Updated: Jan 11, 2021
When real estate agents work as a listing agent the asking price that the home is set at is extremely important. If the listing price is too high the home seller might have their home go stale on the market and people will wonder what is wrong with it. Realtors® will sometimes do this to secure the listing and hope that it sells or they can talk the seller down at a future time. On the other hand, the home could be priced too low in order to start a bidding war and reduce the marketing work that the agent needs to do. Although the home will sell quickly, it won't maximize the sale price that it should have obtained. This is because the bidding war will typically bring the home to the buyer's maximum price range but won't show up on the alerts for buyers who could afford the higher price. Pricing is very important and a good real estate agent will provide a comparative market analysis (CMA) for your home. This includes reviewing recently sold homes in your housing market and adjusting your home accordingly. This includes differences in square footage if it has air conditioning and the condition of the home to accurately assess its proper market value.
Brokerage fees are the commission from the sale paid to the brokerage. If you are a home seller this means the amount that will be paid to the buyer's agent and the listing agent. If you are a home buyer, this is the amount that the buyer's agent will gain from closing the transaction. Many agents will negotiate their fees however it is important not to necessarily go with the cheapest agent. The cheapest agent may not be able to market the home to gain all potential buyers to get you the best price.
Many real estate agents will talk up a lender that they use. It is however very important for you to also shop around. The reason why agents like to use their lender doesn't have to do with a good interest rate, it has to do with the lender being reliable to close the home and favorable referrals. Lenders give agents referrals and real estate agents do that back.
Many agents will state they will hold open houses to help expose your home to additional prospective buyers. This however can be controversial and actually rarely lead to a home sale. They do provide exposure to potential home buyers but often allow the Realtor® to gain new clients. In the real estate industry, the toughest part for many agents is to gain new clients and this provides them the visibility in a competitive market.
Home Repair Costs
All homes will have something to fix up. This could be anything from paint to large structural changes. Watch out if a real estate agent tells you that it's not a big deal or that the cost of a repair will be very low. Many agents don't complete rework projects themselves and it would be important to ask the agent if they have completed a similar project themselves. Another option is to have an independent contractor supply a free quote or do a quick cost estimator online. It is always important to have a home inspection and review the report in-depth and ideally be there during it. This piece of due diligence is important to ensure that you aren't left with a major headache after moving in.
For Sale By Owner
Home sellers pay the commission of the buyer's agent, however many homes that are for sale by their owner will not pay commissions. Many agents will continue the common lie that the for sale by owner could cause issues. This is because they may lose out on their commission or it would be heavily reduced. Many agents should explain this to potential homeowners instead of trying to have their clients lose out on what could be a good deal.
Dual agency is when the broker acts with the home buyer and home seller at the same time. Dual agency is illegal in Colorado and a few other states however brokers can act as a transaction broker which is similar. Real estate professionals enjoy acting as a dual agent as they will often get a double commission than working as a single one of these. These transactions can often lead to savings on commissions for both sides of the transaction. However, it is also important that the agent is upfront that they won't be able to negotiate on your side. Since the agent is working both sides of the transaction you now won't have someone watching out for your best interest and would not be recommended for a first-time homebuyer.
What is the most common complaint filed against realtors®?
The most common lawsuit brought against a Realtor® is when they breach the duty to protect their client. Real estate agents are legally bound to act in the best interest of their client. This applies to both negligence and intentional actions. Real estate agents should document everything to make it very clear everything that has been disclosed.
What should you not tell a real estate agent?
Real estate agents generally work on a percentage of the sale price, because of this it is important to not share the max price you are willing to go and instead share the budgeted amount you would like to look at. You can always increase the price of homes you are looking at however if you start at a $600,000 home it will be difficult to compare to the more budget friendly $400,000 homes. Second thing to avoid is pressure situations such as an upcoming divorce or end of your lease. It would be important to keep these things to yourself so that you can't be pressured due to this timeline. The last thing to keep to yourself is your financials. A preapproval letter from a lender is all that you need to provide an agent where sharing what you have in the bank or your income could allow the agent to pressure you into a higher priced home.
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