Would it surprise you to learn that people spend more time shopping for a TV or a new car than finding the right agent to sell their home?
Despite the fact that your home is your single most expensive asset, we often spend only a few minutes (or if we’re lucky a few hours) choosing a real estate agent to work with on this transaction. Sadly, this oversight can cost you, big time. Like $24,000 in commissions on the sale of a $400,000 home (assuming a 6% commission split between buyer’s agent and seller’s agent).
For that kind of money, you want good advice and to get good advice you need to find the right real estate agent. Here’s what to look for when picking the perfect agent for you:
#1: Is Your Real Estate Agent Competent?
My dad was an immigrant. Born and raised in Liverpool, England, my dad came to Canada with his young family in the hopes of giving us a better life. (Side note: He did, but that’s another story.)
Part of that new life was to become landowners — a big thing when you come from a country where the barriers for entry into homeownership are very, very high. But in his first real estate transaction, my dad was burned by a terrible realtor. Determined never to let it happen again, he developed what he considered a fool-proof method for testing each agent.
- Do lots of homework on the area you’re interested in before you set foot in a property
- Then ask your Realtor a series of questions that you know the answer to, and they should know the answer to.
- If they are vague about their answers or, worse, offer wrong information, my dad terminated the relationship.
While this sounds pretty labour intensive — it takes a lot of work to research neighbourhoods, find out about future building plans and investigate current market conditions — my father was more than a bit successful when it came to real estate from that point onwards. (Keep in mind, this was at a time when the Internet was not as robust and accessible as it is now.)
What does this mean for you? As the seller, you’ll want to do a bit of reading about the current market conditions in your city and neighbourhood. Start with local Realtor blogs as well as local news sources.
Make a list of questions you think your Realtor should know the answer to.
In each Realtor interview ask each question and write down the answers. Then spend an evening going through your notes with someone whose opinion you trust and respect.
This discussion should help illuminate which Realtor was forthcoming and knowledgeable. Put a star beside those that pass the test, as these Realtors have shown they are, at the very least, competent at their job.
#2: Is Your Real Estate Agent Honest?
Knowledge is one thing. Honesty’s another. You want a realtor with both. A good honesty test is to ask your realtor about any inherent conflicts of interest they face.
An honest agent will talk openly about their desire to close a sale and you’re desire for top dollar.
They should also discuss the potential of conflict should they bring their own buyer client to the table. This is known as dual agency — where one agent represents both the buyer and the seller — and in some jurisdictions in Canada and America, it is illegal. For instance, B.C. no longer permits dual agency, except under special circumstances, while dual agency is allowed in Alberta but only in respect to the brokerage, the buyer and seller must still work with separate agents.
Finally, the agent should discuss their relationship with other real estate professionals (such as home inspectors, lawyers and mortgage brokers) and whether or not they receive a referral fee, a typical fee paid to a Realtor by another professional to acknowledge a shared business transaction. The standard referral fee in most regions across North America is 20% to 25%, although some go as low as 15% and some, like relocation firms, demand as much as 45%.
The key is not how the Realtor answers this question, but whether or not they provide any substantive answer at all. If an agent doesn’t discuss potential conflicts of interest they either don’t know (red flag!) or don’t want to alarm you. Given what a seller pays in commission, you don’t want a Realtor who protects you from information, but a Realtor that protects you with honest information.
#3: Does Your Real Estate Agent Offer Value?
Many studies have been done to try and test whether or not Realtors add value to a real estate transaction. One decade-old study by two Northwestern University economists found that people who used a Realtor typically did not sell their home for more than FSBO sellers. In fact, when these economists factored in the agent’s commission, the FSBO sellers came out ahead — with an extra $19,800 in their pocket, based on the average $330,000 sale price of a home (in 2010).
So, from a strict dollars-and-cents perspective, hiring a Realtor to sell your home may not be worth it. But before you go it alone, ask yourself: How confident are you at setting a reasonable selling price in today’s housing market? How comfortable are you advertising your home and developing a marketing strategy? While you’re at it, do you have the time to attend viewings with potential buyers? What about returning phone calls as well as calling other Realtors in the area to alert them to your listing? Then there’s door-knocking, possible online coverage, staging and the list goes on.
Turns out the “value” you’re looking for is more than slapping a “For Sale” sign on the home and praying for a viewing.
To assess what value a Realtor offers, ask them how they market homes similar to yours. Ask them how comfortable they are with online advertising and what strategies they have to attract buyers. Remember, there is no right answer to these (and other similar) questions, but the agent should have answers — answers you are comfortable with. As Paul Anglin, a real-estate economist in Guelph, Ont., explained a few missteps can cost a seller as much as 5% on their sale price.
#4: Are You Favouring a Friend or Concentrating on Business?
Let’s face it. If you’ve lived long enough chances are at least one family or one fairly close friend is a Realtor. That’s when sellers start to feel the pressure. The aim is to hire a competent, knowledgeable and honest agent and who better fits that description than family or a dear friend, right?
We have four word’s for you: Don’t hire a friend.
Listen, there is nothing wrong with hiring a Realtor that happens to be a family member or a good friend, but that shouldn’t be the reason you do business with this person. Regardless of how well you know your agent, that person must pass your due diligence. Interview your family friend who is an agent, but also interview other agents. Then pick the agent that fits your criteria. In the end, you’re paying a lot of money for housing market advice, so make your agent earn your business, whether you know him/her or not.
#5: Does the Agent Listen to What You Want?
There is nothing worse than working with someone who doesn’t listen to you. Don’t believe me? Try negotiating with a 5-year-old hell-bent on having ice cream for dinner and you’ll know what I mean. When it comes to selling your house, it’s vital that your agent listens to you.
Some agents will value a quick sale, but that doesn’t always translate into good news for you, the seller. The key is to find an agent who will respectfully listen to what you want and an agent who is a professional that can offer justifiable alternatives to your chosen outcome.
For instance, if a low-ball offer comes in just a day after your home was listed for sale, you may be tempted to simply ignore the offer. You may even feel insulted and you can tell your agent as much. An agent that is capable of listening will acknowledge how you feel and acknowledge that perhaps the buyer is throwing a Hail Mary (hoping the offer will land, even if it is hopelessly out of touch with the market). But even a sensitive agent that’s able to listen will know how important it is to counter every offer. An agent that is capable of doing both — listen empathetically but offer real, practical advice — is a professional worth working with.
Does all this work to simply find an agent sound a bit daunting? Then take a deep breathe and remind yourself:
A bad agent can cost you big time — either in lost opportunity, by underselling your home, or because you aren’t given the information you need to make informed decisions.
It’s worth a bit of work to avoid choosing a bad agent.
Know Who You Are Working With
Realtor, real estate agent, broker. Many people just assume that these are different terms for the same professional. We dive into the differences:
Real Estate Agent
A real estate agent is anyone with a real estate license. Requirements to become licensed differ from country to country and province to province. For instance, in British Columbia agents must complete two courses which take, on average, between 60 to 72 hours to complete (in total, and not including exams). In contrast, agents in Saskatchewan must complete the educational curriculum through the Association of Saskatchewan Realtors (ASR) usually within one year.
Due to regulations, a real estate agent must work for a real estate broker (or brokerage). That means when you hire a real estate agent, you are technically also hiring his or her broker.
Agents charge a commission based on a percentage of the sale price of the property. While Canada’s Competition Act promotes free and open competition, there is no standard commission rate. Most agents will charge a commission rate that is within a range that is typical for their province or city. It’s easy to find out the standard rates by asking a few agents what commission they charge.
For instance, a Vancouver-based agent will probably charge 7% on the first $100,000 and 2.5% on the remaining balance of the sale price.
In Toronto, however, the total commission rate will be 5% on the full sale price, with 2.5% going to the buy-side agent and the other 2.5% going to the sell-side agent.
No matter where the agent is located, a percentage of their commission is then paid to their brokerage (unless they pay a flat-fee upfront to keep 100% of their commissions on an annual basis).
Real Estate Broker
A real estate broker is an agent who pursues a higher level of education and licensing (often after working in the industry for a while). That means to become a real estate broker, you must first be a real estate agent.
The courses required to become a broker are typically geared towards qualifying the real estate professional to run and manage their own brokerage firm — a legal entity that is able to hire and lead a team of real estate agents but must also comply with real estate regulations, Competition Act requirements as well as a raft of other legal regulations (such as anti-money laundering requirements).
This also means this real estate professional now has extensive knowledge of real estate laws and regulations as well as more power and responsibilities than professionals who remain real estate agents.
Realtor is a trademarked term for an agent who belongs to a recognized real estate board.
For instance, an agent who pays their fees and belongs to the Real Estate Board of Greater Vancouver (REBGV) can call themselves a Realtor.
As a Realtor, these agents must adhere to the board’s Code of Ethics and standards of professionalism. In addition, each agent that belongs to either their provincial board or the Canadian Real Estate Association (CREA) must complete ethics training on an ongoing, regular basis.