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A real estate agent is a licensed professional who helps buyers and sellers with property transactions. The agent representing the buyer, aptly referred to as the buyer's agent, helps their client find the perfect home and prepare an offer to purchase a property. By contrast, the seller's agent, or listing agent, helps sellers determine their sales price, market the home and show it to prospective buyers through open houses and viewings.
Should you use a real estate agent? To better answer that question, it's essential to understand the role real estate agents play, what they do and how they're compensated.
What Do Real Estate Agents Do?
Many real estate agents specialize by working almost exclusively with buyers or sellers, while some prefer working as dual agents with both types of clients. No matter what side of the transaction you're on, a real estate agent can negotiate on your behalf to ensure you get a fair price. Here's how these agents help you buy or sell a property.
What Does a Buyer's Agent Do?
- They help you find the perfect home. A buyer's agent works closely with you to understand your preferences and budget, and then uses their local market knowledge to find and visit properties that meet your requirements. In this way, a buyer's agent can save you valuable time when searching for the right home.
- They help you create a fair offer. Once you identify a property you like, your agent will assist you in drafting a solid offer that considers the local market value and trends. A good agent can help you submit a competitive offer that stands out to the seller.
- They negotiate on your behalf. Generally, a buyer's agent represents you and your interests during sales contract negotiations. An agent with extensive negotiation experience will aim to secure the best possible price and terms, including contingencies and closing costs, to ensure you get the most value out of your home purchase.
- They facilitate the transaction. Your real estate agent should help you stay on top of the required paperwork and ensure everything is submitted correctly and on time. They can also recommend reputable home inspectors and professionals that can help you address any issues the inspection reveals.
What Does a Seller's Agent Do?
- They establish the best price. A listing agent typically conducts a review of recently sold comparable properties, or "comps", to estimate your home's current value. A good agent will review current pricing data and trends to advise of the highest price buyers are likely willing to pay.
- They market and advertise your home. Seller's agents list your property in the multiple listing service (MLS). The MLS is a platform of property listings that real estate professionals use to share property information with each other, and buyers can search MLS listings on various real estate portals. Listing agents also market your home on social media and advertise with local outlets to attract attention to your home.
- They help prepare your home for viewing. Real estate experts say buyers often form their opinions about a house within seconds. Agents understand there's little time to waste, and they'll use their experience to identify ways to improve your home's indoor and outdoor appeal.
- They negotiate with the buyer's agent. Selling your home can be stressful. Your agent can help you alleviate some of that stress by advocating for you in sales contract negotiations. Your agent will update you on the proceedings and, ultimately, you have the final say on what you will or won't accept.
Real Estate Agent vs. Real Estate Broker
Both real estate agents and real estate brokers help people buy and sell their homes, but there are differences between them. A real estate agent has a license and works with clients directly to help them buy or sell a home. These agents work under the supervision of brokers.
For their part, real estate brokers are usually experienced agents who've undergone additional training and passed a broker's licensing exam. Brokers typically have a broad knowledge base, including specialized education in insurance, taxes, business management and other areas of expertise. Additionally, brokers can work independently as associate brokers, oversee sales agents as managing brokers or run their own firms as principal brokers.
Real Estate Agent vs. Realtor
The terms "real estate agent" and "Realtor" are often used interchangeably, but in reality, they are not the same. As discussed, a real estate agent is a professional licensed to facilitate real estate transactions, and they work under the supervision of a broker.
Realtors are also real estate agents, but they've taken the additional step of becoming National Association of Realtors (NAR) members, pledging to uphold the trade organization's high ethical standards. It's worth noting not all real estate agents are Realtors, but all Realtors are real estate agents.
Realtors also receive continuing education to improve their knowledge and skills. Working with a Realtor may assure you that you're working with a professional who adheres to high ethical standards.
How Are Real Estate Agents Compensated?
Real estate agents typically receive a sale commission that's paid by the seller and split between the buyer's and seller's agents. These fees are typically included in the home price, and the agents only receive the commission when the home sells.
The combined commission for the buyer's and seller's agents on a deal typically amounts to around 5% to 6% of the total sale price. If the commission is 6% on a $400,000 house, the commission would amount to $24,000 and be divided between the buyer's agent and the listing agent.
Do You Need a Real Estate Agent?
You are not required to have a real estate agent to buy or sell a property. Many sellers opt to sell their homes without an agent, usually to avoid having to pay a commission to a listing agent. Be aware, however, real estate contracts can be complex, and going solo without significant experience handling real estate transactions may not be your best move.
Since buyers typically don't have to pay commissions, there's little benefit in buying a home without a real estate agent. According to 2022 data from the National Association of Realtors (NAR), 86% of buyers worked with a real estate agent or broker to purchase their home.
By enlisting the help of an agent, you might save time searching for the best properties and avoid the stress and hassle of directly negotiating with the seller's agent.
How to Find the Right Real Estate Agent for You
Choosing an experienced real estate agent can help make the home transaction process go more smoothly. Follow these four steps to find the best agent.
- Search for reputable real estate agents. Ask people you trust for recommendations of professionals they've had successful experiences with in the past. You can also search online reviews for agents with a strong track record, positive reviews and experience in your local market.
- Meet with at least three agents. Studies show that two-thirds of homebuyers and 56% of sellers only interviewed one agent before choosing one. However, you may avert future headaches by speaking with several agents to find the best fit.
- Prepare questions for prospective real estate agents. Be prepared with a list of questions. For example, buyers may ask agents how often they're available to look at properties and inquire about their preferred method of communication. Alternatively, sellers might ask an agent how they plan to market your home and what they will do if it isn't selling at its list price.
The Bottom Line
If you plan on buying or selling a new home soon, consider using a licensed real estate agent to assist you through the process and negotiate the best deal. And if you're taking out a mortgage to purchase a home, you should check out your Experian credit report for free. Reviewing your credit report at least a few months before applying for a mortgage loan can give you time to address any credit issues and improve your approval odds.