The top three questions you must ask your real estate agent

In Georgia, real estate agents can help you in a variety of ways as you search for a house. Typically, the agent working with the buyer is called the buyer’s agent, and technically represents the seller. That’s because the seller is typically paying the full real estate commission, which is usually split between the listing broker and the selling broker. The buyer’s agent acts as a “sub-agent” for the selling broker.

In recent years, buyers have been given the option of actually employing their own agent who will represent them and not the seller. This type of arrangement is called “buyer’s brokerage,” and allows the selling agent to actually promote and protect the interests of the buyer, not the seller.

The theoretical advantage of buyer’s brokerage is that your own agent has no conflict of interest between you (their client) and the seller. The downside is that you must become contractually bound to work with the buyer’s broker you select, and may be responsible for paying a sales commission if the seller does not offer to pay a full commission.

Buyer brokerage in residential settings is still relatively new, but it is a growing trend. But before you even get to that point, I believe there are several important questions you must ask before you decide on buyer brokerage as your preferred way to buy.

Q: If I sign a buyer brokerage agreement with you, am I restricted to working solely with you in my search for a house? What if we don’t click as a team? Can I easily cancel our agreement without any penalty?

A: Some agents are so confident of their own ability to get more business, that they require prospective buyers to not only sign a buyer brokerage agreement, but also to pay a nonrefundable retainer fee to demonstrate commitment on the part of the buyer.

Whether or not such a fee might apply to the subsequent purchase is unclear to me, and I could never recommend such an arrangement. There are simply way too many good real estate professionals in this market to lock yourself financially to just one person, even before you’ve had a chance to work with him or her.

I have no issue with signing a buyer brokerage agreement, but it must stipulate that the buyer has the right to terminate the agreement upon written notice to the broker.

Q: What happens if you or I find a house being sold “by owner,” with no provision for any real estate commission? Do I have to pay you, and if so, how much? And is that negotiable?

A: Let’s say you have signed a buyer brokerage agreement with Broker Hart, and you have not yet found the right house for you and your needs. One day, you see a “for sale by owner” sign in front of what looks to be the perfect house. On the sign it also says “no agents and no commissions.”

You knock on the front door, tour the house, and fall in love! This is what you’ve always wanted! You shake hands and agree to draw up a contract tomorrow, then you call your agent with the good news.

At this point under some buyer brokerage arrangements, you might have an obligation to pay 3.5 percent (or posssibly more) of the purchase price to Broker Hart at the closing table. To make matters worse, your lender may be unwilling to fund such a payment, even if you wanted to pay it.

And finally, you’ve read here that all real estate commissions are negotiable between client and principal. Yes, your buyer broker has the right to set a minimum fee for his services, but no, not all brokers operate under the same fee structure.

Independent brokers are sometimes able to be more flexible in commission arrangements than traditional mainstream companies. So don’t be afraid to discuss these matters thoroughly before you sign the brokerage agreement.

Q: What are the names and phone numbers of the last six buyers you worked with? Did each of them successfully find a home through you? May I contact them myself to ask candidly about their experience?

A: If the agent is unwilling to share this information with you, you should assume they are hiding something. My advice in that case is to move on to another prospective agent.

Also, look out for agents who may be working only part-time or just beginning their career.

I specifically remember an incident that occurred when I had just started as a real estate agent. I discovered that a friend of the family (a professional salesman, by the way) was trying to sell his house. I asked him if I could list the house for sale with my broker. He politely told me he wanted an agent with more experience.

My feelings were hurt at the time, but in retrospect, I wouldn’t have listed with me either if I had been in his shoes. There is simply no substitute for “in the trenches” experience.

The decision to work with a real estate professional is an important one. It may well influence your success or failure in your goal to own your next home. But it’s a personal decision as well.

Asking these three questions should help you make the right decision for you and your needs.

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John Adams is a real estate broker, investor, and author. He answers real estate questions every Sunday at 3 p.m. on WGKA-920 AM. He welcomes your comments at Money99.com, where you will find an expanded video version of this column.

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