In many states, the sub-agency has been eliminated. In these states, if an agentis working for a buyer, he or she is a buyer agent. In this case the buyer mustpay the percentage or fee to the broker or agent. If the agent is working for theseller, he or she is a seller agent (or conventional). That clears up some of theconfusion. If the subagent t1 or the buyer broker is also the listing2 broker, he orshe is known as a dual agent.
So let’s make it clear: If you haven’t hired a buyer broker and signed anexclusivity contract with him or her, and if you’re not living in a state thatmandates buyer brokerage, you’re most likely working with a seller orconventional broker or agent.Don’t think now that working with a conventional broker or seller broker/agent isworse than working with a buyer broker/agent. That is not always the case. Foryears conventional brokers were the only game in town. They’ve helped millionsof buyers successfully purchase homes. But if you have a choice, go with a buyeragent or broker.Remember, you want to work with the very bestagent/broker you can. A seller broker may be a better choice for you than a buyeragent/broker who doesn’t really know the particular neighborhood that is ofinterest to you.
1 The subagent is an agent or broker who brings the buyer to the property. Although itappears to be working for the buyer, they are paid by the seller and have a responsibilityby the seller.
2 The listing is a legal procedure, where a property will be listed for sale by a broker inreturn for a commission
How Agents and Brokers Get Paid
When a person wants to sell their home they usually contact a local real estateagent. The agent views the property, estimates what the selling price should be,and advices the seller of any other things that need to be done to the property tomake it more saleable.
The seller and the agent sign a contract that the house will be listed by the agentand that the agent will receive a certain percentage of the selling price when thehouse closes (or sells).When the property is sold, the seller’s agent who got the listing gets his or herpercentage of commission. The seller’s agent then takes part of that amount andgives it to the buyer agent. This percentage of split is determined by prioragreement.
For the real estate agency, it is more profitable when both the buyer agent andthe seller agent are working for this agency. This way, the agency will get theentire percentage of the selling price as listed in the contract, as opposed tohaving to split it with an agent who works at another agency.
The Agent’s/Broker’s Obligations
A good agent or broker has more obligations, which are significant for you in thebuying process. Here are the most important four obligations a good agent orbroker should have to you:
1. Eyes and ears ?A good agent or broker is supposed to act as your eyesand ears, prescreening homes no the market, finding out why a home isfor sale, and selecting the homes he or she thinks might be right for you.
2. Less legwork ?A good agent or broker is supposed to do at least someof the necessary legwork, which means walking through the availablehomes and eliminating those that won’t meet your needs and wants, oryour standards.
3. Guide you ?A good agent or broker will make the appointments for you,chauffeur you around from showing to showing, help you understand thegood and bad features of a house, provide you with enough information tocreate an offer, and than present that offer to the seller and seller agent orbroker.
4. Educate you ?A good agent or broker will educate you about the homebuying process and the local real estate market. He or she should be ableto point out the good and the bad, so you can make an inform decision.What Not to Say to Real Estate AgentsNever let your real estate know that you are willing to know that you are willing togo higher in an offer for a home. The higher the selling price, the morecommission they make. While it is not ethical, your real estate agent may betempted to tell the sellers that you are willing to pay more.
Traps Used to Make the Sale
Very important is to know what motivates your agent or broker. You’ll know this ifyou know how real estate agents or brokers get paid.Don’t forget these two important factors:
1. It is more profitable if the same agency that list the property also sells it.
2. It is more profitable to sell the property at the highest price possible.Most of the real estate agents or brokers do not defraud in order to get the sale.However, the following are some of the more common traps used to push a sale.
a. Amplifying the value of the house. Real estate agents or brokers canincrease the worth of the house in a number of ways. These two are themost common of them:
1. Showing you houses listed at a higher price range as than thehomes are actually worth. Once you have seen a few over-pricedhouses, the agent show you a house that is properly priced, but stillin the same high price range. There are two problems here:
2. The high-priced homes may be beyond what you want topay
3. The over-priced homes you looked at may not be a goodexample of what is available for that price.This manipulation makes the one properly-priced home look like agreat offer.
4. Using the asking price of similar homes and not the selling pricewhen making a comparable calculation. This make homes look likethey are worth more than the market value and again may push youinto considering property above what you decided was your limit.
If you want to know the worth of a particular house, askthat the real estate agent or broker show you similar homes that have recentlysold at a similar or comparable price. A good agent or broker should be able andwilling to give you this information. If yours is not, consider getting a differentagent or broker.
b. Rushing you to make an offer. The real estate agent or broker may alsorush you to make an offer by saying you that they have heard thatsomeone else is making an offer on that property right now, so you musthurry. That there are times when people are standing in line to make anoffer for a particular piece of property, is totally true. But normally thishappens very seldom.
Another time when you could be rushed to make an offer is after youmade the offer. The seller rejects the offer and come back with a counteroffer5. that is more money that you want to spend. I personally do not likeplaying games with the real estate purchase.When I make an offer on a property it is usually fair and in accordancewith what I believe the property is worth and what I can afford. If thesellers counters with an amount that is outside of my budget or I feel isoutrageous for the property, which means he is not acting in good faithand I look for another property.You’ll have to be careful, because many agents or brokers want to urge you tomeet the sellers offer, to extend yourself more and do it right now. You will beurged to do this immediately before someone else buys the property -- beforeyou get the chance to think.
5A counter-offer is when the seller or buyer responds to a bid. For example if youdecide to offer $100,000 for a home listed at $130,000, the seller might counter youroffer and propose that you purchase the home for $120,000. That new proposal, andany subsequent offer, is called a counteroffer.
Buying a home is one of the biggest decisions of your lifeand you do not need to be pushed into making it before you are ready. When youfind the right home you will not be asking for time to decide. The decision will feelright.
Carey Pott is an experienced mortgage broker and owner of January Financial in Foothill Ranch, CA. He has helped hundreds of clients find the best financing for their home purchase or refinance needs. You can find more information on mortgage financing here.
Carey is also a frequent contributor to many websites with mortgage articles, including Home Experts Online.