- “Heavy machinery is on its way.”
- “My commission is not set in stone.”
- “I make more money when the sale is through my brokerage.”
- “I might have to tell the seller everything you say.”
- “I am in cahoots with the home inspector.”
You want to keep in mind when you are buying a house that you must exercise the same caution as you do when buying a car. Since you often spend more time with a realtor, you can start to forget that they are a commission-based salesperson. Agents are incentivized to want you to pay as much as possible, as quickly as possible. That means they will sometimes withhold certain information that would be helpful for you to know.
Of course, there is a range of honesty levels among realtors, notes Home Buying Kit for Dummies co-author Eric Tyson. “Real estate agents provide an important service, and the top ones have your best interests at heart,” he says, “but you should be aware of the practices that go on to protect yourself.”
Here are a few secrets that your agent may be keeping from you:
“Heavy machinery is on its way.”
If your agent is hungry to sell a house as quickly as possible, they will be less likely to mention anything negative about the general area. For instance, there might be a huge construction project that’s just starting in a couple weeks, or a registered sex offender may live on your block. The city could even be preparing to replace the grass in the park across the street with artificial turf, as they did when I was living in Brooklyn.
The real estate agent should tell you that information. National Association of Realtors President Moe Veissi mentions that you should ask agents about the local schools, crime figures, post offices, and whatever other neighborhood amenities might concern you. You also want to know how long they have been a realtor and if they are in any professional associations – since those groups typically promote ethical standards for their members.
“My commission is not set in stone.”
How much commission typically goes to brokers and agents? Realty analyst Real Trends estimates the nationwide average is 5.4%. When the house is sold, half of the commission goes to the buyer’s agent and half to the seller’s agent. The specific rate is debatable, though.
The seller is the one who has the most control over commission. They can work with an agent who will accept a lower rate. It will be easier to negotiate a better percentage if your property is worth more.
You just want to make sure that your agent isn’t going to take all the money out of the share going to the buyer’s agent, explains Tyson. “If your broker advertises a fee less than what buyers’ agents normally get,” he says, “buyers’ agents are less likely to show your house.”
“I make more money when the sale is through my brokerage.”
An agent gets a bigger check if the property is one of the brokerage’s listings. One option when you buy is to use a broker who only works with buyers so that there isn’t a conflict of interest. You can find realtors of that type via the National Association of Exclusive Buyer Agents (NAEBA).
NAEBA President Benjamin Clark argues that working with agents who don’t sell is especially critical given the way real estate started changing in the mid-90s. “Since several states discarded the common law of agency in the mid-nineties,” he says, “the real estate agent’s duties of obedience, undivided loyalty, confidentiality and reasonable care have been greatly diminished.” He points out that the housing crisis associated with the Great Recession was caused in part by unscrupulous or desperate agents guiding homebuyers and investors into mortgages that were not in their best interests.
“I might have to tell the seller everything you say.”
Many people will accidentally mention something to an agent who is showing them the house that they should not – such as the amount of a mortgage preapproval or the desired speed of a move. Often there are laws in place that require the agent to pass on whatever you say to the sellers.
Remember that different agents are on different teams. Be careful not to talk openly when you are within earshot of the other side.
“I am in cahoots with the home inspector.”
Generally when you are buying, your agent will give you a list of home inspectors that they recommend. Like agents, some of these inspectors will overlook problems so that the sale moves more quickly toward a close. Shady brokers will keep working with them for the favor.
Now, you won’t always run into this problem, of course, notes Tyson. “If you picked a good agent, you should get high-quality referrals,” he says.
Nonetheless, it’s a good idea to speak with several inspectors and get a sense of their credentials. You can ask for a sample inspection report. Also see if they are in the American Society of Home Inspectors (ASHI) or a similar professional group.
Checking the Neighborhood While you Search
Watching out for realtor secrets in the above categories can protect you when you buy a house.
You can actually educate yourself on the community (the #1 secret) ahead of time through Realty.com. All our property information is integrated with school ratings and local amenities so that your house search is optimized for your lifestyle. Find a new home now!