Finding the Right Real Estate Agent

The Market is Getting Busy

At the time of this writing the weather is starting to warm up in many places, especially here in California. With the warm weather comes a more active real estate market. Also, at the time of this writing, prices in real estate are starting to increase from the horrible declines of the last few of years.

The weather change and the new excitement emerging in the real estate industry will start some new activity and you may be one of the ones looking to purchase a home. I know that my wife and I enjoy driving around looking at houses even when we are not in the market to buy one.

I am NOT a real estate professional, I do NOT have a real estate license, and anything that I say should be taken with that grain of salt. I am just expressing my opinions. However, I have bought/sold about 15 properties over the last 15 or so years, so I know a couple of things from experience. I want to share with you a mistake that I believe many potential buyers make.

The next section of this HUB is regarding how a real estate agent is paid. You may not be interested in this or you may already know, but I would encourage you to read it as it is the basis of this error potential buyers make.

How Agents Are Paid

In a simplified manner (there are variations by State) there are four paychecks from a real estate commission. In my area the standard real estate commission is 6% of the sale. Here is how it is broken down on average:

  1. The listing agent will receive 1.5% of this commission
  2. The listing agents broker will receive 1.5% of this commission
  3. The selling agent will receive 1.5% of this commission
  4. The selling agent's broker will receive 1.5% of this commission

Obviously, these percentages are negotiable. A high selling agent will typically receive more because the Broker wants to keep them at their office. But for the sake of my example we have broken it up evenly.

Therefore, on a $200,000.00 home the commission of $12,000.00 will be broken up four ways in my example. Each party will receive a check for $3,000.00. Now allow me to explain the problem.

The Buyer's Problem

Any real estate agent that knows basic math realizes that if they sell the property they listed they become both the listing agent and the buying agent, thereby receiving both sides of the commission. In other words, they've doubled their paycheck. There is nothing wrong with this and if i were a real estate agent I would do the exact same thing.

Every agent that lists a house will actively work to try and find a buyer for it. There is a two-fold reason for this. The more properties they move the better reputation they will have which will open the door to get more listings, and also, the more properties they move the more money they will make.

Every house you see will have the listing agents name and typically their cell phone number. They don't want you calling the office and potentially being assigned to another agent so they allow you to call them directly. Again, I would do the exact same thing if I were an agent.

Here is the problem for you, as a buyer. Unless you pay a fee to obtain a "sellers agent", which most do not the person helping you purchase a house is just a sales person to you. They are no different than the furniture, car, or door-to-door sales person with no legal responsibility to you. Take that statement with a grain of salt, they do have some responsibility, but there is no signed contract between you.

On the other hand the person listing the home has a contract with the seller. They have legal responsibilities to the seller.

Many potential buyers will call the number on the sign because "that's the sales person for this house." My advice to you is to not do this. Because the person who you are calling has no legal responsibility to you, while they do have a legal responsibility to the seller.

I would assume that a good portion of brokers/agents are honest and will treat their clients right, but why do I want someone representing me that has a legal obligation to the person I will be negotiating with? Answer: I don't.

If you are in the market to buy a house find an agent to look for the houses for you. In doing this, realize that the first houses they want to show you will be the ones they've listed -- more money in their pocket. Simply advise them that you are looking for a home and if they show you a home that they have listed that you will have another agent represent you since they already represent someone on that transactions. They will give you a sells pitch as to why it doesn't matter, but would you hire an attorney who was also representing the person you were suing? I think not. While real estate and legal battles are not in the same venue, the same principles do apply. You want someone "looking out for you." Remember the old saying, "Buyer Beware!"

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