How to Get the Most from a Real Estate Agent

BEFORE YOU search for a house or apartment, you should hunt for a real estate agent. Do not rely on luck and newspaper ads but start with recommendations from friends who have recently moved. Call the board of realtors in the community you are moving to and ask for names of several former Realtors of the Year; agencies earn this designation because they sell a lot of houses and know much about the market. If the board of realtors is not listed in the phone book, a local realtor should be able to direct you to the nearest board. Also, go to open houses where the public is allowed to view some of the homes listed for sale with various brokerage firms.

The agent you choose should have access to the local multiple listing services. It is a computerized network that gives him or her a complete rundown of all the houses listed for sale in the area. He or she also should know the local mortgage market and help you figure out how much house you can carry based on your income and expenses. Once you have found a house you want to buy, the agent will help you negotiate the price and close the sale.

A brokerage firm usually earns a commission of 6% of the selling price of the house for listing it that is, putting it on the market and selling it. If your agent works for another firm, the commission is split 50-50 between the firm that lists and the firm that sells. But the bottom line is that the seller of the house, not the buyer, generally pays the commission.

Almost all agents really work for the seller. For this reason, when you have found a house you would like to make a bid on, never tell your agent: "Let's offer the Smiths $ 100,000 but we'll go as high as $110,000 if we have to." The agent is obliged by the custom of the trade to repeat that information to the seller. So wait until the seller refuses your offer before you volunteer that you are willing to pay more. And remember: It is generally in the broker's interest to downplay whatever faults lie in a house or neighborhood.

Some agents, however, have set themselves up to represent only the buyer. The buyer often pays this kind of broker a flat fee or by the hour. That way the broker will not steer the buyer to more expensive houses in order to get a fatter commission. If the buyer does not find a house he or she likes, the broker usually refunds part or all of the fee.

The broker who works for a buyer will examine houses listed through agencies as well as those advertised directly by owners. He or she will also inspect the house for flaws in construction and check the neighborhood for potential changes in assessments or problems in the schools. Such a broker is likely to strike a much tougher bargain for his or her customer, the buyer, than a conventional broker. The broker might demand, for example, that the seller guarantee the integrity of the roof or the plumbing for a period of up to one year. When serving the buyer, some real estate agents submit questionnaires to sellers requesting specific details about a house's condition. This tends to flush out the costly little surprises.

What if you are selling your house? You will find that the competition among real estate brokers for your business has become fierce, partly because nationwide companies are fighting to expand in the market. Thus, you can make some particularly good deals now.

The large, national organizations claim to offer more tempting services than small, independent agencies can. For example, one national agency, Electronic Realty Associates (ERA), promises to buy your house if it can't make a sale within 210 days and if you buy another house from ERA.

Independent real estate brokers have been fighting back, sometimes offering to work for less than the prevailing commissions. But the kind of deal you get from any agent depends overwhelmingly on how desirable your house is. If you have a sound, attractive structure in a sought after location, you might be able to offer a broker a commission of 4% or 5% instead of the conventional 6%.

Occasionally you can persuade a broker to give up part of his or her commission just to get a stalled deal moving again. If a buyer and a seller are only a few thousand dollars apart, the broker may agree to cut his or her fee if the seller accepts a lower price. In effect, the broker absorbs some of the seller's loss.

Some brokers have unbundled the traditional package of services and provide, at an hourly rate, only what customers need. Other brokers the discounters are charging commissions of about 2%. But these agents use color slides to let the potential buyer screen properties in their offices, and then they expect sellers to show their own houses to prospects.