another bidder were to offer $280,000, the escalation clause would kick in, and your escalated offer price would be $280,500. (This gets more complicated if counter offers also
have escalation clauses built in.) In your escalation clause, you should request a proof of the trigger. Otherwise, you will not know whether there is really a higher offer or you are being duped into paying a higher price. Note that escalation clauses invite bidding wars that do not always pay off. You may eventually feel that you don't have a choice after losing several contracts. But try to stay rational, and don't let things get out of hand.
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