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Can You Trust Your Residential Real Estate Agent?

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Four years ago when I was writing snail mail newsletters, I wrote one about residential real estate agents. I opined that there were far too many agents in the business and that many of them were unprofessional. The hate mail I got was amazing.

Today, as thousands of fringe agents leave the business, those who remain will be individuals who see real estate brokerage as a career. A career means longevity and these agents will generally be more business-like and ethical than agents of old.

That does not, however, necessarily mean you can trust your residential real estate agent.

The most important point to understand about agents, of course, is that they are only compensated if a sale goes through. So, like any profession paid by commission, the agent has a strong incentive to see you close a deal. This pressure can at times cause some agents to push a little too hard - and yes, to even distort or color information that may be relevant to your decision to sell or buy.

What's more, the residential real estate agent business is essentially unregulated and until agents police themselves (or the States do it for them), there will be agents whose loyalty is not to you but to the commission. They will do and say and act in a way that is only conducive to seeing a deal go through. If your best interests get hurt, well that's business. (By the way, there are also great, honorable agents - so if you're an agent, skip the hate mail.)

So you need to protect yourself. Not only do you need to be sure you are using and working with reputable people (ask everyone you know for referrals), you can do your own homework. There is an incredible amount of information available to you re comparables (www.zillow.com), listings (www.realtor.com), and recent sales and specifics about sold properties (your town hall). No longer do you need to take at face value everything your agent tells you.

Many experts miss how powerful the residential agents are. They control the flow of information, they speak directly with sellers and buyers, they regulate the tempo of negotiations, they see things before others. Because of that, they have a lot to do with prices on sales and purchases. In fact, I believe that experts who claim housing prices will not rebound until 2011 and then perk along at yearly increases comparable to inflation (2% - 3%) are missing the point about residential agents. (See Wall Street Journal, December 2 - "The Future of Home Prices.")

Once the market stabilizes, residential agents will once again be pushing the benefits of home ownership. They will be pressing sales (to earn commissions) and moving buyers and sellers to act quickly. They will be negotiating with intensity and increasing the pace of transactions. As a result, in my view, housing prices will appreciate at levels several notches above inflation. Experts who think otherwise are treating the housing market like the stock market - with a mechanized system of selling and buying. Thanks to the residential real estate agent, there is nothing mechanized about residential sales.

Jim Randel is the author of The Skinny on the Housing Crisis (Clover Leaf 2008), Confessions of a Real Estate Entrepreneur (McGraw Hill 2006) and The Skinny on Willpower (Clover Leaf 2008)

www.jimrandel.com