If you are looking to buy your first home, odds are that you will be working with a real estate agent for the first time. You might have some questions about what a REALTOR® does and how you can prepare yourself for the buying/selling process. Here are a few things to consider:
There are two forms of agency relationship. Your relationship with a REALTOR® will vary whether you are looking to buy, sell, or do both.
Buyer Representation. If you are in the market for a home, you are looking for Buyer Representation. A real estate brokerage representing a buyer must do what is best for the buyer. A written contract, called a Buyer Representation Agreement, creates an agency relationship and establishes buyer representation. This contract also establishes fee arrangements, and specifies what obligation the buyer may have. Typically, buyers will be obligated to work exclusively with that brokerage for a specified period of time. Buyers working with a real estate agent can find the perfect property based on their budget, preferences and needs.
Seller Representation. When a brokerage represents a seller, a written contract is presented. This contract is called a Listing Agreement. This document creates an agency relationship between the seller and the brokerage and establishes Seller Representation. It explains the services the brokerage will provide and establishes a fee arrangement for the REALTOR®’s services, as well as the obligations a seller may have. Sellers working with a real estate agent are assured their property is shown in the best possible light and that their agent will work to sell the property for the highest price possible with agreeable terms.
REALTOR® commissions can vary in range, understand what you are getting:
Agents will charge different percentages based on the services they offer, how much experience they have, etc. A common misconception is that the less commission you pay, the more money you will make. The truth is, if someone is a top-seller and they excel in their business, they would not discount their services (because they do not have to). You get what you pay for. If an agent offers a lower commission, ask what services they are cutting out.
When you are working with a real estate agent, a lot of the work is done for you, but that does not mean that you should not go into the process unprepared. Get the most out of your experience and relationship with these tips:
Tips in Advance of Working with a Real Estate Agent:
1. Do Your Research. Know what you are looking for. If you are selling a property, visit open houses in your neighbourhood and look at MLS listings to find out how your home compares to others in the market. If you are buying a property, decide which neighbourhood you would like to live in, the type of home you can afford and the features you would like in it. With a bit of preparation, it will be easier for your REALTOR® to assist you and get the ball rolling!
2. Know the Difference Between Your Wants and Needs. Your needs are the non-negotiable elements. This is perhaps your price point, particular home features or an exact location. Your wants are the extra perks that you would like to have but that will not necessarily make or break a deal. Ensure that you make the distinction right away to avoid wasting time being shown homes that you would never buy. Alternatively, without the distinction, your REALTOR® might think that your preference for a four-car garage is a ‘need’ and skip over some amazing homes in their search. Be open-minded, but firm about your needs.
3. Get Pre-Approved / Pre-Qualified For Financing: Meeting with a lender can be an eye-opening, but important, experience. By examining your income, assets and liabilities your lender can help you determine how much you can afford on a mortgage. They can also let you know what credit score you might need in order to qualify for a more reasonable interest rate for your mortgage. Once you have this information, you can begin to search for homes within your price range.
4. Communicate; Ask Questions. Communication is a two-way street. Your REALTOR® should be available and willing to answer your questions and put your mind at ease, but it is up to you to voice your concerns and ask the important questions. Ensure you find someone that you feel comfortable talking with. Understanding the home buying/selling process is important– ask your questions to get any misconceptions out of the way and set realistic expectations.
5. Be Realistic. It is okay to hope that your house will sell for $10,000 more than the other homes in your neighbourhood, but it is important to be realistic and informed. Similarly, if you are buying you should understand your budget and know its limitations. Working with a real estate agent, you will have help to achieve the best results possible, but if you enter the process with unrealistic expectations, you will undoubtedly leave with disappointment. Sometimes it is hard to know what to expect – communicate your expectations and see how they line up with your REALTOR®’s analysis.