8 Things Real Estate Agents Don't Want You to Know
Ask a real estate agent what she or he is hiding from clients, and you will almost always get the same answer: Absolutely nothing.
After all, ethics are built into the training agents need to renew their licenses, and some disclosures are even mandated by law.
"In my experience I have found most agents to be very ethical in terms of disclosing information to both clients and other professionals," one agent told me in an email.
That said, there are plenty of things about the home buying and selling process that agents are not required to disclose to clients. There are truths that some agents tell you about but others don't. And there are things that agents disagree amongst themselves about. (See also: How to Choose a Real Estate Agent)
1. You May Be Able to Get More by Selling It Yourself
A 2007 Northwestern study showed that sellers in Madison, Wisconsin, who signed up for a "for sale by owner" service netted more money on their homes. Why? Their homes sold for about the same price as similar homes handled by agents, but they didn't have to pay the 5% to 6% commission agents charge.
However, the study did show that FSBO properties in that time and place took longer to sell.
Other more recent studies have come to a similar conclusion: FSBO sales get closer to their asking prices than those handled by agents.
2. Those "Comps" Are Out of Date
Many agents will use recent sale prices in your neighborhood to help determine the asking price or offer price for you. But Lorri Rosenberg Arazi, a well-regarded Bay Area agent, said, "We look at the comps to give us guidelines, but the thing that people aren't realizing is that the most current indicators of the market price are the pending sales — and you don't know what the pending sale prices are."
A really good agent who is well connected with other local agents will be able to get a feel for what pending sale prices are by asking around, Arazi said. Many agents — especially if they are not local to the area where you are buying or selling — won't have access to that more current info. But of course, they'll never tell you that.
3. They May Tell the Other Side All About You
Have you ever been in negotiations over a house, and your agent said, "The buyers' agent said they are coming around to the idea of your price," or "the agent said they really, really love your house"?
When I first heard these things, I was appreciative that my agent was able to gather this inside info for me. But then it made me wonder, is my agent telling the other side what we say?
Many agents say they characterize conversations with clients only to the extent that it helps the client's case. But keep in mind that the two agents are working together to close the deal — and that gives them incentive to share any and all information that will get them there — including information about you.
4. Open Houses Are for Finding New Clients
"An open house serves me more at finding prospective clients than it does to actually market the house itself," one agent wrote on an online forum. "Not that you shouldn't hold open houses… it is good exposure. [But] for every five or six people coming through the door, maybe one of them actually liked the house, and I've got three to five properties in the area nothing like the house that I offer to show the other four or five people when I'm done."
Other agents have told me the same thing, usually when I ask them to hold an open house for a property I'm selling.
That said, as a seller, I would rather leave no stone unturned. I have sold a property to a buyer who came to an open house, I have friends who did the same, and my grandparents bought their current home after dropping into the open house. So it's not a if open houses never sell houses — it simply may not be their main purpose.
5. Commision Is Negotiable
Recently my parents contacted an agent for help listing a relative's home. The agent told them his commission was 6%, which surprised me considering that all the agents I had worked with recently charged only 5%. I called him up and at first he insisted that 6% was standard for that particular town. But when I pressed him on it, he finally agreed to drop his commission to 5%, "just for us." This expert says that commission is always negotiable, but if you pay too low a percentage, the agent may not have much incentive to work hard for you.
6. You Could Have Gotten a Better Price
"You haven't always gotten a great deal, whether buying or selling, but I will almost always tell you that you did well unless you got royally hosed, because everyone wants to get a good deal," one agent confessed.
In one way, buyers, sellers and agents all want the same thing: to close a deal. But when you look beyond that, our incentives diverge. How a deal gets done and exactly what deal gets done matter a lot more to buyers and sellers than to agents.
The book Freakonomics cited research showing that when real estate agents sell their own homes, they get higher prices and take longer to sell than other sellers. The theory here is that even though your agent makes more money if you sell for a higher price, the difference in commission isn't enough to justify the added work of holding out. So, Freakonomics authors reason, agents must encourage clients to accept the first reasonable offer you get, while holding out for top dollar on their own homes.
Not all agents agreed with the Freakonomics writers' conclusions; one response pointed out that agents' biggest incentive is to build up repeat business by helping clients get the best deals they can.
7. They Could Play Both Sides and Double Their Money
Some states allow "dual agency," which means that if the buyer or seller has no agent, your agent could represent both sides and keep the whole commission, which would normally be split between two agents.
Some buyers see this as a way to save money by negotiating with that one agent to cut his or her commission. But one agent warned that agents dealing with unrepresented buyers or sellers don't always offer to cut the commission.
"That agent just double-ends the deal and gets paid twice. No deal, no saved commission, just less aggressive representation," the agent posted to an online discussion.
The organization Consumer Advocates in American Real Estate recommends against consenting to dual agency, warning that representing both sides prevents your agent from advocating for you — because now they also represent your adversary and are not allowed to do anything to either party's detriment.
"That means that they can not help you negotiate price or terms of your real estate transaction. It means that they are getting paid twice as much for doing a tenth of the work," CAARE warns.
8. You Picked an Awful House
"I don't always like the property that you may be bidding on, but if you fall in love with it, and there are no glaring deficiencies, I will do my best to get excited about it too," one agent wrote.
But do some agents go farther than that, and overlook real problems with houses just to get that commission?
If you believe the letters and responses in Barry Stone's column House Detective, some agents not only overlook problems themselves, but recommend inspectors who do the same. In one letter, a client complained that the agent told them not to attend the inspection; later they received an inspection report that seemed to overlook problems. Stone called foul.
"Agents who are honest and ethical do not give that kind of misleading advice to clients," he wrote.
What did your real estate agent fail to tell you? Please tell us in comments!