This month we are going to shed light on some myths and urban legends surrounding Realtors and their role in a real estate transaction. Just last week I was browsing Facebook and was shocked at how misinformed some people were in regards to ‘blood thirsty real estate agents’. First of all, don’t rely on Facebook for news or accurate information. Although some of the posts are interesting, factual material, there are tons of misleading posts pushing opinions as facts which is never a good thing. Check the source; or as we internet trolls say, check the sauce!
Anyway, back to the subject:
Real Estate MYTH 1 – It costs me extra $ to buy a home if I use a Realtor
To debunk this myth, let’s first look at Realtor’s responsibilities and how they get compensated for their work, particularly Buyer’s Agents. Just so we’re clear, a Buyer’s Agent does not cost a buyer any money!
A Buyer’s Agent is supposed to conduct searches on your behalf, based on information you provide them with, and present you with viable properties that may catch your interest. Their purpose, aside from representing your interests and protecting you legally, is to help find your new home; not just provide a list of houses for you to sort through. However, you as a buyer do not pay them a penny for their efforts!
Buyer Question: So who pays the agent’s commission?
Answer: The SELLER pays the commission.
When someone decides to sell their house, they meet with a Listing Agent who outlines recent comparable sales which will help establish a sale price. They will also outline what they will do in order to advertise, market, and sell the property. At the same time, the agent and seller negotiate the commission for the sale. Typically, the commission is 5%-6% of the total sale price depending on market conditions and the value the seller sees in the agent. That 5%-6% commission is split between the Listing Agent and the Buyer’s Agent, netting each agent anywhere from 2.5%-3%. The Listing Agent’s responsibility is to represent the interests of the seller, usually in the form of getting them the most they can for their house.
Given that information, you should now clearly understand that as a buyer, an agent does not cost you anything. The value they bring to the table makes it a complete mystery as to why someone would attempt a home search without one. If you can have someone help you find your home, FOR FREE, why wouldn’t you go that route?
Disagree? Have other myths or questions you would like us to cover? Let us know!!!
Next time, we’ll cover Real Estate Myth 2 – I will get a better deal or have a better chance if I go directly to the Listing Agent. Don’t miss it!