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10 Things Your Real Estate Agent Won’t Tell You Comments

What buyers and sellers should know about that 6 percent commission

  • By Jonathan Burton, MarketWatch
  • June 06, 2014

buying a house

1. “I’m using your house to sell myself.”
U.S. home prices have rebounded to mid-2004 levels, according to the latest S&P/Case-Shiller home price survey, and though monthly gains are slowing, this spring — traditionally the prime home-buying season — looks to be a sellers’ market.

That’s good news for real-estate agents as well. A 2013 National Association of Realtors member survey showed that agents’ $34,000 median annual income last year reflected a level not seen since 2006, just before the U.S. housing boom went bust; incomes in 2012 were up 37% from 2010.

But while most agents are hardworking professionals, buyers and sellers may encounter some agents who see only the “me” in home.

To get a listing, some agents tell dazzling stories about houses they’ve sold in your area. They’ll promise to splash photos of your home across the advertising pages of glossy magazines and blanket your neighborhood with direct mail to lure move-up buyers.

Critics say these agents are great marketers — of themselves. Photos in real-estate circulars “market the agent,” says Karen Krupsaw, vice president of real-estate operations at brokerage website Redfin. Mailers generate interest in the neighborhood — not the home. “It’s an avenue [brokers take] to generate business for themselves — using your house,” she says.

Furthermore, just because an agent does a lot of business, that doesn’t necessarily mean his clients were happy with his work, Krupsaw says. Indeed, the Council of Better Business Bureaus reports that consumer complaints against agents nationwide rose 22% in 2012 over the previous year.

The real estate website Trulia advises sellers to ask an agent how long their recent listings stayed on the market before selling, and compare that to the neighborhood’s history. Find out the average sale price compared with the average listing price of the homes they’ve sold. And ask how many other sellers the agent currently represents.

This way, buyers and sellers alike stand a better chance of enlisting an agent who’ll works for them — both in terms of a personality fit and a willingness to roll up their sleeves, real-estate insiders say.

2. “You might never get the chance to buy your dream house.”
Whether we’re aware of it or not, most of us find our dream house through a multiple listing service, a database of local or regional properties for sale by participating brokers that is available to other brokers and agents.

But some houses are kept off the MLS, in a pre-sale, or “pocket” listing arrangement. These residences are marketed among associates of the selling agent’s firm and by word-of-mouth to handpicked agents. In other instances, it’s not uncommon for one or two agents to dominate the sales in a particular neighborhood or residential development — a retirement community, for instance — and bring buyers properties that aren’t officially for sale.

Some agents say pocket listings have advantages for all concerned. A homeowner can ask a high price to test the market, for example. And if the property is overpriced and doesn’t sell, it won’t have languished on the MLS, which can be a kiss of death in real-estate sales. A buyer, meanwhile, can land a house in a secret sale without entering a bidding war.

On the downside, a pocket listing limits the pool of available buyers. Anyone not in the know won’t even knock on the door, let alone get past it.

Accordingly, many real-estate agents and housing experts disapprove of this practice.

Pocket listing “makes no sense,” says Doug Miller, executive director of Consumer Advocates in American Real Estate, a Navarre, Minn.-based watchdog group for home buyers and sellers. “You’ve eliminated much of the market, and you’re not saving the client any money. The Realtor should be trying to sell the house in the shortest time possible for the most amount of money.”

3. “My commission isn’t set in stone.”
Perhaps no part of selling a house generates more controversy than agent commissions. A 6% fee, split 50/50 between the buyer’s agent and the seller’s, has long been considered standard for a full-service listing (where a brokerage handles everything about the deal, from marketing the house to moving arrangements). Close to 80% of licensed agents work on a split-commission basis, National Association of Realtors data show.

Commissions in fact are negotiable and vary regionally. Rates typically are lower in high-cost markets and higher in low-cost markets, the NAR reports. One way for a seller to pay a lower commission is to agree to price a house aggressively — that is, at the low end of the market. Time is money. A quick deal means an agent can move on to the next deal and boost productivity. Just make sure you’re not giving up more in the sale than you’re getting in commission savings, insiders warn.

Some agents will trim their commission and actually make more money on the deal. That’s what happens when an agent represents both seller and buyer, known as dual agency, allowing them to collect the full fee, which is then split with their brokerage. So instead of a listing agent and their firm each pocketing 1.5% of the sale price on a deal with a 6% commission, they can make 2.5% apiece on a 5% transaction. In some instances, a listing agent and a buyer’s agent are both licensed with the same firm, which again allows one side to keep the entire commission.

Dual agency has the potential for conflicts of interest, and accordingly raises eyebrows — and red flags — among real-estate experts and state departments of consumer protection alike. But this “double-ending” practice, while not widespread, is legal in most states as long as it’s disclosed to all parties and receives their written consent.

“Be aware of what those [commission] rates are,” cautions Krupsaw of Redfin, which doesn’t permit dual agency among its brokers. “There is a gray area,” she adds, that “varies greatly according to the market.”

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