Top 10 Questions About the Role of the Realtor
Sometimes the most simplest of things can be most misunderstood. So let's help demystify the actual role of the Realtor®. In fact, I'd like to do it in the most simplest of ways, so here's the top 10 answers to the top 10 questions I often get asked regarding the role of the Realtor®:
- I'm the Buyer. What do I pay my Realtor®?
Buyers do not usually pay the Realtor® any commissions. Sellers pay the commissions. There is one exception: There are some Realtors® who will have you sign what they call a "buyer's agreement" which will usually address 2 items: (1) That you will use them exclusively instead of calling each Realtor® who's name is on the sign in front of the home you want to see and/or (2) guarantee them a certain commission amount. Usually that means that when the final closing occurs, if the seller paid commission falls short of the amount the Realtor® is asking from you, that you will pay the difference. This is most often used to guarantee that when a property's list price is very low, the Realtor® will not be doing all their work for nearly no pay. Just know that most of the time, buyers are not paying any commissions.
- I'm the Seller. What do I pay my Realtor®?
Seller's do pay the commissions. The commission amount, whatever it is, will be one of the deductions from the seller's proceeds at closing. If your home does not sell and your contract with the Realtor expires, then you usually owe no commissions. Commissions are paid only at the end of a successful closing.
- What does the Realtor® actually make off the deal?
What sellers and buyers may not realize is that Realtors® does not actually get the full amount of the commission check that is received at closing. Just to be clear, the transaction is really between Brokerages, not Realtors®. Each Realtor® represents a Brokerage. Each Brokerage takes a certain percentage off the amount they receive from the deal and the amount that is left goes to the Realtor®. The Realtor® must then deduct taxes and a host of other business expenses - including gas - from that amount. Whatever is left from all that is they actual money they earn.
- Why not just call each Realtor® on each sign I see in front of each home that I am interested in viewing?
First of all, Realtors® like to have listings so that the signs they put up in the yards get buyers to call them direct. It's like having a fishing pole in the water to attract fish and it really does bring the buyers. When you call that Realtor® they will work hard to keep you as a buyer, whether you actually see that specific property or not. This is an important moment for the buyer, as you should size up your first communication with the Realtor® and decide whether this is a Realtor® that you would feel comfortable communicating with and one that displays a good knowledge of the local market. However, calling a different Realtor® each time you see another property is actually not in your best interest, even though you may think so. The Realtor® you call listed on the front yard sign actually represents the seller, so by trying to negotiate your contract on that property, you have put the Realtor® into a "dual agency" role and they are now representing both sides of the contract. There are laws governing how a Realtor® is to proceed on such transactions so that confidentiality is maintained on both sides of the transaction, but it isn't hard to see the benefits of having an outside Realtor® negotiate in your best interest for the property.
- Why should I stay with one Realtor®?
By connecting with one Realtor®, you will be building a professional relationship with one who will be working in your best interest. They will know what you are looking for, be able to notify you immediately of new homes in the market that meet your search criteria, provide you with navigation in this ever changing market, educate you on the buying process, provide you important research on each property and negotiate in your best interest on each and every deal. In short, if you found a good Realtor®, stay with them, as they will continue to work in your best interest.
It's important to note that Realtors® want you stay with them as they will be devoting massive amounts of time, energy and resources to find you the perfect home. By leaving them in a heartbeat, they not only have lost you as a buyer client, but also will not be getting any money for all the work they have already done on your behalf. This is one of the reasons for the buyer's agreement that was mentioned above in #1. Realtors® are also most frustrated by buyers who jump from Realtor® to Realtor® and don't actually understand the process and benefits of searching the market with one Realtor®. In fact, some Realtors® will not show properties to buyers who cannot commit to utilizing them throughout the buying process, as it is comparable to doing all the work for no pay. It is most frustrating to agents to be contacted by a buyer that has just admitted looking at a property in the morning with one Realtor® and then wanting to view another property with them in the afternoon. The buyer doesn't understand the position they are putting each of the Realtors® in by using different Realtors® to view different properties. Both will burn up gas, time and energy, but only one may be paid for that. When you can't commit to building a relationship with one Realtor®, you might now understand why some Realtors® may not show you properties.
- I've bought houses before by contacting the owner directly with no Realtor® involved. Why should I contact a Realtor® now?
First, if the property is listed through a Realtor®, you would not be calling the owner directly, as they are under contract to have the listing Realtor® sell their property. You must go through the listing brokerage and hopefully, with a Realtor® representing you in the contract to purchase. Second, you will benefit having a Realtor® represent you in this transaction based on all the reasons mentioned in #5 above.
- I don't like my Realtor®. Do I have to stay with them?
Absolutely not. Buying a home is one of the most important decisions you will make, so having the right Realtor® guide and represent you is just as important. Try to evaluate your relationship early on so that you don't find yourself invested in a relationship that you do not feel satisfied with. A good Realtor® should be able to explain information simply to you, provide you with facts and research to allow you to make solid real estate decisions, return your calls within a reasonable time, and provide an engaging communication so that you never feel any question is too dumb to ask.
- My Realtor® isn't communicating with me enough. I'm frustrated.
Real estate deals can be challenging enough without having a Realtor® that does not communicate well with you. The real estate market can be rather challenging at times. You need to find one who will stay with you and the deal. It requires energy, time and communication to get these deals done. Lack of communication builds frustration. Deals can be frustrating enough without adding a lack of communication about what's going on.
- I just want to look at homes, but my Realtor® won't show them to me until I get pre-approved. What's with that?
Why put the cart before the horse? Why look at properties you like but have no idea if you can get a loan on or not? You need to know what you can afford and you need to streamline your search to make sure that the home you are seeing could fit your loan type and price range.
I often have buyers tell me that they know they have a good credit score and can get a loan with no problem, only to find out when they actually check in with a lender that they are not pre-approved at that time and need to do a little credit repair work before looking for a home. A lot of buyers do not realize that its not only their credit scores or the fact that they think they can handle a monthly mortgage of whatever amount they come up with, but it's also about your debt to income ratios. The pre-approval is the foundation from which you start your home search. If it is not solid, then the rest of the home buying process falls apart.
In any market there are sweet spots where homes move fast. You need to be ready to write an offer to purchase with a pre-approval letter submitted with the offer. So don't wait.... get pre-approved, as it will help to secure success in your home search adventures.
Additionally, sellers do not want people coming into their property that are not pre approved. After all, they have to constantly clean their home for potential showings, leave the home during the assigned showing times, take care of any animals they may need to get out of the home for the showing and deal with their children schedules that may mean they are postponing their suppers or study time. All in all, sellers really want the agents to do their due diligence in making sure each buyer is pre-approved before they step into their homes.
- I'm afraid to contact a Realtor® because I really don't know if I can get a loan yet.
Don't waste another minute sitting there worrying what you will find out about your current credit situation. Knowledge is power. You need to know where you stand at this very minute so that you can take your next step confidently. If that step is repairing your credit, know that there are many loan officers that will help you achieve those goals at no cost. They can check in with you as you progress on your credit building and let you know approximately how many more months it will take to get you to the point where they can lend on a property for you and how much you can afford to buy. So go ahead and contact a Realtor® today and let them know you need to get pre-approved. They may be able to give you some great lender suggestions to help get you started. Remember, too, that it is best to talk with a few different lenders to see which one may be the best fit for you.