Do You Need A Real Estate Agent?

Mar 7, 2011

By Staff writer State Farm™ Employee

The Internet has made us rethink a number of old assumptions about buying and selling. Transactions that were once difficult to perform without the assistance of a third party – setting up travel plans, say, or reshaping an investment portfolio – are now, simply put, far easier to perform. So when it comes to buying or selling a home, one of the bigger and more complicated financial transactions in most people’s lives, it’s worth asking whether doing it alone makes more sense.

While it’s certainly possible to buy or sell a house without using a real estate professional, and while there are even a number of advantages, don’t discount the value of agents just because you think it will automatically save you money. Sometimes it will; sometimes, it won’t.

Below are some pros and cons to help you make the decision.

Pro: Agents Have More Information And Expertise

While anyone can access a number of websites that provide information about listings, real estate agents have access to an exclusive database, the Multiple Listing Service (MLS), which provides detailed price history information – in other words, the MLS lets agents tell you how the price of properties has changed over time. Agents also have training, familiarity and experience with what can be confusing paperwork and a hard-to-navigate process.

Con: The Fees, Of Course!

The math is simple, and so is the point. Selling agents will typically charge you around 6 percent for their services – thousands of dollars that you would otherwise be counting as profit. Buying agents, however, do not directly charge the buyer a fee.

Pro: Agents Can Make You More Overall Money

Even though the cost of an agent might make you consider selling your home yourself, think about what an agent can do for you as a negotiator. Experience, access to the MLS, and knowledge of the marketplace can all lead to a higher negotiated price – in many cases, easily high enough to justify an agent’s fees.

Con: An Agent’s Interests Are Not Necessarily The Same As Yours

When you’re buying a home, there’s a basic, underlying economic tension between you and your agent: You’re rewarded differently for different outcomes. Whereas you’re looking to buy a home at the lowest possible price, and therefore save as much money as you can, your agent’s compensation actually decreases as you find a better deal.

The following hypothetical situation demonstrates a possible problem when you’re working with an agent to sell a home. Say your house has been on the market for three weeks when you get an offer for $250,000. Based on your research, the offer is lower than you’d hoped, but it’s a firm offer. Your agent, who will most likely be splitting the commission with the buying agent, stands to make $7,500 on the deal.

You hold out and decide not to sell, against your agent’s advice. Two weeks later, you get another offer: $275,000. While your decision has proven extremely valuable – you’ve made an extra $25,000 – the difference in profit for your agent is far less significant. His overall commission has only gone up by $750. The difference between your additional profit and his additional profit is enormous. Despite being your representative, getting the best deal for you may not have been in his best interest.

Either Way, Ask The Right Questions

It might be useful to simply make a few phone calls and discuss your position with a number of possible agents. You may find somebody you like; you may hear that final argument – or unexpectedly find that dream property that an agent just heard about through the grapevine – that ultimately persuades you.

Whatever the case, don’t be afraid to ask the questions that will help you make an informed choice. Make a list before you make the call, or use the questions below as a starting point:

  • How do you plan to keep us informed on the progress of the sale?
  • Where do you feel your strengths lie?
  • How did you arrive at the suggested listing price?
  • What is your marketing plan for the sale of my home?
  • Can you give me three references of buyers/sellers you have worked with?
  • How long have you been in real estate?
  • Are you a full-time agent?
  • How many home sales did you participate in last year?
  • How many buyers/sellers are you presently working with?
  • How "available" do you make yourself?
  • How does someone contact you?
  • Are you familiar with the price and area in which we want to look?
  • What was the average selling price of the homes you sold last year?
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