In an ideal world, your real estate agent serves as an advocate, confidant and maybe even a marriage counselor, guiding you through one of the biggest (and often fraught) financial decisions of your life. In reality, he’s a salesperson who earns a commission based on what a house sells for. This means brokers have an incentive for buyers to pay more, and in some cases, may also be tempted to gloss over details that could sour a deal. And those are just two potential conflicts. “Real estate agents provide an important service, and the top ones have your best interests at heart, but you should be aware of the practices that go on to protect yourself,” says Eric Tyson co-author of the Home Buying Kit for Dummies. Since your broker may not be willing to tip his hand, we’ll clue you into the secrets he may be keeping from you.
“They’re paving over the park across the street.”
An agent who wants to make a quick sale might not share information a buyer could find unappealing about the neighborhood, like an office building going up on the street, or a registered sex offender who lives a few houses down. But these are things he’s supposed to disclose, says Tyson. Guard against this by thoroughly vetting your agent in the first place. Moe Veissi, president of the National Association of Realtors and a broker in Miami, suggests asking realtors about area schools, crime statistics, parks, hospitals and whatever else is important to you (he should be well-versed in all of these topics) and learning how many years he’s been in business (longevity is usually a good sign). Also check that he’s a member of a local, state or national realtor board, which holds members to a code of ethics. A respectable agent knows repeat business and referrals are his lifeblood, so it benefits him to be honest with you, says Veissi. Still, it’s a good idea to ask directly about upcoming construction projects and the proximity of sex offenders before closing a deal.
“You can negotiate a lower commission.”
On average, 5.4% of each home sale price goes to brokers’ commissions, according to real estate research firm Real Trends. But the rate varies depending on your area. You probably know that the commission comes out of the seller’s proceeds from the sale and is split evenly between the buyer’s and seller’s agents. What you may not know is that commission isn’t a fixed rate, says Veissi. When you’re selling, interview a few brokers to get an idea of the going rate in your area, then, before you commit to one realtor, see if any will lower their fees, says Tyson. Typically, the higher the value of the property, the more bargaining power you’ll have, but it never hurts to ask. Just be sure a broker offering you a low commission rate isn’t planning to dock the commission paid to the buyer’s agent. “If your broker advertises a fee less than what buyers’ agents normally get, buyers’ agents are less likely to show your house,” says Tyson.