Should you hire a real estate agent?
- Bragan Jackson
- Jan 29, 2023
- 5 min read
The Risk Sentinel - VOL 1, ISS 5
If you're in the market for making a real estate purchase or sale, you might be asking yourself, "Should I hire a real estate agent?" In this post we'll dive into some of the primary factors affecting which direction is right for you or your business. We'll also cover why you might not have the representation you think you do.
Real estate transactions have large implications because of their proportional size in relation to expenses more typical to daily purchases. Because of this, it's extremely important to make a full assessment of the opportunities and risks associated with such a large purchase.
We'd love for you to take the time to read the full post (you never know when you might find yourself on the other side of the transaction table), but if you'd like to skip ahead you can use the navigation links below to jump ahead:
Section: Prospective seller
Hiring a real estate agent can help ensure that your sale goes smoothly and quickly. Here are some reasons why it's smart to have one on your side:
They can help you get an accurate estimate of what your home is worth based on current sales in the area. They'll also know exactly how much time it takes to sell similar properties in your neighborhood.
They have deep connections in the community — including other agents who may work with them as part of their listing agreements — so they can help you find qualified buyers quickly without wasting time or money.
They'll have access to resources like local home inspection companies or contractors who can give you estimates on how much repairs might cost so you can determine if they should be completed now or if trying to sell the home "as-is" is a better option.
Section: Prospective buyer
If you're in the market for buying real estate, there are lots of factors to consider when deciding whether or not to hire an agent. As a buyer, here are some things to consider:
Market conditions – How hot is the market? If homes are moving quickly and prices are rising rapidly, it may be worth hiring an agent who knows what they're doing.
Loan rates – If interest rates are low and loans are easy to get, you might be able to save some money by going without an agent.
Type of property – A big house with many bedrooms or a small condo can both be tough sells without an experienced agent on your side. A professional can help understand what will sell well in your area and give you advice on pricing. In addition, if you're looking for something specific (such as a fixer-upper), an agent can help locate properties that match those specifications.
The cost of commission – If you don't use an agent but end up finding a good deal on your own, it's possible that you can negotiate for a lower sales price. But read on below to see why you need to be careful making this assumption.
Section: Representation
Real estate agents are often the first point of contact between a seller and buyer. While some buyers may find a property on their own, most will use the services of an agent to help them navigate the process.
The role of an agent is to represent their clients' interests in transactions. They negotiate on behalf of their client, provide advice and counsel, handle any financial transactions and make sure that all parties involved in a transaction are protected.
In most cases, it's not possible for a real estate agent to represent both sides in a transaction. For instance, if you're selling your home and need an agent to represent you, they can't also represent the buyer and work with them directly on price or terms.
Some agents choose to focus on representing sellers and others focus on representing buyers. Those who work with both sides are known as dual agents but this isn't always permitted by state laws or local regulations, and it usually requires additional disclosures and paperwork if there is dual representation in a real estate transaction. Real estate agents who represent only one side are called exclusive agents because they work only with one party at a time – either buyers or sellers but not both at once.
Section: Agent relationship
Okay let's say that you've decided that you want to work with a real estate agent. If you're on the seller side of things, the next steps are fairly straightforward: locate a brokerage firm with an established presence in your area and a good reputation, set up a call with one of their brokers or seller's agents to discuss your goals, sign a listing agreement and let them get to work.
If you want to work with an agent on the buyer side of things it might seem a little less involved "hiring" an agent (we'll get to why I put 'hiring' in quotations down below). It might go something like this: you perform an internet search of for sale properties in the area you want to buy, SUCCESS - you found the perfect property so you click on the number shown to set up a showing appointment, an agent picks up and introduces themselves then goes on to tell you they'd be happy to get you in to see the property in person, you hit it off at the appointment and they help you write up an offer that's accepted later that day. Wasn't that easy? No meetings, no real commitments (other than showing up to see the property you already picked out for yourself), and you got the property you wanted under contract without a hiccup. On the surface, hiring a real estate agent as a buyer seems way less involved than on the seller's side of things.
Would it surprise you if I told you that our buyer in the example above didn't have any representation in their purchase transaction? "How could that be possible?" you wonder, "I met with the agent at the property and they helped me write up the offer so they must've been representing me."
WRONG - in most states you cannot be represented in a real estate transaction (whether you're a buyer or a seller) unless there is a written agreement that establishes an agency relationship between you and the agent/broker that you want to represent you. So what was the agent in our buyer's example above? Most states classify the relationship between our fictitious buyer and seller as a transaction brokerage agreement. Essentially, they help facilitate some portion (or all) of the transaction's paperwork, but they have no specific duties to represent you in negotiations or protect your best interests in the transaction.
So is that to say that you're automatically in dangerous territory submitting an offer to purchase real estate without signing a buyer's agency agreement with a real estate brokerage firm? No, not necessarily, but you definitely need to know what you're getting into, and how the scope of services you're receiving in such a transaction might be limited by the fact that an agency relationship does not exist.
In a future post, we'll discuss some of the differences in the levels of service you receive when you forego an agency relationship in a real estate transaction. If you don't want to miss that post, be sure to subscribe to The Risk Sentinel so we can provide you with updates.
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