Would you consider hiring a home improvement contractor without first checking references and analyzing their portfolio of past work? Probably not. Most people do their research before they hire service professionals like roofers, plumbers, and general contractors to make sure they find someone trustworthy.
However, this due diligence often falls by the wayside when it comes to hiring a real estate agent. Yet buying or selling a home is one of the biggest financial decisions you’ll make, and finding the right person to represent your interests is key to getting the best deal or the best return on your investment.
If you choose the right real estate agent, the process will go relatively smoothly. However, the wrong agent can wreak havoc on a transaction and possibly even lose you the sale entirely. In other words, it’s a big decision.
But what should you look for when hiring a real estate agent? What red flags should you watch out for? Here’s what you need to know to find a great real estate agent.
What Type of Agent Do You Need?
First things first: Are you buying a home or selling a home? This answer is key to figuring out the type of agent you need.
Agents who work with homeowners selling a home are called “seller’s agents” or “listing agents.” These agents represent the interests of the homeowner during the listing and negotiation process.
Agents who work with homebuyers are called “buyer’s agents” or “selling agents.” These agents represent the interests of the buyer during the showing and negotiation process. Some buyer’s agents work exclusively with buyers, meaning they don’t list any homes at all.
The terms “seller’s agent” and “selling agent” often confuse people in the home buying and home selling process because they sound almost identical. However, they represent different parties with different interests. Seller’s agents represent the party selling a home, while selling agents represent the party buying the home; however, they’re only called a “selling agent” once the final contract is signed.
Dual Agents
Some agents are called “dual agents,” which means they’ve agreed to represent the interests of both the buyer and seller during the home buying process.
Here’s how it works. Imagine you walk into an open house and fall in love with the place. It’s a hot property, and you know it’s not going to last. You just started your home search and don’t have your own agent. However, the listing agent is on site and would love to help you make an offer on the home right there. You don’t want to wait to get your own agent, so you agree to work with her. In this case, you just entered a working relationship with a dual agent.
Dual agency is controversial because agents are forced to walk a very fine line and stay neutral throughout the process. After all, they’re representing a seller who wants to get the highest price possible for their home and a buyer who wants to get the lowest price possible for that same home.
There’s also a potential conflict of interest because of commission. In a typical sale, the buyer’s agent and listing agent split the roughly 6% commission, getting roughly 3% each. A dual agent keeps 100% of the commission, which means it’s in their best interest to sell a home for the highest price possible. This works out great for the seller, but not so great for the buyer.
Many real estate professionals feel strongly about dual agency, with good reason. Dual agents are legally prohibited from taking sides in the transaction or sharing confidential information. So they get double the commission while providing less advice and guidance to both parties. Most of the time, the only person who really benefits is the agent.