If you’re buying or selling a home, why would you try and do it on your own?
In today’s technology-rich world, with information immediately available and a desire by many for immediate gratification, some prospective homebuyers and home sellers might rely on the internet and themselves to get the job done!
And, if you’re currently involved with either buying or selling residential real estate, you may have already visited the websites that sing the benefits of a DIY residential real estate process known by the acronym FSBO…For Sale By Owner.
If a home seller makes the decision to go the FSBO route, in many cases it will be to ‘save’ the 4%-6% commission they would otherwise pay to an agent.
The reality, however, is that such a decision may be somewhat shortsighted and in addition penny wise and dollar foolish.
The benefits provided by the real estate agent, including but most certainly not limited to the proper marketing of the property, in the majority of cases makes paying the commission extremely cost effective.
And of course the DIY seller needs to recognize the fact that any buyer putting a bid on an FSBO home has already taken the fact that no commission will be paid into account when determining the price to offer.
Why You Need A Real Estate Agent
A November 2016 article in Dan’s Papers, the go-to publication for the East End of Long Island and beyond, provides an even more in-depth explanation of the need to have top representation when buying or selling a home regardless of where it is located.
One of the reasons for utilizing a real estate agent, as we had described in an article here a few years ago titled ‘Title Insurance: The CT Scan and MRI for your real estate transaction!‘, is that there is so much more to a property than the bricks and mortar visible to the naked eye!
The best listing agents sell property based on substance. Before even marketing the property, these agents understand that they are brokering a specific property that requires a tailored approach. To define their product, the best listing agents look beyond the walls and examine the deed, covenants and restrictions, historic easements that run with the land, tax bills, certificates of occupancy, open permits, survey, and existing liens (e.g., mortgage) while obtaining payoff letter(s). The deed is used to confirm ownership and to ascertain whether any legal action is required to be pursued prior to even considering selling the property. The covenants and restrictions provide whether the property has restrictions on its use such as only permitting local vegetation on the land. The easements indicate whether another has a superior legal right to use the property, such as a right-of-way to the beach. The tax bill confirms whether the property is in a hamlet or a village while also providing the district, section, block and lot number(s) for the property from the relevant tax map.
Knowing the property’s district, section, block and lot number(s) is important for top agents to sell prospects a vision of what the property can be under new ownership (e.g., whether a barn can be built on the property pursuant to the applicable code or a tennis court or even a moat). The certificates of occupancy identify whether the municipality has recognized the existing structure as legal or if a buyer will be buying a violation and a future court appearance with their real estate purchase. The open permits advise what construction has yet to be finalized and whether the construction is permitted to continue as intended. The survey explains the metes and bounds for the property, which detail such items as whether the driveway is within the property’s boundaries or problematically, located on neighbor’s property. Lastly, the liens and payoff letters, when compared with the fair market value for the property, define whether the property has equity. Only after obtaining this information, and more (i.e., a seller’s home inspection, appraisal, etc.), can a listing agent tailor their marketing strategy for the specific property to obtain an optimal purchase price.
To know if you are working with one of the best, see if the agent asks you for your closing statement and title policy from purchase prior to taking the listing. This information is the ideal starting place for a listing agent in commencing their due diligence in seeking to get you the highest price.
The best buyer’s agents look for much of the same information, but for a different purpose. Their goal is to negotiate down the purchase price through substance. To know if you are working with one of the best, see if they both go to your town or village in order to check the legality of the property and then to the County Clerk in order to pull your deed with the covenants and restrictions for the property. Alternatively, many of the best brokers have a computer program that gives them access to much of this information (i.e., both the Suffolk County Clerk and the Town of Southampton also have websites with this information). Just know that the best real estate salespersons have a relationship with those who work for your local municipality where they can greet the municipal worker by name and obtain immediate help with questions and concerns.
As simple as it may sound, the best agents can articulate who they represent and whether a conflict of interest is present in a given transaction. A conflict of interest may occur if the same associate real estate broker or real estate salesperson represents both sides of the transaction. Additionally, a conflict of interest may occur if the same real estate brokerage (through different associate real estate brokers or real estate salespersons associated with such brokerage) represents both sides of the transaction. The best agents value serving as strategic negotiators, not just marketers, for their clients so they only seek to have these conflicts of interest waived (i.e., dual agency and dual agent with designated sales agent are the terms of art for the waivers) where their clients understand that such waivers limit the agents’ ability to negotiate.
Now, assuming no conflict of interest is waived, the best strategic negotiators have three skills that set them apart from the rest. First, they set realistic expectations so sellers and buyers alike are not anxious throughout the negotiation process. To set expectations, the best agents explain risk/reward analysis for each possible negotiation position where transacting parties can make informed choices of how they’d like their deal handled. Dogma is ignored and strategy rules the day.
Next, the best agents never have their clients involved or present during negotiations. Even the most sophisticated clients will be too emotionally involved to optimally negotiate their own transaction. In this sense, the best associate real estate brokers and real estate salespersons know that their job is to serve as a screen for their clients where they can obtain the other side’s position, explain it to their clients in private, and then take the necessary time to respond after a strategy session with their clients.
Lastly, the best agents understand principled negotiation where they look at the entire picture of the transaction rather than engaging in position bargaining on just price. To illustrate, maybe the seller really wants to take the antique chandelier and maybe the buyer doesn’t really want the chandelier. Perhaps the buyer can save money on the purchase price by offering the seller to take the chandelier.
To know if you are working with one of the best, ask them if such agent will be your strategic advisor and negotiator throughout the process, or, if instead, they want you to waive all conflicts of interest and have them represent both sides of the deal with compromised fiduciary duties. To be clear, there’s nothing inherently wrong with having you waive the conflicts of interest. Instead, what you should be looking for is how the agent explains the effects of a waiver and if the agent takes pride in wanting to negotiate on your behalf and only offers to have you waive the conflicts of interest if you are a strategic and experienced real estate negotiator on your own. Otherwise, waiving a conflict of interest for your specific agent (as opposed to the company level conflict of interest waiver) can be dangerous according to the Department of State in its article Be Wary of Dual Agency.
The best agents understand their role as gatekeepers to integrated communities. When seeking buyers and tenants, they don’t see demographics, they see dollar bills (i.e., the best offer gets the property not just the applicant who looks like the neighbors). As New Yorkers we know that living in a melting pot is our identity. Only through a meshing of diverse cultures can we achieve greatness. To further that goal, which is legally required by way of the Fair Housing Act, the New York State Human Rights Law, the Suffolk County Human Rights Law and local laws, these agents understand the exponential exposure that their sellers and landlords face if decisions about terms, conditions or privileges are made with the demographics of the purchasers or tenants being a relevant factor.
In fact, the following demographics are protected on the East End of Long Island: race, ethnicity, creed, color, national origin, alienage status, citizenship status, sexual orientation, lawful source of income, marital status, partnership status, military status, sex, gender identity, age, disability, familial status, domestic violence victim, sexual abuse victim, stalking victim, and religion. Knowing that such protections cover just about every demographic, the best agents serve as a screen as an integral aspect of their service offering. In such, the top agents never reveal any demographics of prospective purchasers or tenants to their sellers and landlords. As a result of this practice, the best agents make it a functional impossibility for their clients to have discriminated in a transaction. This is because not knowing the demographics makes it impossible to discriminate, which is the ultimate defense to a discrimination lawsuit. Therefore, these agents understand that offering this screen service is as important as getting a high sales/rental price for their clients because those who hire the best like to avoid losing money in suit as much as they like to make money in the transaction.
To know if you are working with one of the best, ask the agents what you should know about housing discrimination and see if they explain their role as a demographic screen.
- Who is your underwriter?
- What is the claims experience of your title insurance provider?
- Do you know whether the non-title insurance premium fees you are paying are fair and reasonable?