How Buying a House Works

Real Estate Agents

Do you need a real estate agent to buy a home? Absolutely not. Anybody with an Internet connection can search and view homes on the market. You can customize your search by price range, number of bedrooms, style, and location, and even contact the sellers to arrange a showing. But with so many tools at our fingertips, why do most people still use a real estate agent?

To answer that question, we first need to define our terms. Real estate agent (or realtor) is the general name for someone licensed by the state to help people buy and sell homes. Real estate agents provide a huge advantage because they know the process and the paperwork; they have relationships with lenders and understand the local market.

However, as a homebuyer, it's important to understand that most real estate agents are working for the seller, not you. The reason is simple; the seller is the one who pays the commission when the home is sold, not the buyer. Since the real estate agent's commission (usually 5 to 7 percent) is higher when the price is higher, it is in the agent's interest to secure the highest sales price.

Keep this in mind if you contact a real estate agent directly regarding a specific home that you find online. While the agent may be a perfectly decent and ethical individual, the simple fact is that he or she is not working for you. Your agent is working to sell the house. In fact, he or she is bound by contract to try to get the best deal for the seller.

Another thing to understand is that most real estate agents work for a specific agency. If you call up George from Howard Hanna and ask him to show you some properties, he'll likely show you homes that he's listing first, then homes that other Howard Hanna agents are listing. For him, it simply makes the most financial and business sense. But for you, it limits your choices.

The best type of real estate agent for a homebuyer is a buyer's agent. This individual signs a contract with the buyer to help find the best house for the best price, regardless of which person or agency is listing the house. We'll talk more on buyer's agents on the next page.