People new to the world of real estate transactions often enter the market with misconstrued ideas about the way agents operate. Many of these myths are a result of the "armchair" experts that are our parents, neighbors, and colleagues; all claiming to know the real estate process inside and out.
Believing everything you hear or read can cost you a pretty penny when it comes time to buying or selling a home. In this blog post, we tackle seven of the most prevalent myths that plague newcomers to the real estate market.
All agents are created equal
Something that many people believe, especially those with little or no experience in the world of real estate transactions, is that agents are all the same. They assume that a real estate agent’s job is a cookie cutter template that anyone could do, and do well. But this is just not the case.
While the process of a real estate transaction is standardized, a realtor’s ability to negotiate, schedule, and hunt for the best deal in the best neighborhood that meets your highly specific requirements in a new home varies a great deal from agent to agent.
The differences between agents doesn’t stop with these qualifications. When finding an agent to work with, you should also consider their work style. Is this a full-time job or a part-time, secondary income stream? Do they live in or near the neighborhood you are looking at buying in, or are they from out of town? Are they willing to provide you with contact info from past buyers/sellers who would happily give them a recommendation? Do they respond quickly to your calls and texts? Or is getting their attention a never ending game of cat and mouse?
Doing your due diligence before getting involved with a real estate agent will save you both time and money, and make it that much easier to land your dream home.
Agents always make 6%
Ah, the standard six percent myth. Ask anyone you know how much an agent makes on a home transaction and you can almost guarantee the answer will be, “six percent, right?”. Really, there is no “standard” commission rate when it comes to real estate transactions. Sure, six percent is a common number to land on, but all commissions are negotiable. There is also a new wave of tech-enabled real estate brokerages companies, Homie for example, who charge sellers and buyers a flat rate as opposed to a percentage - potentially saving you thousands.
It’s also important to note that even when the commission rate is set at six percent, that money doesn’t all go to the agent. That commission is actually divided up four ways: between the two brokerages and the two agents.
Whatever commission the agent ends up making, it’s probably worth it when you realize all the legwork a realtor puts in to sell your home or find you the perfect house.
Agents get kickbacks from inspectors/mortgage companies
This is perhaps the easiest of real estate myths to debunk, in large part because both state and Federal law prohibits real estate agents from taking kickbacks from any business or individual providing services to their clients. Regulations called RESPA (Real Estate Settlement Procedure Act) require any licensee in a real estate transaction to disclose to the client any financial benefit (a.k.a. kickback) they receive from a service provider.
This being said, you shouldn’t blindly follow the recommendation your agent when it comes to inspectors and mortgage companies. RESPA actually mandates that agent’s provide you at least three options if they are going to make any recommendations at all. Platforms like Inspectify, were built with the goal of ensuring consumer choice and transparency in the home inspection process and our Partners are focused on doing the same throughout the entire real estate transaction.
Buying through the listing agent means you’ll get a better deal
The logic behind this one is that by buying your home through the listing agent, that agent will cut their commission percentage since they’re receiving “both sides” of the transaction. Which then results in a price cut for you, the buyer.
That might sound great in theory, but in practice it gets a little more complicated. What the buyer needs to understand is that because the listing agent represents the seller (and has from the beginning), they need to look out for the seller’s best interests - which can limit your negotiating power. What does happen, is what is called a dual-agency, where another agent from the listing agent's brokerage can represent you and have fiduciary duty to only you, not the seller.
Of course agents need to be ethical in their deals, even when they represent both sides of the transaction. By choosing a separate agent to represent you as the buyer, you guarantee that negotiations are being made on your behalf and you walk away with the best deal possible.
Agents will say (or do) anything to make a sale
The unfortunate truth here is that there are agents out there who will lie to you or tell you what you want to hear just to ensure a sale, a situation that occurs during the home inspection process more than you would believe. But it’s unfair to the vast majority of realtors to toss them all into the same bucket as Danny DeVito in Matilda.
Most agents are honest, ethical professionals who are genuinely motivated by finding you the perfect home to fit your needs. A lot of an agent’s business is done through referrals and ongoing relationships with their clients, so by taking their time to make sure you’re happy, they also increase their chances of growing their clientele through you.
Once you pick an agent, you’re stuck with them
When it’s time to sell your home, you’ll most likely ink a deal with a listing agent that will include a time frame (usually six months to a year) binding you to the brokerage. Fortunately, there is almost always a way out of that contract if something goes wrong or if you aren’t satisfied with the service you’re receiving.
All that said, sticking with the same agent from list to sale will save you a headache or two. So make sure you do your research, read reviews, and ask plenty of questions before signing with a brokerage.
Always go with an agent from the biggest firm
Going with the biggest firm comes with pros and cons. It is possible that the most established brokerage comes with strong marketing strategies and connections to other leaders in the industry.
However, you also run the risk of being “just another client” that falls through the cracks and is forgotten about until you speak up. There is also the risk that because they are part of a large brokerage, your agent isn’t as familiar with your neighborhood (or future neighborhood) and has limited knowledge of important aspects of home buying like safety, school districts, or diversity.
In summary, choosing a real estate agent is a big decision and not one to take lightly or make hastely. It is important to take time to get to know your potential agent, their working style and past performance before starting the buying and/or selling process.