Laura explains the differences between real estate professionals and provides tips for hiring one, whether you need to rent, buy, or sell a home.
Laura explains the differences between real estate professionals and provides tips for hiring one, whether you need to rent, buy, or sell a home.
Transcript: https://money-girl.simplecast.com/episodes/how-to-hire-the-best-real-estate-agent/transcript
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Whether you need help finding a rental, are ready to buy a home, or want to sell a property, using a great real estate agent can be essential for a smooth and financially successful transaction. But if you don’t understand exactly what various real estate pros do or how they work with clients, the industry can seem confusing.
This post will review how to find the best real estate agent for your situation. I’ll review what you should expect from great agents, how they get paid, and what to ask before hiring one.
Welcome back to episode 944 of Money Girl–I appreciate you spending time with me! I'm Laura Adams, an award-winning author, on-camera spokesperson, money speaker, and founder of The Money Stack, a Substack newsletter. I've been providing personal finance tips and advice on this podcast weekly since 2008, with over 44 million downloads.
You can learn more, ask questions, and sign up for the Money Stack at LauraDAdams.com. Newsletter subscribers automatically receive my Money Success Toolkit, which includes the exact templates I use to manage my finances.
Understanding differences between real estate pros
Like every industry, real estate has plenty of jargon. Some of the most misunderstood terms get used interchangeably, such as real estate professional, agent, broker, REALTOR®, and property manager. So, hiring the best pro starts with understanding what they do and how some roles may overlap.
First, a real estate professional is anyone working in the industry. They may or may not be licensed to sell real estate. A real estate pro could be licensed as a property appraiser, or work as a mortgage broker, closing agent, or a broker’s assistant. So, it’s a general term referring to people who work in the housing industry.
A real estate salesperson is what most people call an agent because they hold a state-issued license to sell real estate. Becoming a licensed salesperson is regulated at the state level, so every state’s requirements are a little different. Many years ago, I was a licensed salesperson in Florida, where I still live. So, I’m most familiar with the real estate regulations here.
To take Florida’s real estate salesperson exam, you must be 18 years old, have a high school diploma, and pass a 63-hour pre-licensing course from an approved real estate school. You can take the class in person or online from an education platform like Aceable. The course covers all the topics you need to know, including real estate law, practices, and ethics, to get prepared for the state-administered licensing exam.
Once you pass a state exam and criminal background check, including fingerprinting, you can submit an application and fee to become a licensed salesperson. But that’s just the beginning of an agent’s educational requirements.
Florida salespeople must pass a 45-hour post-licensing course before their first license renewal, which happens two years after becoming licensed. Then, they must pass continuing education every two years to maintain a license. Additionally, salespeople in most states can’t legally practice without working under or being sponsored by a licensed real estate broker.
In Florida, to become a real estate broker, you must have held an active salesperson license for at least 24 months within the preceding five years. You must pass a state broker exam and broker-specific continuing education.
Therefore, a real estate broker is a salesperson who completes more education, passes a state broker exam, has more practical experience, and typically owns or manages a local real estate office.
REALTOR® is an often misunderstood and misused term. It’s a membership mark owned by the National Association of REALTORS® (NAR), the largest trade group in the country. You can only use the term after your name or call yourself a REALTOR® if you join NAR and the mark is licensed to you.
In other words, every REALTOR® is a real estate professional, but not every professional is a REALTOR®. NAR protects the designation fiercely because it distinguishes its members in the industry. For instance, REALTORS® pledge to protect and promote the interests of their clients and to always act ethically.
However, joining NAR isn’t mandatory, and some real estate salespeople may choose not to participate and pay its annual fees. In that case, the agent is just a salesperson or broker without the REALTOR® designation.
Property managers are another type of professional who handle real estate for others. In Florida, if you get paid a commission or a percentage of rent for showing, advertising, or leasing property, you must have a broker's license.
However, if you own a property and manage it yourself or you’re an employee of a licensed property management company acting under a broker, no license is required.
LISTEN ALSO: How do I get preapproved for a mortgage?
Tips for hiring a real estate agent to rent a home
Now that you know the main players in the real estate industry, let’s talk about best practices for hiring them. Here are seven tips for working with an agent to rent a home.
1. Get a referral when possible: If you know someone who found a great rental in the areas you want to live using an agent or property manager, be sure to get their contract information.
2. Ask agents if they handle rentals: Not all salespeople handle rentals; however, some brokerages specialize in them and may have a dedicated property management department.
3. Understand how an agent gets paid: Find out if they will get paid by a landlord or you to avoid any surprises. Also, find out what you get for any fee, such as a list of properties, tours, and help completing a lease.
4. Work with a local expert: Using a local agent or manager is invaluable because they understand different neighborhoods, price trends, and which landlords or management companies have good reputations.
5. Allow them to save you time: An agent’s familiarity with neighborhoods and buildings means they can quickly filter out properties that don’t meet your needs. Plus, they can coordinate multiple property viewings by scheduling appointments on your behalf.
6. Get more choices: An agent has access to the Multiple Listing Service (MLS), which includes rentals and listings that may be open to a lease instead of a purchase offer. That may give you a much wider range of rental choices than what’s publicly available.
7. Let them negotiate: Many landlords are willing to adjust rent prices or lease terms, and an experienced agent will gladly negotiate for you. Just be ready with documents to prove your identity, income, employment, and previous landlord references.
RELATED: Should my first home be an investment property?
Tips for hiring a real estate agent to buy a home
Finding the right agent to represent you as a real estate buyer is critical because it can be a complex and even emotional process. The best agent will be someone with lots of experience in the area where you want to live, a good communicator, and someone you trust.
Here are seven tips for working with a buyer’s agent.
1. Get a referral when possible: If you know someone who had a great buying experience in the area you want to find a home, a referral could be extremely helpful. You might also see an agent’s name on yard signs in neighborhoods you like; however, that doesn’t mean you have to work with them.
Remember that a listing agent’s primary responsibility is to their client, the seller who pays a sales commission, which means they’d represent you as a dual agent. There are pros and cons to that relationship, which I’ll discuss in a moment. Also, take note if they’re a REALTOR®, salesperson, or broker to understand their level of experience and education.
2. Work with a local expert: Using a local agent is invaluable because they’ll have a deep understanding of a neighborhood’s listings, recent sales, community features, amenities, typical costs, future plans, school districts, and much more.
3. Interview multiple agents: Unless you find the perfect agent, consider interviewing a few to understand their expertise, network, availability, communication style, feelings about the housing market, and technical savvy.
4. Ask for references: A good salesperson or broker should have many happy clients they’d be willing to let you speak with about working with them. Take the time to speak with their references about whether the agent is responsive, detail-oriented, well-connected, and a good negotiator.
5. Discuss the buyer’s agreement: Due to a nationwide NAR legal settlement about broker commissions, starting in August 2024, REALTORS® must ask their buyers to sign a written buyer’s agreement before taking them on home tours. The agreement clarifies their services and how they get paid. It was previously a requirement in many states, but it is new in some.
You can negotiate the amount, percentage, or flat fee you pay a buyer’s agent; however, a percentage of the sale is typical. In reality, once you find a home, you can make a purchase offer contingent on the seller paying your agent’s fee. But they may or may not agree to it.
Note that if you sign an agreement with a buyer’s agent but tour a home with another agent, you may owe both parties a commission. So be sure you understand the duration of the agreement and the conditions for changing or cancelling it.
6. Ask about dual agency: Some buyer’s agents may also have listings. First, recognize that they may have an inherent bias to show them to you before other agents’ listings. And, if you make an offer on one, they become a dual agent, representing both you and the seller in the same transaction, and must legally get informed consent from both parties.
Some advantages of dual agency include having more streamlined communication, which could lead to a faster and smoother transaction. Additionally, a listing agent may be willing to cut their commission, if allowed by their brokerage, since they won’t have to split it with another office. Since a seller typically pays a real estate commission, they could save money.
However, the downside of a dual agency is that, as an agent is typically paid by the seller on the purchase price, they tend to prefer a higher price rather than a lower one. That’s a difficult conflict of interest to overcome when a buyer’s agent is supposed to advocate for a buyer’s best interests.
So, instead of having a dedicated representative, a dual agent is supposed to be a neutral facilitator in the transaction, not really advising or negotiating for either side. That can mean both parties get less than they deserve. So, find out if a dual agency is something the agent has experienced or could happen.
7. Get a mortgage preapproval first: A good buyer’s agent will only work with you after knowing you have the financial ability to buy a home, and for how much. They usually have mortgage lenders or brokers to recommend if needed.
LISTEN ALSO: Will renting or owning a home make you richer?
Hiring a real estate agent to sell a home
Selling a home as a listing agent requires different skills than working as a buyer’s agent. Namely, you must be a savvy marketer and understand how to accurately price a property.
Here are seven tips for working with a listing agent.
1. Get a referral when possible: If you know someone who loved working with a listing agent in your area, they could be right for you, too. This is the best first step before working with any professional for a good reason–there’s no substitute for a personal review! If someone you trust believes an agent is great, it increases the odds that you’ll have a good experience, too.
2. Interview multiple agents: Unless you already know the perfect agent, consider interviewing a few to understand their marketing expertise, communication style, feelings about the housing market, and technical savvy. Review their listings to see if the photos are professional and have well-written and compelling descriptions. Consider how close their listing prices are to the selling price and how long they took to sell.
3. Work with a local expert: Similar to buying a home, using a local agent is critical because they’ll have a deep understanding of a neighborhood’s listings, recent sales, community features, amenities, typical costs, future plans, school districts, and potential buyers.
4. Ask about any support staff: Some high-producing listing agents employ a team for administration, setting appointments, handling paperwork, and much more. Understand who your primary point of contact would be and how any team members would handle your needs.
5. Ask for references: Take the time to speak with a listing agent’s references about their marketing and negotiation skills. Plus, if they have a staff, find out if they’re responsive, detail-oriented, and work well together.
6. Discuss the listing agreement: Review the contract and commission they’ll ask you to sign. But remember that real estate commissions are negotiable and would be split between their brokerage and any buyer's agent’s office. Also, ask about the probability of a dual agency situation and how they handle it.
7. Request a Comparative Market Analysis (CMA): Once you sign a listing agreement with an agent, they should create a detailed CMA, comparing your property to similar homes that have recently sold, are currently on the market, or failed to sell. That’s the best way to price a home correctly.
Questions to ask a real estate pro
Whether you’re hiring a listing agent, buyer’s agent, or property manager, you can check your state’s Real Estate Commission to confirm that they’re licensed and have no disciplinary actions. Consider the following questions to help you narrow down the right professional for your situation.
How many years have you worked in the real estate business?
That's all for now. I'll talk to you soon. Until then, here's to living a richer life!
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