There are people who spend more time finding the perfect Lululemon yoga pants than buying or selling a house. While I fully appreciate the importance of a chiselled butt (you’d know if you saw me), there’s no excuse for real estate ignorance. Not when houses costs what they do, and it’s so easy to learn.
I’m not talking here strategic about strategic knowledge. Regular readers of this pathetic blog will know some of my usual guidelines. Like, never buy real estate with anyone you haven’t slept with, or the Rule of 90. The former is crafted to protect you from doing business with relatives (unless you have an exciting family), while the latter exists to ensure too much of your net worth is not chunked into a single asset.
Beyond that, there’s so much more to the process of acquiring or dumping real estate. Here are a few points worth remembering about using agents.
First, you always do better with one. This applies equally to buying and selling. If you’re shopping for a house in a certain area, hook up with a well-connected, recommended agent who can pull listings for you, organize tours, dig up comparables and sales data you won’t see otherwise, advise you on writing an offer, present it for you, and negotiate on your behalf. After acceptance, the agent will help deal with conditions, liaise with the vendors, deliver docs to your lawyer and tackle any problems prior to closing. Never use the vendor’s agent, thinking you’ll get a better price or it’s less trouble. This is a big deal. You need your own representation.
Ditto for selling. FSBOs are so trailer park. The only possible reason for trying to sell the house on your own is because you’re cheap. But cheap costs. An experienced agent who knows how to market can almost always find buyers willing to pay more, who are better qualified, or aren’t just coming by to check out stealing your 60-inch hi-def. The agent’s job is to make sure you’re protected with an offer that’s properly executed, locking in the buyer, and legally covered. Expect this person to spend money promoting the property, to sit through open houses, to arrange showings, create feature sheets or a site, network and advise you on how to maximize value through staging or rearranging. But if you want to be cheap, and self-sell, be prepared for fewer nibbles and low-ball offers.
If you engage an agent to represent you as a buyer, the vendor usually pays the cost. When you sell, you pay. But remember, all commissions are negotiable. Some agents will tell you the rate’s set by law. Punt them. It’s not true. Yes, there are some broad guidelines that real estate associations encourage – like 7% on the first $100,000 and 2.5% on the rest in BC, or a flat 6% in Ontario – but the final deal is worked out mano-a-mano. If you have a hot house in a demand area, then 4% might be reasonable. If it’s an OSB McMansion in the boonies, count on 6%.
Interview a few agents and have them evaluate your house. This should be free and without obligation. And don’t sign on with the one who gives you the highest number without solid neighbourhood comparables to back it up. Odds are the same guy will be telling you ten weeks later ‘market conditions have changed’ and you have to reduce. By then, the listing is stale, and all that new-virgin excitement has drained away.
Also negotiable is the length of time you decide to list with one agent. You’ll be pressured for a six-month commitment, but 90 days is perfectly acceptable. In fact, a shorter listing should motivate the agent to devote more time and energy into marketing the place. Be aware that anyone introduced to your home during the listing period (whether the agent did it or not) triggers commission to that agent even if an offer and sale happen after it expires. Check the contract for the relevant period of time.
And if you’re a buyer arranging for an agent, you might be encouraged to sign a BRA – buyer representation agreement. Don’t. This will obligate you to pay a commission to that agent even if you buy a house he or she had nothing to do with showing you. You’ll have to pay commission if you decide to buy a FSBO house. You’ll pay the agent even if you buy a house after the BRA expires (the holdover period). And you can be sued for commission even if you ‘become aware of a property of interest’ that your agent does not show you, which you later purchase. No BRA, no way.
Realtors get a lot of flak on this blog. Lots of them deserve it. The bar for entering the profession is absurdly low, and regulation way too thin. Realtors and developers routinely make claims and guarantees that would put financial advisors out of business. Tons of houses are sold without proper disclosure, to people who are vulnerable, naive and gullible. There is usually no ongoing relationship between agents and their clients, and vast numbers of recent buyers will come to understand nobody was looking out for their interests.
Having said that, an ethical agent should be a key part of any buy-sell decision. If you act on your own, your client is a fool.