10 Things Your Real Estate Agent Won’t Tell You
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.”
4. “Your home isn’t worth as much as you think.”
Some real estate agents joke that there are two types of home sellers: Those who want more money than their house can fetch, and those who refuse to back off that position.
Some agents won’t take a listing from a seller who wants more than the market will bear. Other agents aren’t so choosy, says Michael Haltman, president of title insurance provider Hallmark Abstract Service in Jericho, N.Y. — even though overpricing can come back to bite the seller by lengthening the amount of time the house sits on the market.
These agents encourage a seller to have surreal expectations, by promising to get top dollar for the house. The wide-eyed seller then signs with the agent who talked up the listing, and the house comes on the market at the seller’s dream price. But after a few weeks with no serious offers, the agent advises cutting the price.
At that point, Haltman says, a seller has little choice but to drop the asking price to a more realistic level — and is none the wiser to the agent’s tricks. “Human nature is you want the top,” Haltman notes. An agent’s job, he adds, is to set a seller’s expectations, not to follow them and create disappointment later.
5. “Young buyers don’t want your old house.”
“This Old House” is a popular television series among do-it-yourself repair types. But if your old house could be featured on the show, you’ll need to make improvements before you sell.
Surveys of home buyers show that many people have a preference for environmentally friendly, technologically up-to-date dwellings that require no more than superficial repairs.
This is especially true of people in the so-called millennial generation, now in their 20s and early 30s. Millennials will unplug from a house that is stuffy and tacky and not cool and techie, according to a study by market researcher GfK Roper Reports. They want a fun house: whirlpool bath, swimming pool, game room, and large walk-in closets are dream-home amenities, the survey showed. High-tech entertainment centers and a sauna/steam room also make their fantasy list. State-of-the-art kitchens, meanwhile, are less of a priority.
Indeed, in a 2012 survey of 1,000 18- to 35-year-olds conducted for Better Homes and Garden Real Estate by Wakefield Research, 64% of respondents said they would not consider living in a home that lacks the latest technology. Moreover, 84% of millennials surveyed said technology is an “absolute essential” for their homes.
And nowadays buyers of all ages gravitate to homes in move-in condition, says Mia Simon, a Redfin agent in California’s tech-savvy Silicon Valley. “People have the money but not the time to fix something up,” Simon adds.
But even if your home is far from factory-fresh, you needn’t despair. Agents say that relatively affordable touch-ups like a fresh coat of neutral-colored paint and window treatments, refinished hardwood floors or new carpeting and redone countertops can turn browsers into buyers. Advises Simon: “Price it well, and present it beautifully.”
6. “Another agent can make you more money.”
Sometimes, the way an agent prices a home can hurt an unsuspecting seller. Some agents overprice a home to get the listing — sellers love to hear their house is worth a lot of money — and then the property sits. Or an agent will undercut the price to generate a quick sale and a commission for themselves, but not necessarily the best price for the seller.
On the other hand, an agent with a proven record of getting deals done at an attractive selling price — without overpricing a listing — is the kind of representation every seller should have. To increase their odds of successfully hiring such an agent, sellers should check a listing agent’s references, request a detailed marketing plan, and talk about what the agent can and cannot do for them, notes Haltman, of Hallmark Abstract Service.
A sophisticated agent also can put money in your pocket in untraditional ways. One example: Pulling out furniture, appliances and other personal property from the total price, for which the buyer writes a separate check. The revised home value means a lower transfer tax for the seller and lower property tax for the buyer.
7. “I don’t know anything about the neighborhood you’re interested in.”
Good fences may make good neighbors, but a good real-estate agent should be familiar enough with a neighborhood to know what’s behind those fences.
“You want to point out things a consumer isn’t noticing,” says Leslie Piper, a real-estate agent in the San Francisco Bay Area and consumer housing specialist at Realtor.com, the website of the National Association of Realtors.
Unhappy clients often complain that their real-estate agent didn’t know, or didn’t warn them about, key issues in a new neighborhood.
An agent should tour clients around a neighborhood in the morning, afternoon and evening, on weekdays and the weekend, Piper says. Maybe a home is on a bus line and every 20 minutes during the week you’ll hear one go by, she adds. Or perhaps a house is close enough to railroad tracks that when a freight train rolls through on a Sunday night, you’ll know it’s there. And if you see a house in spring or summer when foliage is thick, a broker should be able to tell you what the view will be like once the leaves fall.
Ideally, some say, a good agent will be forthcoming with such details, even if it means talking someone out of buying a home.
That said, under fair-housing laws, an agent can’t discuss the type of people in a neighborhood or whether it’s a “good” area, or even the quality of the local schools. But an agent is able to supply data and information about a community’s demographics, crime statistics and school ratings.
8. “I can’t win a bidding war.”
Multiple offers, especially common in hot real-estate markets, put sellers on a gravy train but leave otherwise qualified buyers disheartened at the station.
Still, someone wins. So what can a buyer do to improve their odds of being that someone? An agent who is acquainted with other agents in the area and is a skilled negotiator is one good bet. (And if he or she has a passable knowledge of Sun Tzu’s “The Art of War,” that doesn’t hurt, either.)
A better bet, some say, is to find an agent who goes into battle fully prepared. An agent who has been around the block will ask a client what his absolute highest bid would be, so there’s no confusion in the fog of a bidding war. Knowing the lengths a buyer will go to for a house can give that person’s agent a powerful advantage in dealing with the seller’s agent — especially when emotions are running high.
9. “I might be fired soon.”
What would Phil Dunphy do? The fictional real-estate agent on the hit sitcom “Modern Family” has gone to comical extremes to make a deal, like the time he got locked out of a house he was about to show, climbed in through an open second-story window — and stepped into a fish tank, soaking his pants.
For real-life agents who are suffering a lack of business or are behind on their firm’s sales quota, one transaction can mean the difference between showing houses and being shown the door. Agents are still recovering from the housing crash, which severely thinned their ranks. Membership in the National Association of Realtors, which includes brokers and agents, surged during the housing boom. At the end of 2006, the NAR had almost 1.4 million members, compared with around 800,000 at the end of 2001. At year-end 2012, the group counted just under 1 million members.
An agent under the gun to produce might demur when asked for references, saying that they work with a limited number of clients in order to provide exclusive service. They might promise a seller that their home can fetch an above-market price, or dismiss a buyer’s concern with “it’s no big deal” or “we’ll figure it out.”
In such cases, the agent really is saying “Please don’t fire me.” They fear telling a client what they don’t want to hear and risk losing a sale—and their job.
Of course, that requires buyers be honest with themselves. “We have this saying, ‘buyers are liars,’” says Bonnie Clark, an agent with Illustrated Properties in Jupiter, Fla. “They’ll say, ‘This is all I’m going to pay — and then they go up. I have had people say to me [after losing a bid], ‘I would have gone up more; why didn’t you tell me?’”
Once a buyer has set a ceiling, Clark looks to “any ideas that would top the other person” as a strategy in multiple-bid situations. For instance, besides suggesting that the client cover closing costs and title insurance, an experienced broker might encourage a client to stretch in ways that may be uncomfortable but can seal a deal — such as paying all cash or waiving the appraisal and other contingencies. Says Clark: “Sometimes just the price doesn’t do it. You have to think of everything other than money.”
10. “I’d like to dump you as a client.”
Agents work on commission, but buyers sometimes forget this fact. These “lookie loos” require round-the-clock access and counseling verging on therapy. Realtor.com’s Piper once had a customer who contacted her several times a day and sometimes more. “When they said ‘Jump,’” she says, “I was supposed to say ‘How high?’”
Agents tend to be patient sorts, but they also have a life beyond the MLS. Piper says she won’t answer work-related calls after 7 p.m. “You have to set a standard,” she adds.
Many real estate agents readily tell similar stories. “There are people out there who are really not serious,” says Renee Sabath, with Realty One Group in Las Vegas. “They’re not just looking for their dream home. They’re looking for a fantasy home.”
To get rid of pesky clients, agents employ subtle and not-so-subtle tactics. They’ll pass them to another broker who might be a better personality match or frankly could use the business and can’t be choosy. Or a brooding buyer will be told to take more time to thoroughly research the market — and their needs — before seeing yet another house.
Jonathan Burton is a MarketWatch editor and columnist based in San Francisco. Follow him on Twitter @MKTWBurton. This article originally appeared on MarketWatch.com and is reprinted by permission from Marketwatch.com, 2014 Dow Jones & Co. Inc. All rights reserved.