You must be wondering why you should hire a real estate agent!
Are real estate agents worth hiring?
Although over the years, a large number of people have found their way to the Realtor career, it has become obvious that some of them should not have gotten their licences in the first place. Yes, there were some bad apples, but luckily we live in a country where we very quickly identify those and they are gone even faster. There are bad examples in any profession. I like to think that we should focus on the value that real estate agents with reputation and experience can bring to the table and help you navigate the real estate market.
Why hire a real estate agent? Read the scenarios below that have taken place in real life over the last few years In Mississauga, Milton, Oakville, Toronto and Burlington.
Open House Scenario
Buyers walk in and start to look around, making a great effort to let me believe that they are not going to put an offer. However, I can see from my experience that they fit all criteria of a buyer who is about to make an offer. They ask for the paperwork and if there will be a discount on the price if they make an offer without an agent. I tell them that the price is entirely up to the seller but that the sellers will consider their offer with that in their mind. Further to that, I explain to them all forms of representation that are possible in a transaction, but they feel that me providing customer service to them is the way to go because I started with the sellers and they are paying me. In buyer’s opinion it would be hard for me to represent the buyers as well as sellers without a one sided bias. There is truth in that (a buyer would be wise to have their own agent to represent their interests – a listing agent may have a relationship with the seller and may be even related to the seller and it could be difficult for the listing agent to remain impartial). As I mentioned, they did not have their own agent because they felt they could handle a real estate transaction. Buyers also assumed that sellers would automatically reduce the price by additional 2.5% since that is what they don’t have to pay to a buyer’s agent.
Of course they were wrong. They should have hired a real estate agent. Read below what mistakes buyers made in this scenario.
What happened before they got to me?
They did not do any research.
The lovely couple went to see many homes. They were ripe for a change. Their motivation was not for better schools for their kids, better area to live in, shorter commute etc. In fact they told me that when they started to look it was just an idea and after they saw a few listings on MLS and then visited a few homes, they got hooked on the idea that they should move to a nicer looking, more expensive home. After they did some basic math, they figured that they can afford the price range and started visiting open houses.
Their Motivation was wrong given their circumstances
Although we are all entitled to buy a house because we simply love it and always had a dream to have our own ‘castle’ to live in, it is necessary to remember that our living arrangements are determined by more than just our dreams. Such things as kids, work, income, neighbors, health, safety, traffic are just some of the criteria I instruct my Buyer clients to consider and in this case this couple that did not have an agent did not have anyone qualified to suggest those points to them.
They did not want a Real estate Agent
They did not like the Idea of having an Agent represent them and assist them because they felt that they wanted to go see places on their own and they did not want a pressure of having someone following them around and showing them places they did not want to see. Also, the BIGGEST REASON was that they felt that if they come to make an offer alone that they would be able to get a better deal. They made a very bold assumption that I would reduce my commission since there is only one agent to pay.
No pre-approval from the bank
They did not check with the bank if they could arrange additional financing in the amount that the house was selling for.
Here is what happened. The offer was accepted, conditional on financing and inspection. However prior to accepting I negotiated a higher deposit from the buyers and that the deposit becomes non refundable on clearing of all conditions. This was fine with the buyers since they believed that this was their dream home and they made enough money to afford it. In fact, they did luckily get approved and the home passed the inspection. Once all the conditions were waived, the deposit became non refundable.
If the buyers at this point finally examined other criteria, and perhaps realized that there are no schools in the area that fit for their kids, or that the commuting to work will now take twice as much time maybe also impacting their living arrangements in terms of after-school child care, put strain on their relationship, chances are they would have had to walk away from the deal and at best case only lose their deposit.
Here is what they did not know.
They did not have an agent and therefore no one did a comparative market analysis of the value of the property for them. They negotiated a price that was inflated by an expert agent. I knew that everyone negotiates the price, but I also KNEW how to set it just high enough that even a buyer with an agent would not have been able to get more than the sellers are willing to give, BUT IN THIS CASE the buyer did not even get that. They COULD have negotiated another 3.5% , $35,000 (on an $839,000 home) just based on having some idea of what the market value of that home was. THAT ALONE WAS WORTH HAVING AN AGENT.
No Negotiating Skills
They negotiated not knowing how to negotiate, and I was able to wear them down using a proprietary negotiating technique and essentially sellers GAVE UP NOTHING while the buyers think that they got all they asked for. Again they could have gotten much more in VALUE and $$$ had they had someone like me in their corner.
Falsely Expected Commission Reduction
Of course, since the buyers are not privy to the details of my remuneration for my services to the sellers, they can never really know if they have saved any money at all by not having an agent represent them. IN FACT, a good experienced agent would have been on average worth AT LEAST 3 times the commission they are paid (see how I came up with this number).
Why hire a real estate agent?
1) Just by having someone skilled in negotiating representing them, they would have still been able to buy this home WITHOUT a non refundable deposit.
2) They would have been told about schools in the area, home values, home appreciation, how banks see this area, how good the neighbourhood is, etc.
3) They would have been told what they should pay maximum and what the home is worth and would have saved tens of thousands.
How much can you save using a real estate agent versus not using a real estate agent in dollars? Have a look at my rough estimation of savings using the above example!