Three Questions to Ask Your Real Estate Agent

Are you thinking about hiring a real estate agent? If so, you are on the brink of making a very good decision. This holds true no matter if you are hiring an agent to sell your home, or if you are in the market for a new property. Either way, asking specific questions of potential real estate agents will give you a feel for what you are getting into.

Here are three of the most important questions to go over with your agent before hiring them.

  1. Do you have any experience in my area of interest? If you are buying a home, you want to make sure that your agent has experience in the neighborhood. This way they will know where to look for properties, what to expect, how to negotiate, and much more. The same thing holds true if you are a seller. No matter what, you want to get further information on the experience of every agent you are considering.
  2. If you are selling your home, you need to find out what your real estate agent will charge as a commission. While this is pretty much standard, you still want to make sure of this. After all, it is better to know about the commission rate up front than to get hit with a big number when it is finally time to sign the contract. You will more than likely find out that most real estate agents work with a standard fee that is identical.
  3. What do you do that sets you apart from other agents? This can be a difficult question, but one that you should ask. You want to hire a real estate agent that thinks outside of the box, and has ideas that are unconventional. When you hire an agent who is willing to do anything for you to achieve success, you will be in good shape. Most agents have a list of things that they do which could be considered unique, etc.

Overall, ask every real estate agent you are considering these questions. Their answers will determine which one you hire, and how you move on.

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One Reason NOT to Do Too Much Before You Sell

Usually, it goes like this: During a listing appointment I take a tour of the house and I make recommendations on what the sellers can do to make their home sell faster and/or for a higher price (the two are inter-related).

My recommendations usually involve things like getting rid of clutter (a good rule of thumb is that closets, cabinets, and shelves should all be no more than half-full, all other flat surfaces – tables, counters, etc. – shouldn’t be full at all), sometimes I’ll have them put a table or chair in storage to open up the floor space and to make the room feel larger, and I’ll always tell them to take down any personal pictures and other personalized items (you don’t want the buyers to feel like they are in your house – you want them to feel they are in their house).

Beyond that, if it is necessary, I’ll make some small suggestions as to how they can stage the home a little better. And if necessary, I’ll tell them what they can do to spruce up the house (if the carpets can get away with only a steam clean – then do that, otherwise replace them – and a fresh coat of paint is always a good idea) and we always take a tour of the yard to discuss landscaping. And if the appliances are more than 15 or 20 years old, those might need to be updated as well.

Almost always, a buyer will ask if they should do something major (remodel the bathroom, remodel the kitchen, build a deck, etc.) – my advice is not to do it.

And the reason for this is “the typical buyer spent $4,350 on home improvement projects within the first three months of buying the home. Repeat buyers spent more than first-time buyers.

“Nearly half of home buyers remodeled or made improvements to their kitchen.

“Close to half remodeled or improved a bathroom in that time frame.”

This is all from data collected in a survey of people who bought a home from late 2005 to early 2007 done by the National Association of Realtors.

It is true that in today’s markets buyers are expecting a house to be in move-in condition. Everything has to work and nothing can be broken – but every homeowner has their own ideas on what they want done in their house: whether it is a certain kind of appliances in their kitchen, or a special kind of whirlpool bath.

The point is, neither you as the seller or me as the agent can anticipate exactly what the buyers expectations are going to be, so we shouldn’t try.

Get your house ready to move-in by fixing it up the things that need to be fixed up, but you don’t need to do anything major.

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Real Estate Market Conditions for 2008 (Feb)

Alright, I decided to do a little analysis today on how 2008 is shaping up when compared to 2007. This is something I like to do every spring or so. I have found that so goes the first three months of the year – so goes the year.

I decided to look at only settlements (not contracts written) that have occurred in the month of February going back to 2003.

First off, 2008 is not 2007. In 2007 whenever I was asked about how the market was, I would respond that it will take a little longer to sell your home, but that the market was still very strong and that the sales price was generally going up.

So far in 2008, the story is a little different. From what I can see right now* – only half as many homes sold in February 2008 as sold in February 2007. They were on the market longer (by an average of 16 days), and the overall settlement prices fell by 6%.

This is definitely the first decline we’ve seen in a while. It is almost like the market is catching up to all the bad news that we’ve seen in the media.

Here is my quick snapshot:

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I would like to tell you that these conditions are isolated, so I did a quick check for the following areas: Annapolis, Arnold, Crownsville, Davidsonville, Severn, Severna Park, Crofton, Gambrills, Edgewater, Glen Burnie, Laurel, Odenton, Pasadena, Riva and Hanover. The rest of the areas or towns had too few transactions to matter.

What I found was the drops are across the board.

On top of that, right now there are 3364 homes listed for sale in Anne Arundel County (not counting for new construction and build-to-suit properties). Based on the pace of February and taking into account seasonal changes in the market – we probably have 6 to 7 months of inventory on the market. Of course a lot of people are not going to wait around that long for their house to be on the market. They’ll withdraw their listings, just let them expire, or they will drop their price!

In any case that is a lot of gloomy news if you were looking for a turn-around in the market this year.

We’re probably looking at September or later before the market starts rocking again. The first transferees for the Base Realignment (BRAC) will start to relocate by then.

So, how do we use this info?

Real Estate Pricing Still Matters

First off, as always when selling a house – pricing is important. There are a lot of things to remember when setting the price. As your house first comes on the market, it generates a lot of interest in the community. If it is perceived to be overpriced, people will associate the house with that – even if you reduce the price later.

Also, you have to remember the vast majority of people do their home search online. And a lot of online home searches use a pull-down menu – so if you’re priced just a little bit above that price selection, and you’re willing to take something below it, you need to make sure your home is found by the people looking for it.

Make sure you are following an aggressive pricing strategy that will allow you to sell your home fast while getting the best value for your home. This doesn’t mean to give the house away, or to leave any money on the table when it comes time to negotiate a fair price. But you do have to be mindful of it and put a lot of thought and consideration into how you want to price your home.

Real Estate Marketing Still Matters

Just listed postcards, door hanging, staging, curb appeal, directional signs, open houses and Internet advertising – all still matter. Yes, it is true that most buyers find their home either through the Multiple Listing Service (either by an online search or through their agent). But in today’s market you really can’t afford to leave any stone unturned.

In order to sell your house you need a real estate agent that knows how to cast the widest net possible.

I’m not one of those agents that think people can’t sell their home “For Sale By Owner” (FSBO). I think there are a lot of talented and knowledgeable people out there that know how to price and market a home – and save the real estate commissions in the process. But I think a lot of it depends on the market. Unless you’re willing to give deep deep discounts on your house, I don’t think 2008 is the year to be going FSBO.

A Good Time to be a Move-Up Buyer

As the chart above shows, if you’ve been in your house for any period of time (3+ years) you’ve brought built up some equity just in market changes alone. Meanwhile, the house you’ve probably been looking for over the last year or so is now at the lowest its been in a couple of years. FHA limits in Anne Arundel County have been increased, making it easier to qualify for certain loans – and conventional rates will probably follow. And interest rates remain at historic lows making the move-up even more affordable than it would have been in the past.

If you’re thinking of moving up, now is a good time to put your house on the market and begin searching for your new home.

And just to leave you with a bit of good news. To understand how important pricing and marketing are to selling your home – this year alone 124 houses this year have sold in 30 days or less. Price your home right, market it correctly, and you can still sell your home in a reasonable amount of time in 2008.

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Who Does the Real Estate Agent Work For?

In Maryland all real estate agents are required to have their clients sign a one page form titled “Understanding Whom Real Estate Agents Represent“.  This form needs to be signed before or after the first meeting with the clients.

Since a lot of people are taken aback by this form – especially since it happens on the first meeting before anything has even been done, I thought I’d try to explain it in layman’s terms.

Who Represents the Seller?  Who Represents the Buyer?

The first thing we have to understand, is that in Maryland (and most other states) the real estate broker actually “owns” the listing of the property in question. It isn’t the agent who has their name in the yard – but the broker they work for. So, if any agent in a broker’s office is trying to sell a property that is listed by the broker, and they are not a buyer’s agent – then they are representing the seller.

So it isn’t just the listing agent representing the seller, but all of the agents in the broker’s office.

We also have to understand that when we discuss these issues and we use the term “agency” – we are referring to the agency relationship that is set-up when a broker agrees to work on behalf of a buyer or seller.  They usually do this through one of their own agents – and this causes a lot of confusion in the terminology.

Agents Who Represent the Seller

Seller’s Agent: A seller’s agent works for the broker that has the listing on the property.  The seller’s agent markets the property for the sellers and exclusively represents the sellers in any transactions.  That doesn’t mean he or she can’t help the buyers purchase a property – but the agent’s duty and loyalty remains with the seller.  The seller pays the seller’s agent’s fee as specified in a written listing agreement.

Cooperating Agent: A cooperating agent works for a real estate company different from the broker that has listed the property.  The cooperating agent can assist a buyer or tenant in purchasing or renting a property, but just like with a seller’s agent – their duty is to the sellers – even though those sellers are listed with another broker.  The cooperating agent’s fee is paid by the sellers or landlords through the seller’s agent’s company as specified by the written listing agreement.

Agents Who Represent the Buyer

Presumed Buyer’s Agent (no written agreement): If you were to walk into a real estate office and ask to look at a home, that agent is presumed to be representing you as the buyer.  They can show you any properties – not just the ones listed by the broker.  A presumed buyer’s agent can not make an offer or negotiate on your behalf, and you have no obligation to buy anything or pay anything to them.  If you want to terminate a relationship with a presumed agent – you can do so at any time simply by saying so.

Buyer’s Agent (by written agreement): This is the most typical form of buyer’s agency and it happens when a buyer signs a written contract with a real estate agent who says they will represent the buyer in locating a property to buy.  That agent will help a buyer by evaluating properties, doing Comparative Market Analysis, researching market info and preparing offers.  The buyer’s agent negotiates in the best interests of the buyer.  The agent’s fee is paid according to a written agreement between the agent and buyer.  If you want one agent to represent you exclusiveley – you need to have a written buyer’s agency agreement.

Dual Agents Represent Both the Buyer and the Seller

This is what happens when a buyer’s agent and a seller’s agent both work for the same broker.

Since the broker now represents both sides of the transaction – it is called a “dual agency” (the agency relationship set-up between the broker and the parties).

In this case the broker and his employees owe loyalty to both the buyer and the seller and this obviously creates a conflict of interest. Because of this conflict of interest – dual agency always has to be disclosed and agreed to by everyone involved.

In the event of dual agency a broker will assign one agent to represent the seller and one agent to represent the buyer.  These are typically the same agents you started the transaction with – unless a buyer’s agent happens to show you a property they have listed – or vice versa.

If either party does not agree to dual agency, the real estate company may withdraw the agency agreement for that particular property with either the buyer or seller, or both.

Plus, the buyer can always choose not to be represented by an agent of his or her own but simply to receive assistance from the seller’s agent, from another agent in that company, or from a cooperating agent from another company.  There isn’t any law that says you have to have a buyer’s agent.

So Who Pays Who?

When a seller enters into a listing agreement with their agent they can specify how they would like the agent to split the commission and with who.  They can specify whether they want the agent to cooperate (share the commission) with  buyer’s agents.  Most sellers do agree and this is typically how most buyer’s agents get paid.

But, in some cases a buyer’s agency agreement can call for additional compensation.  Sometimes this is just in the form of an admin fee, and in other cases it can be spelled out as a regular percentage of the transaction.

For instance last fall I went to a settlement on a house I had listed.  The total listing commission on the house was 5% and the seller’s agreed to split the commission 50/50 with any buyer’s agent.  This meant that my broker was to earn 2.5% commission once the house sold and the buyer’s agent’s broker was to earn 2.5% commission once the house sold.

When we got to settlement there was the usual line item charge to the buyer’s for real estate commission, but there was also an additional line item charge to the buyer’s for real estate commission.  I wasn’t a party to their agreement so I thought it was curious on why it was there.  I also noticed that the amount (equal to .5% of the sales price) was added to the commission check being paid to the buyer’s broker.

When the buyer noticed this they questioned the agent who agreed to be their buyer’s agent.  Their agent explained that in the buyer’s agency agreement they agreed he would be compensated to the amount of 3% of the sales price, and that if the seller’s paid less than 3% – that the buyers would make up the difference.

So – Does This Mean I Can’t Trust My Realtor?

No, it doesn’t mean that at all.  It just means that during the negotiations a buyers agent and a seller’s agent are going to have a common outcome (a successful settlement built on a fair transaction at a reasonable price), but that they represent different objectives to reaching that goal.

The seller’s agent obviously is trying to get as much money as possible for their client.  And the buyer’s agent is trying to help their clients buy a house for the least amount of money possible.

This means that at the heart of the negotiation they will withhold certain information.  For instance if the seller’s agent knows his clients need to move next month and will probably take an offer way below the asking price – he’s not going to disclose this to the buyers.  Conversely if the buyer’s agent knows his clients are anxious to move next month in order to get their kids into school – and they’re willing to pay way above the asking price – he can not disclose this to the sellers.

So What Must the Agents Disclose?

The law states that no matter what type of agent you choose to work with, you have the following rights and responsibilities in selling or buying or renting property:

  • Real estate agents are obligated by law to treat all parties to a real estate transaction honestly and fairly. They must exercise reasonable care and diligence and maintain the confidentiality of clients. They must not discriminate in the offering of properties; they must promptly present each written offer or counteroffer to the other party; and they must answer questions truthfully
  • Real estate agents must disclose all material facts that they know or should know relating to a property. An agent’s duty to maintain confidentiality does not apply to the disclosure of material facts about a property.
  • All agreements with real estate agents should be in writing and should explain the duties and obligations of the agent. The agreement should explain how the agent will be paid and any fee-sharing agreements with other agents.

You have the responsibility to protect your own interests. You should carefully read all agreements to make sure they accurately reflect your understanding. A real estate agent is qualified to advise you on real estate matters only. If you need legal or tax advice, it is your responsibility to consult a licensed attorney or accountant.

Conclusion

Alright, hopefully this cleared some thing up.  If not, you can contact me (link above) and let me know if you have any questions.  I’ll do my best to answer them.

If you ever have any complaints regarding how you were represented – you should first contact the broker in question.  If you’re still unhappy please feel free to call the Real Estate Commission at 500 North Calvert Street, Baltimore, MD 21202. (410) 230-6200.

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