Why Your Real Estate Agent Is A Spy
BATTLECALL GUEST EXPERT: Steve Gillman, Real Estate Investor
A real estate agent, unless specifically working as a buyer's agent, is working for the seller. Many buyers know this, but don't think it matters, as long as the agent is helpful. This true to an extent, but what buyers don't realize is that an agent has a legal responsibility to and loyalty to the best interests of the seller. This is referred to as a fiduciary responsibility. What does this mean?
The Real Estate Agent Is A Spy
Suppose you make an offer on a home. You mention that if the seller says no, you'll probably offer $5,000 more. The agent now has an obligation to tell the seller what you just said. That makes it an expensive comment, doesn't it? The agent may spend all their time with you, showing you houses and helping you write offers, but their allegiance is legally with the seller, unless they are hired by you.
A good agent, even if she is a seller's agent, can be a great help. Just remember that she is a salesman, and you're not the boss. Be careful about what you say, and be careful with what she says. Another option is to work with a buyer's agent. In this case the agent can actually work for your best interests, but even here remember that they usually get paid only when you buy something, so their objectivity is suspect.
Sometimes real estate agents work under "dual-agency" rules, meaning they are supposed to work for both the buyer's and seller's interests. Be careful here. They only get paid when a property is sold, so they may be more helpful to the sellers. In any case, how can someone really be on both sides of a negotiation. It is likely they would work harder for whoever they like more. Do you want to be in a popularity contest that can cost you thousands of dollars?
More Real Estate Agent Secrets
Agents often let you assume things. They want to get the sale closed, and will let you believe what you have to in order to do that. They'll tell you that the seller and buyer always split the closing fee, for example. They'll tell you that they can't change the commission after it has been set. They'll tell you that you have to write a big check for a "good faith" deposit when you make an offer.
I have seen realtors knock $4,000 off the commission to get a sale closed at a lower price. I have seen the buyer or the seller pay the entire closing fee. People sometimes put less than $1000 down as a deposit with an offer, and sometimes nothing - with the agreement to put up something when the offer is accepted. Very little is set in stone when it comes to real estate.
Real estate agents are not all experts. The first time I made an offer on a house, the agent didn't understand what I meant when I told him that I wanted to get a 90% first mortgage and have the seller carry a second for 5%, so I could get in with only 5% down. Years into his career, he still had only dealt with deals that had regular bank mortgages.
How do you choose an agent to work with? Often agents will be very knowledgeable about a certain type of real estate, or a certain neighborhood, but know little else. Like other professionals, they specialize. If you really need help finding a particular type of property, look through listings online until you find a real estate agent that already has several of that type listed.
Got an opinion? We want to hear from you. Post your thoughts or comments here in our Mortgage Warrior Forum. Come join the conversation and say hello...onward mortgage warrior!
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