For homebuyers and sellers alike, a good agent is well worth the money.
A buyer’s agent helps someone buy property
A listing agent helps someone sell their property
Real estate commission is typically paid by the seller, not the buyer
Licensed real estate agents have more resources and local and professional knowledge that a homebuyer or seller may not have
Whether people are buying or selling their homes, nearly 90% of them enlisted the help of licensed real estate agents, according to the National Association of Realtors. It’s the job of a real estate agent to help you buy, sell, or even rent a property and as a professional, they have a wider network of contacts and resources to get it done. A good agent protects the interest of their clients, provides professional experience and guidance on all parts of the homebuying and selling process, including how to understand the paperwork and negotiate a deal.
Someone who works in the real estate business knows the lay of the land and can give you hard-won advice that can’t be gleaned elsewhere. For all of this work, real estate agents will charge a commission, but don’t let that scare you. The commission can be negotiable and it’s usually paid for by the home seller.
You’ve probably heard the terms agent, broker, and Realtor but they're not exactly interchangeable. A real estate agent is a licensed professional who can help you buy, rent or sell a property. Real estate agents must log hours of coursework and take an exam to get a license in their state. A real estate agent may act as the buyer’s agent or the listing agent. They might even represent people on both sides of a transaction. This is called dual agency, and it is legal in most states as long the agent is transparent about it. (We’ll delve more into the details of what a real estate agent does in each role in the next section.)
A Realtor is a real estate agent who is registered with the National Association of Realtors (NAR). One advantage of becoming a Realtor might be to access a database of properties called a multiple listing service (MLS).
A real estate broker is someone who has gone through additional training and obtained a broker’s license to manage a real estate firm and its agents. The broker may even be the owner of the firm. (You will see their title as broker-owner.) If an agent makes an error, then the broker might also be responsible. Agents usually pay a percentage of their commission or a flat fee on each transaction they close to the real estate broker, who may or may not work as an agent in their day-to-day.
A real estate agent who helps someone sell property is called the listing agent, or seller’s agent. It is their job to list the property, attract buyers, and negotiate on your behalf until the sale has completed. While you can list a house for sale on your own, it can be a time-consuming endeavor, and using a seller’s agent can make sure your listing is more attractive to home buyers.
The first thing the listing agent does is determine the sale price of your home, using not just publicly available data but also algorithm-based competitive market analysis and professional knowledge based on their past experience. For example, they will look at not only what similar homes sold for in your area, but consider other factors like damaged structures and unrecorded easements. They may make suggestions on how to increase the market value of your home.
The real estate agent will stage and photograph the property, and market it in newspapers, magazines, online listing services. They will also add it to the multiple listing service (MLS), which other agents and brokers can access. They’ll also hold open houses and show the property to the potential buyers or (give buyer’s agents access to do so). You get to work out the specific terms of how and when your house can be shown with the agent.
Finally, the agents will vet potential buyers and help you negotiate with a buyer and their agent, and they can help you navigate seller concessions, which may help the buyer close on the house sooner.
If you’re looking to buy a property, a good real estate agent can be extremely helpful. Even though you can browse through property listings online, a licensed agent will have more resources at their disposal.
In most cases, a real estate agent has access to the MLS, which provides them with information on more than just the houses and properties listed with their brokerage or company. The database has more information about a property that might not make their way onto a public online listing, including a property’s prior sales and transactions, renovations, whether or not it’s a short sale or foreclosure, and more. It’ll also have the most up-to-date information about the property’s status, like if it’s under contract or newly listed. MLS systems are typically divided regionally.
After accompanying you to showings, the real estate agent’s work doesn’t stop there. Once you find your dream home, real estate agents are there to help you negotiate and get the best deal. It’s common for buyers and sellers to haggle over the purchase price through offers and counteroffers. A good buyer’s agent will tell you if the asking price — or your counteroffer — is unreasonable, and what seller concessions you’re likely to get after a home inspection.
Agents and brokers have many local contacts, so they can recommend home inspectors, contractors, attorneys, and other professionals in the real estate industry. They can even refer you to a mortgage broker if you need financing.
Whatever questions you have about home buying you can direct to your agent. If you find a real estate agent you trust, then you’ll probably also trust their advice and referrals, freeing you of time and energy trying to find the best person online to fix your roof or set new tiles in the bathroom.
There is no legal standard for commission, so you should always feel free to negotiate.
If you’re selling a home, you can expect to pay anywhere from 5% to 6% of the sale price as commission. The money will be split between the listing agent and buyer’s agent. If you’re buying a house, then you more than likely will not have to pay commission for either agent. The real estate agents who helped you find and purchase the house will likely be paid out of the seller’s pocket.
Buyers who don’t realize that they will not have to pay real estate commission might be tempted to go to closing without their agent in hopes that ditching them will save money. They are not only ethically in the wrong, but the money that the buyer's agent should have collected may simply be paid instead to the listing agent. This is why many agents have their clients to sign an agent disclosure, so that there is a record of who represents whom.
If you’re renting or leasing your house, then you may also consider hiring a real estate agent. The renter’s agent would act similarly to the buyer’s agent (finding the renter a rental home), while your listing agent would list and market the home just as they would do if you were selling it.
The agents’ commission and fee structure for rental properties may be assessed differently — especially in high density areas where renting is more common than buying.
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Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.
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