Recently, a friend of mine was asking me about the process of hiring a real estate agent, and I thought it would be a great blog post!
Here are some of the questions that people tend to ask me and my colleagues about buying and selling especially in terms of commissions and remuneration.
Please note, I have already written other posts on various points that are discussed in this post.
Question: I am planning to sell my property, can you explain to me how hiring a real estate agent works?
Answer: Its not that complicated, you would first make an appointment with a real estate agent and they will most likely come to your place and take a look at your property. Usually agents bring in comparables (similar to your house-sold within 6 months to a year or a shorter time period depending on the property type and desired individual goals of the seller) to you at this meeting so that you have an idea of what the latest prices are in the market around your neighbourhood. If you agree, they will do a comparative market analysis after viewing your property, prepare a detailed report which gives a realistic price and marketing plan for your house.
Question: So how does commission works, how much do I pay?
Answer: There is usually a 5% rate for residential properties when you sell, however, this might vary depending on various brokerages and what types of services they offer. From that 5%, typically 2.5% goes to the listing agents’ brokerage (the agent who is selling your property) and the other 2.5% goes to the buyer agent’s brokerage. For example, if you are selling for 100, 000 then 2.5% goes to the brokerage who is selling your house (say it is my brokerage selling your property), and 2.5% goes to the brokerage who brings in the customer for your property. With the typical 2,5 % rate, the breakdown of the commissions within a brokerage between the sales person and the office changes from one brand/office to the other.
Question: But what if the buyer and seller agents are the same agent?
Answer: In those situations where I bring you a customer which is what we call as a multiple representation situation in the industry, you are still my client and my fiduciary duties are to you, and most of the time, serious buyers usually have their own agents, so such situations do happen, but are rare and open to discussions.
Question: As a buyer, if I want to buy a property, do I have to pay a commission to the agent?
Answer: No, as a buyer you usually* don’t pay the agent, only sellers pay a commission to their listing agent (a total commission) and the listing agent offers usually half of that amount to the selling agent. Please note, every brokerage and sales person might choose various paths when it comes to commissions.
Question: I am currently renting and want to buy a property, how can an agent help?
Answer: Lets give an example, if Barbara and Peter are looking for a property for 300K, I would find them them a property in the area that they plan to live (close to work, school, 3 bedroom, single garage, etc) and make appointments for them for the houses that they like to see within their price range, from there, if they like one of the houses I showed or they have seen on an open house, I would represent my clients (Barbara & Peter), place an offer, negotiate the best price, closing date and conditions for them.
Question: How much closing costs should I put aside before purchasing a place?
Answer: Closing costs are anything from legal fees to moving expenses to land title fee and usually you should have 2% of the house value as the closing cost.
I have a blog post that covers this process.
Question: What is the benefit of using an agent for selling my property?
Answer: Your agent is a trained professional, they go through extensive pre-licensing courses and exams to get licensed and to practice in real estate. They go through an extensive code of ethics, and your interest is put first. Agents have access to their local MLS systems, which enable them to do market research for you and be able to price your house accordingly. They have the insight to your current market conditions, and provide you with price guidance. They will better your property for you, help you get it ready for the market, stage it, video/photograph it professionally and will expose your property to many more potential buyers using unique marketing strategies. Agents will help you to get the most value for your home. They act as a buffer for you and the buyer and negotiate on your behalf, they also help answer any questions through the entire (closing) process or even after! The service a good agent provides makes the entire process safer, easier and smarter for you.
Question: What is the benefit of using an agent for buying a property?
Answer: A real estate agent can help you research and find the exact property that you wish to purchase. They have full access to MLS systems that allow them to cater the search criteria to your needs. They can quickly tell you if a house is overpriced, underpriced, or priced right. They will be able to tackle the paperwork that it requires to purchase a property, and they will be able to represent you to negotiate the price professionally and calmly. Last but not least, using an agent to purchase a property does not cost you and they will be able to represent you as their clients, be able to hold and represent your rights as a purchaser.
There is always the next blog post to cover various more aspects and interesting dynamics of real estate…Stay tuned…
Author: Nilay Ertemur