If you are thinking of buying a home, you have many options when it comes to who will represent you -- from your relative or friend who is in the industry to the amiable realtor you've seen on signs throughout your neighborhood.
But before you dive in with the first person you meet at an open house simply because you think they're "nice," it's a good idea to stop and think about some other factors that go into someone being the right agent for you.
A likely initial concern will be about the whole commission/money element. (Even though buyers don't pay the commission, it still can play a huge role in the equation.) But there are other common questions, whose answers can influence your decision-making process:
Shouldn't I just work with the person who has the listing on the property I'm interested in? That way, I can save money since that agent will reduce their fee because they have both sides of the transaction.
This term is called "duel agency." And although this delicate balance can be achieved by a select number of professionals, as a potential home buyer, be sure to consider the following:
- Most listing agents, when securing a listing, will offer an incentive to the seller of a reduced commission if the agent represents both sides. This fact may hurt your ability to truly receive added value because the value may have already been negotiated away.
- Your contract to purchase the home with the listing agent is far less "a sure thing" than the contract between the same listing agent and the seller. So when it comes to the strength of the loyalty between you, as the buyer, versus that of the listing agent and the seller, consider that your bond is of silly putty while theirs is bound with rope. If your deal falls apart, the listing agent still has a contract with the seller. With you, there is nothing.
- Just because you have secured the property through the initial negotiation doesn't mean your negotiations and due diligence are complete. Quite the contrary: this is when you really need an advocate for you, to assist and guide you through the process of making sure the property is sound. And should issues come up, you want your agent to be fighting for your interests. (Refer back to the previous item above.)
Shouldn't I just work with my friend or family member because they will credit me back some or all of the commission?
Although the gesture is gracious, understand that you still need a quality negotiator and protector of your interests. Does your cousin really have the chops to take care of you?
- Will your business relationship strain your personal connection with your best friend - or vice versa? Is that something you're willing to risk?
- Is your friend an expert in the area, knowledgeable with local ordinances and codes? Most importantly, do they have good relationships with the local brokers, who may have information on the market that could specifically affect the value you pay for your home?
- The fact that your friend is gifting you a percentage of their commission - or deducting it from the purchase price - may be the license for them to not give you their full attention through the transaction.
- "Gifting" commissions is a very dangerous prospect and comes with treble damages to both the Giftor and Giftee if discovered by those that have the authority to levy such penalties.
At the end of the day, you can choose whomever to be your agent. Sometimes going with your gut can be as good of a barometer as any other. But, regardless: be sure that you learn about your potential agent's real estate acumen before making your decision.
How well do they know values in the areas where you are looking to purchase your home? Can your potential agent articulate the pulse of the market through data and statistics that you can understand?
Ask questions about their negotiation style. Find a style that meshes with both your sensibilities and your integrity.
Ask your agent how they "close" when working on your behalf. Do you agree with their strategic approach? Win/Win, Win/Lose, abrasive, soft sell -- these are all different techniques that work, but which one works for you? Because you must figure that their business methods for working with the other side of the negotiating table will also going to be the same way they engage with you. So pay attention to this aspect of who they are.
Look to find the real value of your agent from their expertise, strategic guidance, and how they aim to protect you. These "intangibles" will ultimately prove to have far more short-term and lasting value than the seductive allure of fewer upfront commission dollars.