Buying or selling a home can be daunting. In fact, it can be a full-time job. For many people, it makes sense to hire an expert to handle the time-consuming tasks and the nitty-gritty details. Real estate agents can take work off your hands and also help you get a better deal.
Your seller's or listing agent will advertise your home, walk buyers through, answer questions and help you through the negotiation phase. If you're trying to buy, you can hire a buyer's agent who is familiar with your preferred locations. He will recommend neighborhoods that fit your preferences, and he'll also warn you about possible drawbacks -- like the nearby factory that will wake you up every morning at 5:00 a.m. But not all agents are the same. Some may take advantage of your inexperience and end up costing you a pretty penny.
Since your house is one of the biggest investments you'll ever make, no one should judge you for being more than a little choosy about whom you hire to help sell or buy it. Find an agent whose philosophy and methods align with your preferences. And be prepared to interview at least two or three agents to find the right person. Asking the right questions will help you gain insight into the agent's capabilities and personality. Of course, he or she should offer stellar references and be thoroughly familiar with your neighborhood. In this article, you'll find several essential questions you should ask to help you make the best choice.
First of all, you want to find out what others have to say about the agent. On the next page, we'll learn how to find out if past clients loved an agent's work or think you should steer clear.
Like anyone put on the spot in a job interview, a real estate agent is likely to emphasize all of his positives -- sales records, qualifications, experience and so on. But what he won't be able to tell you is what it's like to work with him day to day.
For this reason, whether you're buying or selling your home, you should always ask your real estate agent for references. Call a few of the references and ask previous clients about their experiences with the agent. Were they pleased with the work he did? Was he easy to get in touch with? Did he keep them well informed? Would they recommend him to others?
In the real estate business, word of mouth recommendations are as good as gold, so a positive review from a past client will give you a good idea whether the agent is worth your time. However, be sure to ask the references if they're related to the agent -- a reference list made up of friends and relatives probably won't give an unbiased assessment of the agent's positive and negative qualities.
In addition to information about himself, the real estate agent should be able to hand over information about the neighborhood in which you're buying or selling your home. Next we'll find out how prepared he is to fill you in on the current market.
Every real estate agent should be able to give you a comparative market analysis (CMA), which is a listing of homes currently for sale and recently sold in the area. The CMA (known informally as the "comps") will compare the details of your home with similar homes on the market, and includes specifics like price, square footage and number of bedrooms. This is your starting point for knowing how your home measures up to others that are selling in the neighborhood and, most importantly, at what price you should list your house. An experienced real estate agent will make this part of the process a priority.
A CMA can give you a lot of important information. For example, what types of homes and home features seem to be the most popular for buyers in the area? What are homes with similar features to your own selling for? How long are homes like yours staying on the market before they sell? Arming yourself with this information is a great way to help develop a realistic view of your home's value and sales potential. It will also help you monitor whether you agent's advice is in line with the current market trends.
But knowing the sales figures for area homes can't tell you everything. Sometimes it takes an expert eye to pick up on the subtle clues to an area's growth trends. The next question digs a bit deeper into your agent's intimate knowledge of the neighborhood in which you're buying and selling.
When it comes to recognizing trends in the market, real estate agents are on the front lines. They see a lot of growth and decline -- some areas can turn from a swamp into a bustling residential area in just a few years, while others can transform from a highly desired neighborhood into foreclosure city in no time. As your window into the real estate world, your agent should be aware of what the growth and decline trends are, and help you find an area that has a positive outlook.
It's easy for most people to see that the neighborhood with lots of boarded up homes might not be growing, but often the signs are much more subtle, especially in the early stages, and your real estate agent can spot the clues. Things like neighborhood activity, street maintenance and the type and number of small businesses in the area can all point to the neighborhood's growth trends. A good real estate agent will be able to tell you if the home you have your eye on is likely to be a good investment based on everything else that's happening around it.
Your real estate agent should be intimately familiar with the neighborhoods in your area -- it's his job, after all, to know the territory well. This type of knowledge often comes through experience, and sometimes agents even work together to share knowledge and expertise. The next question will help you determine whom exactly you'll be working with.
These days real estate teams are pretty common. Whether it's a pair of agents who share the work, a single agent with a support staff behind her or a group of several agents all under one business name, you'll want to know with whom you'll be working.
There are both positives and negatives to working with real estate teams. One drawback to a team is that you might not always be working with the individual you hired. If you call to ask a question, the agent you're familiar with might not be available or the one who speaks with you. On the other hand, a team could mean that you'll get more attention and personalized service, especially if there are people taking care of the behind-the-scenes work for your agent (allowing her the luxury of more face time with you).
If your agent is part of a team, find out what aspects of the work she handles personally and whether you'll be in contact with the other team members or only your agent. Will the number you call her on be a direct line, or will you be speaking with a secretary or possibly another agent or partner?
If the agent works solo, finding out about her current workload is key. Next we'll inquire about the agent's other obligations -- after all, how else will you ensure she's available when you need her?
This is a tricky question, so you'll have to know ahead of time what you consider to be an appropriate figure. While there's no magic number for how many clients an agent can effectively handle, a number that's staggeringly high, like 40 listings or 15 buyer clients, could indicate that her time will be divided and you won't get much one-on-one attention. Working with an agent who's difficult to reach or who's constantly with other clients could lead to a frustrating experience for you, or even a negative impact on the sale of your home. An agent whose attention is too thinly spread might not take the time to ensure all of your needs are met and could even rush the process by listing your home at too low a price.
On the other hand, too few clients could signal an agent who doesn't have much experience or who hasn't been well recommended by previous buyers and sellers. Or, this could be a side gig for her which may or may not command much of her attention. Since word of mouth is key in the real estate business, the best agents are likely to have a full workload.
You'll need to weigh the pros and cons to find out if a busy agent can meet your needs, or whether you're willing to compromise experience for more personalized attention.
You can't sell a house until buyers know it's there. On the next page, we'll learn how to ask about what the agent will do to get the word out.
Posting a for-sale sign in your front lawn is all well and good, but you can do that yourself -- without the aid of a fancy Realtor. But what about potential buyers who don't happen to drive by your particular street? Out-of-towners who are moving to a new area usually don't have the time to comb the streets of every neighborhood to find a house. In this age of a limitless information superhighway, it's much easier to break down geographic barriers that connect sellers with buyers. This means your options expand along with your competition, so it's imperative to think beyond the yard sign.
One of the biggest advantages that a real estate agent offers you is his access to resources for marketing your home. Ask each agent you interview to spell out his marketing plan for getting your house sold. A good agent will post your house on the Multiple Listing Service (MLS) immediately after signing with you. The MLS is a system of databases which lists homes for sale and gives your house broad exposure to homebuyers.
An agent should market your house in other ways too. Print advertising includes ads in newspapers and magazines, or brochures and flyers like the ones you see in waiting rooms and at the entrances to restaurants. However, one of the most common venues for selling homes is the Internet. According to the National Association of Realtors, the Internet is used to find a home 88 percent of the time. Web sites like Craigslist, Yahoo! Real Estate and Realtor.com have exploded in popularity as places for buyers and sellers to find each other, and there are scores of others you can use. Most realty companies even have their own Web sites where you can search their MLS listings.
During this conversation, you should also find out whether the agent has plans to hold open houses. How soon and how many?
After all this hard work marketing your home, what do you owe your agent? Read the next page to find out what to ask about compensation.
During the interview, you'll want to talk money. Most agents don't charge a flat fee but take a percentage of the home's final sale price. This percentage varies with each agent, but the commission typically hovers around 6 percent of the selling price. This fee can be a hefty sum. So, if you're the seller, you may want to ask if it's negotiable.
The negotiability of agent commission can depend heavily on the market. In a booming real estate market, commissions might dip lower because homes are easier to sell. On the other hand, when the market is tight an agent might be less likely to budge on her fee. But it doesn't hurt to ask. If the agent commission is a sticking point, consider ways that you can offer to reduce the agent's workload or costs in order to get her to negotiate to a lower rate. For example, you could employ your superb cooking skills to cater your open house. You might also get a discount by using a single agent for both buying a new home and selling your old one. If the agents you interview agree to negotiate the fee, check to see whether that decision would sacrifice the level of service.
Along with commission, it's also important to discuss the agent's cancellation policy. Consider what would happen if, after signing an agent, you hear that your father's brother's nephew's cousin's former roommate is interested in buying your house? Or, what if you happen to stumble upon your dream home on your own with no help from your buyer's agent? Find out if she would still be entitled to the full commission. Maybe you'll just become unhappy with the realtor or agent somewhere down the road before the contract expires. Ask about what kind of early cancellation fees may apply to you. A great way to get a feel for the agent's professionalism and tactics is to ask how she's dealt with this situation in the past.
Or has she dealt with much in the past at all? Next, we'll inquire after the agent's experience to dig up some telltale dirt.
An agent's experience is more than just how many years he's been in the business. Other details can give you more insight into his success. One factor that speaks volumes about a seller's agent is his list-price-to-selling-price ratio. You get this ratio by comparing the original list price of the property to the price at which it eventually sold. A good agent will come prepared with this number. The rule of thumb is to choose an agent with a ratio as close to 100 percent as possible, which means that his home's final sale prices have been close to the listing prices.
However, after you hear the number -- even if it's impressively high -- you still might want to inquire into the reasons behind it. Perhaps the agent usually has a house sit on the market for a long period of time to get the best price. Depending on your situation, you may or may not have the luxury of time on your side. A low number could reveal that the agent pushes sales too quickly. Although logic tells you that an agent is interested in a higher price to get higher commission, time is sometimes more valuable to him. In the agent's mind, he'd be better off spending that time selling other houses.
Another aspect of a real estate agent's experience you shouldn't overlook is the types of property he's sold in the past. Perhaps all of his experience is in selling condos -- but you have a large estate. Or, an agent may specialize in commercial -- rather than residential -- property. Appropriate advertising methods and knowledge of the market will vary greatly depending on the kind of property you're selling, and his expertise may not be strong for your particular needs.
If you're a homebuyer, finding an agent with expertise in a particular locale will be a big asset to your search. A qualified buyer's agent will be able to take your present and future needs into account to find you the neighborhood and property that fits you best. For instance, if you have children you'll probably want to find a neighborhood with good schools.
Now that we've looked into his past, let's peer into the future to see how your potential agent will work with you.
In most relationships, communication is key. Your partnership with your real estate agent is no different. You need to know, up front, how he will keep you in the loop. This means finding out several factors like what kinds of news he'll update you on, the frequency of updates and how the agent will communicate them. Will your listing agent let you know about every interested buyer, no matter how serious?
If you're a buyer, there are a number of details to handle, even after a seller has accepted your offer. This includes home inspection, reinspection, mortgage paperwork, title search, title insurance, repairs and other items. Will you get a weekly update, or just on an as-needed basis? Will it be with a phone call, an email or both? You may have your own preferences, and the agent may or may not accommodate them.
Ask for details about how accessible the agent will be for you, since you'll have questions and concerns throughout the selling or buying process. Find out what business hours he keeps and -- at the risk of sounding like a stalker -- if you can call him outside of those hours on his cell or home phone. Whether he answers e-mails in a timely fashion will also become important down the line. Hopefully, he'll have positive responses to these questions, but it's always smart to verify them when you check his references.
Our final question might sting a little -- it's time to turn the tables and ask the agent to deliver some bad news.
Although it may seem counterintuitive, asking a real estate agent to evaluate the flaws of your home is a great way to learn other important information during the interview.
For one, if the agent tells you what sounds like legitimate drawbacks, then you know he has a seasoned, keen eye. Not only that, but you'll be able to see that the agent is honest and isn't just going to sweet-talk you into signing a contract. On the other hand, if he doesn't point out what you already know are flaws, this could be an indication that he may have only a half-hearted dedication to selling your home.
What's more, regardless of what it tells you about the agent, you can use this information in the selling process. Knowing your home's disadvantages will give you an opportunity to fix them and a more realistic expectation of the home's market value.
Overall, it's a good idea to hire a real estate agent you think will seek out your best interests. Even gut feelings can tell you something. You don't want to entrust such an important transaction to someone who doesn't make you feel comfortable.
How do we rebuild communities in the wake of the foreclosure crisis? Keep reading to learn how to rebuild communities during a foreclosure crisis.
- How Selling a House Works
- How Buying a House Works
- How Mortgages Work
- How Subprime Mortgages Work
- How Home Equity Loans Work
- How House Construction Works
- How Rent To Own Homes Work
- How Housing Cooperatives Work
- 6 Tips for the Real Estate Closing Process
- 10 Things a Home Inspection Doesn't Cover
- 10 Things to Do Before You List Your House
- 5 Staging Do's and Don'ts
- 10 First-time Homebuyer Mistakes
More Great Links
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- Geffner, Marcie. "The Seller Listing Agreement: What's It All About?" REALTOR.com. 2000. (July 25, 2008) http://www.realtor.com/Basics/Sell/ListAdvert/Agreement.asp
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- HUD. "Interview with Real Estate Brokers." U.S. Department of Housing and Urban Development. July 7, 2004. (July 25, 2008) http://www.hud.gov/selling/intrview.cfm
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- Lewis, Marilyn. "Find a Super-Star Real Estate Agent." MSN Real Estate. (Dec. 27, 2011) http://realestate.msn.com/article.aspx?cp-documentid=13108475
- Mullins, Luke. "6 Signs of a Crummy Real Estate Agent." U.S. News & World Report. July 14, 2008. (July 25, 2008) http://www.usnews.com/articles/business/real-estate/2008/07/14/6-signs-of-a-crummy-real-estate-agent.html
- National Association of Realtors. "Field Guide to Quick Real Estate Statistics." Nov. 2011. (Dec. 28, 2011) http://www.realtor.org/library/library/fg006
- Pasmanick, Zac. "Why Buyers Choose Me." The Zac Team @ RE/Max Greater Atlanta. (July 30, 2008) http://www.mlsinatlanta.com/index.asp
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- Todorova, Aleksandra. "Selling A House? Fees Are Negotiable." Wall Street Journal. April 8, 2007. (July 25, 2008) http://online.wsj.com/public/article/SB117599477375063261.html?mod=sunday _journal_primary_hs
- Total Real Estate Solutions. "Ten Questions You Must Ask a Realtor Before You List or....You Could Lose Big!" (Dec. 27, 2011) http://www.totalrealestatesolutions.com/articles/disp.cfm?aid=205&typeid=1&CFID=107772948&CFTOKEN=58381108
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