Real estate stories radiate from the water cooler and cocktail parties like a brush fire out of control. Like early stages of fires, real estate transactions start out manageable, but occasionally real estate consumers fan the flames because of inexperience, and some real estate agents misplace the water buckets. How can consumers be more proactive before the fire starts? By asking qualifying questions of realty agents to determine if they carry a fire extinguisher in their briefcase.
Under license law whom do you have a fiduciary responsibility to?
Ask this question the first time you speak with a real estate agent. In some areas all agents have a fiduciary responsibility to the seller under license law, even if they are working with a buyer. In other areas unless you have a signed buyer representation agreement your agent under law must represent the seller. To add to the confusion, some states require agents to have a fiduciary responsibility to whom they bring to the transaction, be it the buyer or the seller.
How are you compensated?
The majority of agents are independent commissioned-based contractors of the brokerage with whom they’re affiliated. Real estate commissions vary from one to ten percent and can’t be fixed under anti-trust laws. The broker through a listing agreement with a property seller is paid a commission, who compensates the buyer’s broker cooperatively. Require your agent to show you properties that offer lower than customary cooperative commissions. If you retain an agent under a buyers broker agreement, you will compensate your agent’s broker. Brokers split their commissions with their agents usually keeping 5-50 percent for the brokerage and compensating the agent with the remainder on a sliding scale based on previous sales volume. This is known as the “commission split”. Agents can only be compensated by their broker and can’t receive compensation directly from attorney’s, home inspectors or any other non-broker under the Real Estate Settlement Act.
Do you show all available properties in the market I’m interested in?
Require your agent to show you all available properties listed by all companies. The problem with being shown only the agent’s or their companies listings is two fold. If you decide to purchase the agent’s listing, in most cases they will become under real estate license law a “dual agent”. State laws restrict what a dual agent can and can’t do for both sides in a transaction. Dual agency benefits the agent by doubling their commission, and offers no benefits to either the seller or buyer. When you purchase a property that is listed with an agent in your agent’s office it is known as an “in-house sale”. If you can be confident that the two in-house agents are acting in their respective clients best interest and the agents are not being awarded a bonus for selling an in-house listing, than you could proceed. Require your agent to disclose to you any property that they show you that they have an ownership interest in. Your agent should always show you For-Sale-By-Owner properties, isn’t it about your housing needs being met?
Are you a Realtor®?
Not all real estate agents are Realtors®. Industry sources report that there are 2.6 million real estate agents nationally. Only 1.1 million are Realtors® or members of the National Association of Realtors®, who are required to have ethics training which defines their obligations to clients, customers, the public and other Realtors®. Working with a Realtor® adds another option for dispute resolution should you need it.
Have you been disciplined by your licensing authority?
All real estate agents are licensed in states where they sell property. Ask to see their current real estate license. Find out the name of the department in your state government who regulates real estate agents, go on-line to the website to look up information about your agent’s license status, including disciplinary actions. Most brokerages require real estate agents to have errors and omission insurance, ask your agent if they are covered under this type of policy.
How long have you worked full-time in real estate?
Your home sale or purchase is one of the largest assets you own. Would you use a new or part-time accountant to fight the IRS? It takes an experienced full-time agent to be up-to-date on market inventory, documentation and property histories. Using a rookie or part-time agent is the best way to fan any real estate transaction fire.
Will I be working exclusively with you during my property sale or search?
You want one person to assist you on all aspects of the sale or a purchase of a home. You should not get passed around from one half of a real estate team to another, to a personal assistant or a back-up agent when your agent is unavailable. You are focused on your home search or sale and so should your real estate agent. Your agent should accompany you to all property showings, how else can they see your reactions to have knowledge of the property? If the personal assistant is assigned to do your final walk-through and didn’t attend the home inspection, they might not be prepared to assess the contractual repairs or changes in the property condition. Always ask a potential agent if they are planning to go out of town during your purchase or sell timeline.
Will you answer all my questions truthfully?
The real estate market is not always hot, great or fabulous. And yes, sometimes there are better times than now to purchase a home. Real estate is like any other market that is based on supply and demand. Verify all information on a property-listing sheet. Look for disclaimers on the bottom of property feature sheets that state all information is not guaranteed. Measure room dimensions; verify square footage, taxes and assessments. Agents in most states are allowed to promote or exaggerate but not intentionally mislead or lie. Whether buying or selling ask your agent what the absorption rate is for your home parameters. This will give you an honest market indicator of what’s happening in like-kind properties. How to figure absorption rate: Example: Like kind by style, price, single-family, $200,000-$300,000, number of homes currently for sale: 100, sold last 12 months: 50, 25 sold in last 6 months: 25 sold in last 3 months: 25 months of inventory available.
Looking to buy or sell real estate soon?
Join the 85%* of real estate consumers nationally who will use a real estate agent in their next transaction. The Internet has been a welcome resource to consumers in a business sector that has been dramatically impacted by the Internet similar to the travel industry. The Internet has removed agents from the front line of real estate consumer’s paths and the National Association of REALTORS® has the numbers to prove it. No longer the keepers of the home information, 74%* of all homebuyers start their search on the Internet before contacting a real estate agent.
The age of the consumer has belatedly arrived in residential real estate. Most agents work hard to qualify their clients, but the new reality is you should qualify your next real estate agent.
*2004 National Association of Realtors® Profile of Home Buyers and Sellers
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