How-to Monday: Choosing an agent, part I
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There's no law that says you must get a real estate agent if you're buying or selling a house, but many do. Like any profession (particularly one that's not hard to get into), you can find great Realtors, middling ones and some who are worse than none at all, so you'll want to choose well.
I'll address agent-shopping for buyers next week in Part II. Here's what the Consumer Federation of America thinks sellers should keep in mind before making a choice:
Interview several, asking about their experience, representation policy, commission rate and marketing plan, says Stephen Brobeck, executive director of the Consumer Federation of America.
--Experience: How many homes have they sold in the past year? In their career? Ask for the names of a few past customers and call them, Brobeck suggests. "There's no perfect indicator of quality here, but experience and the experience their customers have had are important," he said.
--Representation: Do they plan to represent potential buyers of your house? "The goal of most agents is to work with a buyer and a seller, thereby being able to retain the entire commission," Brobeck said. "It's called in the trade 'the double dip.' It's not pernicious, but people ought to understand that it does affect representation."
You can go with a double-dipper, though the commission rate ought to be lowered, Brobeck said. (If 6 percent is typical, he says "you should be able to negotiate it down easily to 3 1/2 to 4, depending on the price of your home.") Or you can ask the agent you choose to represent your "fiduciary interests" and yours alone -- and get it in writing.
--Commission: As the example above shows, it's negotiable. And there are a wide range of commission rates out there now, what with discount brokerages competing with the traditional set. But Brobeck says you should be sure to ask about the typical commission split in the area -- that is, how much usually goes to the buyer's agent.
Why? Because you might not want your house showing up in the multiple-listing service with less than the going rate. Especially now that buyers have tons of choices, there's nothing keeping their agents from deftly avoiding showings on your cheap-commission house.
If 3 percent is typical, you can probably get the commission down to 5 percent, Brobeck said, but make sure that's laid out as 3 percent for the buyer's agent and 2 percent for yours.
John F. Sullivan, an exclusive buyer's agent with Buyer's Edge in Bethesda, looked up a bunch of listings for me to see what buyer's agents are being offered. He says there was an almost equal number of 2 1/2 percents and 3 percents.
--Marketing plan: What do your potential agents plan to do to sell your house? Don't assume they'll pull out all the stops. Ask. Also ask for help preparing your house so it looks saleable and pricing it right so it will attract interest, Brobeck says. He cautions against putting much weight on open houses: "Open houses are mainly for the benefit of the brokers to get other clients," he says.
Interested in what others are saying? Click HERE to check out "The Real Estate Consumer's Bill of Rights" written last year by agents at Redfin, an online real estate brokerage. Click HERE to see what the Maryland Real Estate Commission suggests you keep in mind. Or click HERE to see criticism by Brobeck of traditional real estate brokers.
Have anything else to add? Chime in.
EDIT at 2:30: Thanks for all the feedback, guys. Here's the lowdown on the representation question:
Commission double-dipping may be common in America, but Maryland law prohibits an agent from representing both the buyer and the seller in the same transaction, says Katherine Connelly, executive director of the Maryland Real Estate Commission. If a buyer comes to an open house and asks the seller's agent to represent him or her, that agent's broker has to designate another person in the firm to work with the buyer.
I checked with Brobeck, the Consumer Federation of America official, and he suggests a Maryland seller ask potential agents how their firms would handle such a situation to ensure that the seller's best interests are upheld.
Sullivan, the exclusive buyer's agent, notes that a seller's agent will get the entire commission if the buyer is unrepresented.
As always, keep those comments coming. The How-to posts are frequently used for the Wonk column in Friday's paper, so it's a real benefit to everyone when you point out something I should have included.