You need to decide whether you want to be represented by a Realtor. There are many of them out there and making this choice up front will save you from choosing one poorly later on. More on that later.
Why would I not enlist the aid of a Realtor? The most common reason is that the Buyer assumes that some commission can be saved. They reason, “If I don’t bring my Realtor to the deal, then the Seller will save half of the 6% commission.” Sounds good, but here is the problem. The Seller wants to save that 3%. You want to get a 3% better deal.(When talking about For Sale By Owner FSBO properties, you both want to save 6% with no Realtor involved.) Problem is, you can’t both save the same money.
A Realtor is going to have access to more properties, especially in a time when there are relatively few homes on the market. They may know of someone that is ready to sell and just needs a little encouragement, and the Realtor could tell them about your interest in the neighborhood to nudge them along to a decision. Another Realtor in their office may have a listing coming in that you could grab before it goes on the MLS in front of thousands of hunting Realtors’ eyes.
By the way, a licensee or agent is not the same as a Realtor. Anyone who passes the exams can be a licensee. To be a Realtor you must take additional courses, in some jurisdictions, relating to customer service and ethics. Realtors must also pay to belong to that Association of Realtors. The cost is relatively low. There are some fine non-Realtor licensees out there but almost always the Realtors look at them as slightly outside the envelope. I recommend working with Realtors.
What could go wrong if I just start looking? Well, some Realtors are very persuasive. They may not have much experience but their skill at talking you into using them can be very high. They have a real interest in getting your business. The last time I checked, the average agent did 1.7 transactions per year. When you consider that twenty percent of the agents do most of the business; the odds say the Realtor you run into casually probably did one transaction in the last year, or none. That is not the person you want to have handling the most important business transaction in life to this point.
SEE CHECKLIST ONE – FINDING SOMEONE TO REPRESENT YOU, at the end of the book.
Team Realtors can be very effective, but they can also be casting inexperienced junior agents under the wing of a senior Realtor. If the one you get can’t answer the questions above personally, and they keep referring to what the team did, you might want to consider finding someone else.
Real estate representation is both an art and a science. The art segment is carried under the rules of knowing when to push and when to back off. We see it so many times that the Realtor who has little experience will push VERY HARD on elements of the transaction to prove that they have earned their commission. The huge difference between a pushy obnoxious Realtor and a positive encouraging one can make all the difference in a transaction.
Story – An inexperienced agent insisted that the final walkthrough on a home could not occur until five days or less before closing. So when the date for doing the walk arrived, she told her client to wait. She also insisted that the Buyer not lock their interest rate until they fully understood all the charges from the preferred lender and had an estimate from Escrow as well. As rates changed, so did the necessity for a new estimate. Same Realtor told her client not to sign loan documents before the walkthrough. Since the process to close after the signing usually takes four to seven days, she had them stuck in a never ending loop. Result – the transaction closed a month late because of the inexperienced agent.
So decide on whether you want representation and then stick to your guns. If you decided not, then don’t let some agent talk you into using them because they happen to be the listing agent, or happen to specialize in the neighborhood you want.
About Buyer Representation Agreements. Really good Realtors use these. Inexperienced agents will drive you around in their car and just hope you stick to them. Read the agreement carefully and based on local conditions, sign up for a reasonable period of time like a month or two. Realtors have a very high cost for helping Buyers, the loss of their time, the loss of a portion of their life. So unless you are serious and ready to make a purchase, do the fair thing, don’t use a Realtor. If you just like looking at homes, go to the new home tracts and tell them when you walk through the door, “We are just looking for decorating ideas.”
Story – I drove a couple, and occasionally one of their friends, around for two weeks and they finally found a house they wanted to buy. When I asked if we should write it up, the husband said, “No, we’ll have my Mom write it up. She is a Broker.” So the mom was lazy and didn’t want to use her time driving them around. I was used and abused by this couple, which of course was totally unfair.
As you can imagine, I personally would not tour a Buyer who was not willing to sign an agreement. The experienced Realtors, the kind you want representing you, will insist on it. Consider this; if a Realtor cannot be forceful enough to get the kind of contract they need with you, how will they ever be able to negotiate your transaction?
If you decide against being represented, you are on your own. You must be extra careful to read everything that is put before you as you sign it.
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