Real Estate Guide: Is Your
Agent Working for You?
Don't Take it for Granted that any Realtor you Meet is on Your Side
It's hard to go through the home buying process without having a good real
estate agent on your side. The process of choosing a realtor seems simple
enough: you go to the nearest real estate agent's office and they show you the
houses they have available. If you find a property you like, the home buying
process is over. If you don't, you wait a little longer or try another realtor.
But don't move onto our
mortgage articles
just yet. There are several
different types of real estate agents, each with very different priorities and
they're not easy to tell apart. In order to make sure that you're getting the
best information and the best deal when you're buying a home you need to know
which type of realtor you're dealing with and which type you want to deal with.
Choosing the right real estate agent is almost as important as choosing the
right real estate.
The three main types of realtors –
and a few tips on what they can and can't do for you – are listed below:
1) Sellers' Agents
Most real estate agents do most of their work as a seller's agents. This means
that they have an agreement with the owners of properties that are on the
market: the seller allows the realtor to try to sell their home by showing it
to buyers and marketing it to other agents. In exchange, the seller's agent
receives a fee, usually a percentage of the home's final sale price.
Not surprisingly, the primary loyalty of sellers' agents is to the seller.
Various legal and professional codes require that a seller's agent promote the
best interests of the seller and avoid telling potential buyers anything that
may be detrimental to the seller's interest.
Of course, these same codes require that a seller's agent not deliberately hide
important information from potential buyers. If a seller's agent knows a home's
foundation is cracking they have to let the buyer know about it. However,
throughout the process their job is to get the seller the highest price
possible (and thus get themselves the largest commission possible).
If you're a seller, deciding how to select a seller's agent means figuring out
how well connected, how knowledgeable and how loyal potential realtors are.
2) Buyers' Agents
If a seller's agent is like a prosecuting attorney than a buyer's agent is like
a defense lawyer. A buyer's agent is a real estate agent whose primary
objective is to get the buyer the lowest price possible on the home they want. A
buyer's agent hunts around for homes that fit your needs and when it comes time
to negotiate a price, they represent you during the bargaining. Just like a
seller's agent is prohibited from giving away too much information to the buyer
during the sales process, your buyer's agent is prohibited from doing anything
that will hurt your chances of getting a property for the lowest price
possible.
Occasionally, buyer's agents may work for the same real estate agency as the
seller's agent representing the home you're interested in (this is known as a
“designated agency” arrangement). However, for the purposes of your transaction
the relationship is kept adversarial.
Of course, buyers' agents have to be paid. In some cases, buyers' agents simply
charge their clients a fee. However, in most cases both a buyer's and a
seller's agent are involved in selling a home. Oftentimes the seller's agent
will negotiate a deal to split their commission with the buyer's agent. When
this happens the buyer doesn't have to pay anything.
3) Dual Agents
In rare cases you can end up with a dual agent. A dual agent is a realtor who
is working as a seller's agent for a particular property and, should you become
interested in the property, serves as your buyer's agent as well. If it sounds
a little confusing, it is: dual agents are supposed to simultaneously be
representing your interests and the interests of the seller.
In these cases the dual agent is prohibited from sharing too much information
about one party with the other. However, if you do contract with a dual agent
it's best to remember that their loyalties are divided. Dual agent arrangements
tend to work best when the buyer is prepared to pay the seller's asking price
and both parties want to close the deal quickly.