|
RETURN TO HOMEPAGE Most states require real estate sales professionals to be licensed by the state, so that they can control education and experience requirements and have a central authority to resolve consumer problems. The terminology used to identify real estate professionals varies a little from state to state. Brokers are generally required to have more education and experience than real estate salespersons or agents. The person you normally deal with is a real estate agent or salesperson. The salesperson is licensed by the state, but must work for a broker. All listings are placed in the broker's name, not the salesperson's. A broker can deal directly with home buyers and sellers, or can have a staff of salespersons or agents working for him or her. A real estate salesperson is more than just a "sales person." They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home. While it is true they get paid for what they do, so do other professions that provide advice, guidance, and have a service to sell --such as Certified Public Accountants and Attorneys. The Internet has opened up a world of information that wasn't previously available to homebuyers and seller. The data on listings available for sale is almost current - but not quite. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent. If you're selling a home, you gain access to the most buyers by being listed in the Multiple Listing Service. Only a licensed real estate agent who is a member of your local MLS can get you listed there - which then gets you automatically listed on some of the major real estate web sites. If you're buying or selling a home, the MLS is your agent's best tool. However, the role of an agent has changed in the last couple of years. In the past, agents were the only way home buyers and sellers could access information. Now agents are evolving. Because today's home buyers and sellers are so much better informed than in the past, expertise and ability are becoming more important. The real estate agent is becoming more of a "guide" than a "salesperson" -- your personal representative in buying or selling a home. If you have to ask this question, you probably don't have the necessary knowledge to properly represent yourself. The seller pays the real estate commission, not the buyer, and real estate commissions are already set in the listing contract. It doesn't cost you anything extra to have your own agent represent you because the seller is already paying for it. If you don't have your own agent, the seller's agent will often represent both you and the seller as a "dual agent" or just represent the seller. This means the agent either has divided loyalties or is working for the seller, not you. In this situation, since there is only one agent to be paid, sometimes you can get a reduction in price by getting the agent to accept a lower commission from the seller. However, you have to realize that you are interfering in what is essentially an agreement between the agent and the seller -- and something that has already been negotiated and agreed upon. The seller can net the same gain on a lower price if they have to pay less commission. At the same time, the agent is not going to be willing to cut the commission totally in half because - since you don't have an agent - they are going to be doing some of the work that your agent would normally be doing (whether you realize it or not). And you'd better know what you're doing ? because the listing agent isn´t going to be on your side. If your offer causes them to reduce their commission from what the seller has already agreed to -- that agent isn't going to be real happy with you. On most transactions, there is usually a listing agent and a selling agent. The selling agent is sometimes referred to in media as the buyer's agent, because he works on the buyer's behalf and it easier than explaining each time that the "selling agent" is not the listing agent and is actually the buyer's agent. However... There are some agents that market themselves as "buyer's agents," "exclusive buyer's agents," buyer's representatives," and so on. Mostly it is just marketing. At the same time, part of it is because they want to accentuate the reasons a buyer should not go directly to the listing agent when they purchase real estate. This has to do with agency. See, if a buyer goes directly to the listing agent, they are dealing with an agent that has conflicting responsibilities. Their job is to get a good price for the seller and they may not zealously represent the interests of the buyer. Those who market themselves as "Buyer's Agents" indicate they are only working for the buyer in a real estate transaction. The commission is still paid by the seller, no matter what they say in their marketing (with extremely rare exceptions). They either get paid directly by the seller or set up the transaction so that the seller provides a "credit" to the buyer for how much the real estate commission is -- then the buyer pays the commission. Like a Realtor I once knew said, "No matter how it is set up, the buyer still walks away with the house and the seller still walks away with 94% of the purchase price." If you want to purchase that property, the only ethical thing is to purchase it through that Realtor. Otherwise, you could set up potential conflicts between your previous agent and whatever new agent you may choose. You see, if your previous agent finds out you purchased the home with a new agent, he may want to claim all or a portion of you new agent's commission. This could develop into a "battle royale" involving real estate agents, offices, managers, brokers, and attorneys. You may be able to resolve the issue by letting your current agent know you have misgivings about their expertise and ask if a more experienced Realtor from his office can be aboard as your advisor, too. That is the only ethical way I can think of to handle your situation. It isn't "your" ethics I mean, but the ethics of the two agents. One agent isn't supposed to make an offer on a property you have already previewed with another agent. It happens, but it isn't ethical without some sort of disclosure and agreement between the parties. Why hasn´t you home sold? Before listing her house, Mary had wisely interviewed three agents. This is a smart move, even if the first or second agent makes you feel comfortable enough to list your house immediately. Without multiple interviews, you have no way to compare each agent´s marketing plans, including their price recommendations. Each agent had proved Mary a written price opinion, which is called a comparable market analysis (CMA). Two agents had recommended a similar price, and the other had suggested a price that was a bit higher. Mary said one of the agents told her she could get $20,000 more than the other two agents had quoted. The agent was so enthusiastic, believable and convincing that Mary really believed this agent. After all what did Mary know about market values? This agent was an expert. "Buying" a Listing What probably happened is the agent "bought" the listing by quoting Mary a higher price during her presentation, knowing that Mary´s house would never really sell at that price. More likely than not, the agent intended to wait a few weeks before convincing Mary to lower the price. This is commonly called "buying a listing." Mary´s situation demonstrates a valuable lesson for sellers: if one agent quotes you a significantly higher price than the others, that agent is probably not the right one for you. The market doesn´t lie, so each agent you deal with should arrive at a very close figure. If you list your house higher than market value then drop your price later, your house will be "market worn." Your final selling price will probably be lower than if you had listed it correctly in the beginning.. Let´s say you list your house for $150,000 but it´s really worth $140,000. Buyers in the $140,000 range will never see your house because they´re not looking at $150,000 houses. They can´t afford them. And $150,000 buyers will be comparing your house to others that are truly worth that price, meaning those houses will sell while yours just sits there. In fact, many agents will show an overpriced house for comparison when they´re trying to sell their listings that are more realistically priced. Why do Some Owners Overprice? Often it´s on their agent´s advice, which we just discussed. Another reason they´ll overprice is based on past value. Assuming a house appraised for $140,000 three years ago, they´ll add an annual appreciation rate of three, four or five percent to come up with $150,000 or more. Makes sense, right? But that´s not valid reasoning. I´ve never found any research to indicate that a home is guaranteed to appreciate. Your house is worth what today´s market says it´s worth, regardless of what the house was worth one, two, five or ten years ago. Comparing Home Prices to Stocks Houses are just like stock. Hopefully they go up in value. Sometimes they come down. If you paid fifty dollars for one share of IBM stock two years ago and it´s valued at $30 per share now, would you expect to sell your stock at what you paid ($50) plus a profit? Of course not. Well your house is the same. A property´s value is determined by today´s market, not by yesterday´s value plus appreciation. Mary´s price was too high. That´s the number one reason it hadn´t sold after four months. If your goal is to buy a home for it's resale value and the one you are thinking of buying in the older neighborhood is at the upper end of values for that neighborhood, then it may not be the wisest choice. If it is similar or lower in price to the others, then there should be no problem, because pricing should be considered in relation to the local neighborhood and not compared to homes in other neighborhoods (for the most part) Plus, is it a neighborhood on the decline, or are others going to be fixing things up, too, so that it is a neighborhood that is improving? It could turn out to be a very good deal as long as you don't "overpay" because of the recent improvements. Remember that you also buy a home for it's value to you as a "home," and that is something else you should consider. Which neighborhood would you AND your family feel most comfortable in? A lot depends on why you are buying the house. Are you buying it mostly as a home or mostly as an investment? There is a difference. For the most part, upgrades are high-profit items for builders. They aren't designed to enhance the value of the house, but make you happier with the house you do buy. If you are looking at your home as an investment, then you buy from the smaller to medium size in the tract and spend only a minimal amount on upgrades. If you are looking at your purchase as a home, then you select upgrades that will enhance your quality of living. One rule of thumb is to always upgrade the carpet and padding. It's like buying stocks. How do you really know which ones will increase most in value over the next five years? As with any investment, there are risks. The most often quoted rule is that location is the most important factor. You want to make sure that the house does not back to busy streets and is as close to the interior of the tract as possible. Avoid corners and intersections. Choose the middle of the block or a cul de sac. You'll want to be sure it has at least two bathrooms (if you are buying in an older area). Sometimes it is just timing that works out best for you. For example, if you buy a home before a major surge in local prices. This may be a bad sign for you, especially if you think your house is worth more than other houses in your neighborhood. Homes maintain their value better if the neighboring properties are fairly similar. In your situation, you may actually have to talk to several Realtors, get their opinions, and come up with some sort of consensus. Without knowing why there are no comparable properties in your area it is difficult to give another suggestion. If your lot or home is over-improved for the area, that means the value will most not likely be what you think it is. If your home is much larger, you might not get the same cost per square foot as other homes in the area. So I would talk to a bunch of Realtors and get their opinions. I would not recommend hiring an appraiser, however, even though a lot of books recommend this. Appraisers are better at "justifying" a price than in determining market value. The only place I can think of where you can obtain that information is the Multiple Listing Service. For that, you need to be a member, but you could ask an agent to obtain the information for you. I cannot think of any reason why an agent would not be willing to give you that information, so just ask one. There really is not a concrete value in knowing the asking prices. There are different strategies in developing an asking price, plus a lot of properties start out over-priced to begin with. Comparing properly priced houses to over-priced houses, then lumping them together in some sort of analysis would skew your figures. I can see how you could intend to use such knowledge for the purposes of negotiation, but with an informed listing agent, it should be a fairly ineffective strategy. For example, recently I saw a web site where the agent was hawking his ability as a listing agent. He said the average home in his area sold for 93% of asking price, but his average listing sold for 97% of asking price. The implication was that he got more money for his sellers. The truth is probably just that he priced his homes correctly to begin with. Though this seems like an easy question, it is not as simple as it sounds. Keep in mind that much more goes into the market value of a house than it´s square footage. For example, two houses next door to each other can have the same square footage, but if one has two bathrooms and the other has only one, guess which one will probably be worth more? It will also cost more per square foot. However, if you compare recent sales of similar homes, the cost per square foot should be similar to those properties. You can ask your agent to provide you with comparable sales data.
|