Wednesday, November 8, 2006

Adventures in First-Time Homebuying #6: The Hunt for a Real Estate Agent, Part 4

Author: Nick
Category: Money
Topics:

buy a house, get cash back

Now that you know how to find the perfect real estate agent to help you buy your first home, you might be thinking of totally ignoring all my advice and acting as your own agent. Some reasons you may want to be your own real estate agent:

  • I won’t have to deal with a real estate agent!
  • I’m really smart and can find a house on my own!
  • I can get the agent’s commission!
  • Just to spite you, Nick!

If you decide to strike out on your own, you’ll quickly find that all of the above are mostly untrue. Let’s tackle these myths one at a time.

Myth: If I’m my own agent, I don’t have to deal with an agent!
Fact: You won’t have to deal with finding your own agent, but you’ll still have to deal with the seller’s agent. The only case when this isn’t true is if the seller has also decided to go it alone through a For Sale By Owner (FSBO).

Myth: I’m really smart and can find a house on my own!
Fact: Golly gee, I can find houses all over the place. But if you want to actually look inside the house, you’ll either need your own agent or you’ll have to call up the seller’s agent to take you through. If you have the seller’s agent show you around and you decide to make an offer, then guess what? The seller’s agent is your agent now, too!

Myth: If I’m my own agent, I can get the agent’s commission!
Fact: Unless you’re a licensed real estate agent, don’t count on it. That money will likely go to the seller’s agent instead. (But if you’re determined to get your hands on some commission cash, read on…)

Myth: I’d do it just to spite you, Nick!
Fact: Go right ahead. Give me a call when you’re drowning in paperwork… so I can laugh at you!

Put aside any thoughts of going through the buying process without an agent. If you’re buying a home, the seller pays for your real estate agent. That means you’re getting experienced, professional help to find and buy your home for free. Please please please take that free help and put it to good use.

No! I Want Commission Cash! Gimme!

Real estate agents make pretty good money. Say your agent helps you buy a $300,000 home with a 3% commission for the buyer’s agent. 3% of $300,000 is $9,000! While some of that will go to the agent’s broker, they still get to pocket a good amount of it.

Now wouldn’t you love to get even a tiny portion of that 3%? Even if it’s just a small sliver of it? Just 20% of that buyer’s agent commission would be $1,800. That’s your first month’s mortgage payment right there!

It’s actually not all that hard to get some of your buyer’s agent commission. (If you want all of it, go become a licensed real estate agent.) Here’s what to do if you want to roll in a little agent dough.

  1. Get pre-approved for a mortgage. But you’ve done this already, haven’t you?
  2. Find some potential properties on your own. This is helpful but not required. We covered some of the methods of finding homes in Episode #3. And you’re more likely to get a commission rebate on higher-priced properties since there will be more commission money to go around.
  3. Do your homework. Know the ins and outs of buying a home so that your agent won’t have to spend so much time educating you later. This will make you a much more attractive client.

Once you’ve followed steps 1-3 above, do one of the following:

  • Call any agent and ask for a rebate. If you’ve picked out a home (or you at least have a good idea of what you want in a home), and you know your real estate stuff, many agents will be glad to give you a chunk of their rebate even if they don’t normally do so. The more low-maintenance you make yourself appear, the better chance you’ll have at getting a good rebate.
  • Ask the seller’s agent to give you a rebate. Remember how I said that the seller’s agent would get the buyer’s commission if you acted as your own agent? It’s risky, and you won’t have the benefit of your own agent looking after your interests, but you can do just that and ask for a cut of the commission in return.
  • Use an agent who advertises a rebate. There are several regional or nationwide brokers or associations with agents who give a rebate as part of their standard service. Some of the big names in rebating real estate: BuySide, RebateReps, and ZipRealty.

One final note: commission rebates are illegal in some states. The list of states prohibiting rebates changes often as new laws are enacted, but you’ll find out really quick if it’s illegal in your state when you ask an agent for a cut of his or her commission.

Our Real Estate Agent Experience

We were just as happy with our real estate agent as we were with our mortgage loan officer. Since getting some of that commission money was too big of a temptation to resist, we found an agent through ZipRealty.com. Our agent was local and had several years of experience selling homes in our area of interest. We were ideal clients; we knew the property we wanted, we knew our way around the purchase process, and we wanted the same thing she did–to put us in that house. She helped us submit our offer, and the rest of the process was a cakewalk.

Oddly enough, we hired our agent her last day with ZipRealty. She switched to RE/MAX, and RE/MAX was our official broker, but she still agreed to give us the 20% rebate on the 2.5% buyer’s commission we’d have gotten with ZipRealty. At ZipRealty, she received tons of clients and made lots of money even with those commission rebates. Her reason for switching: ZipRealty took a huge chunk of her commission, far more than any normal broker. At RE/MAX, she could make the same amount of money while juggling fewer clients.

I’d be happy to refer homebuyers in the Montgomery County, Maryland area to my agent, but I can’t promise you’ll get a rebate since she’s no longer with ZipRealty. Just send me an e-mail and I’ll give you her information.

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