10 Things Your Real Estate Broker Won’t Tell You

Pauline Millard
Posted

When buying a home, a good broker is an incredibly valuable resource, especially if it’s your first time. They serve as guides to the neighborhood and the home buying process, which can get complicated. They know mortgage brokers, inspectors, and sometimes even listings that the rest of the public does not.

Many people like to consider themselves armchair experts when it comes to real estate, but the business is a nuanced one, best navigated by a professional. We spoke to agents around the country and got some of their best insights, things they are probably too polite to say around clients to help you better negotiate the home-buying process.

1. Qualified clients are my priority: If you have been preapproved for a mortgage, know how much you can put down and understand debt-to-income ratio, then any broker will be happy to spend day and night finding you the perfect home.

If you’re just getting your feet wet to either rent or buy a new place or don’t quite have the cash to start the process, then go to open houses as opposed to a private outing with a broker. Open houses are designed to let people look and ask questions without wasting a broker’s time. (Or two brokers, since many listings are shared.) Along the way you may find a broker you want to work with who can get into specifics for your budget and needs, when you’re ready to pull the trigger.

Generally speaking, a broker will ask you up front if you’ve been preapproved for a loan. If you haven’t, they may ask you to call back when you have all your paperwork in order.

RELATED: 10 Questions for a Mortgage Loan Officer

2. My time is money: Brokers work on a 100% commission structure, so it’s not very cost-effective to work with people if they aren’t serious about buying or renting a place in the immediate future. Brokers try to prescreen everyone on the phone: when are you looking to move? Have you spoken to a mortgage broker? They have to make sure that time with a client is spent wisely.

3. It’s not a buyer’s market anymore: After the financial crisis five years ago, there were definitely deals to be had. But the economy has recovered a bit and housing inventory is tightening up, especially in metropolitan areas like New York City, San Francisco and Atlanta. Assuming that someone’s going to be thrilled that you make an offer on their house—even a lowball offer—is not the case. Bill Golden, a real estate agent in Atlanta, is seeing bidding wars again in his area, and he says it’s not uncommon for clients with unrealistic expectations to lose out on houses.

RELATED: Is it the Right Time to Buy a Home? A Look at the Real Estate Market

4. Aggressive negotiating will get you nowhere: Golden says this tends to be more common in men than in women, but there is no reason to start negotiations with a wildly lowball offer and make outrageous demands.

“I always tell my clients that at the end of the day, what is this house worth? The idea that you should never pay the asking price isn’t realistic, especially when inventory is tight,” he says. “Sometimes the house is worth exactly what they priced it at. And it’s OK to pay that.”

5. Just because information is on the internet doesn’t mean it’s true: Apartment-hunting horror stories are the stuff of cocktail party legend, and in places like New York City, many of these stories start on Craigslist. A no-fee rental listing turns out to have a huge broker’s fee attached to it, or the “owner” you meet is really just some guy who wants you to give him cash on the spot.

Outside of New York City, sites such as Zillow and Trulia can give unreasonably low estimates about what homes in areas cost, because they are taking an average of the area, regardless of the specifics of each property.

“Home prices can vary wildly by just a few blocks,” Golden says. “If there’s one house that’s priced low because it’s right next to the interstate, that’s going to throw off the algorithm for the whole area.” The only way to really know what homes cost is go out to open houses and see what’s available.

RELATED: 5 Times You Should Use a Real-Estate Broker

6. Cash isn’t always king: It’s commonly thought that coming into a real estate deal with all cash gives a buyer more negotiating power. Buyers may think it also gives them a license to make offers well below ask, because the deal will close sooner. In a tight market, though, this can be counterintuitive.

In general, there’s a lot of emotion that goes into selling a house. Even if someone’s coming in all cash, if they’re not making a fair offer or writing a letter about themselves as to why they want the place, they could lose out to someone else with 80% financing who genuinely wants the home.

Which means, if you really want the place, gather stellar references, lock down your preapproval and draft a heartfelt letter about specifically why you want this to be your new home, and don’t count yourself out until the bidding’s been done.

7. There is no advantage to lowering my commission: Sometimes sellers think they can save money by asking their agent to lower their commission, even by just 1%. While an agent will take the listing, the service you receive due to a lower commission might be affected. Maybe there won’t be as many open houses or it won’t be promoted as heavily online.

When you lower a broker’s fee, you’re not only asking the seller’s agent to work for less, but the buyer’s broker has to work for less as well. If the deal gets hairy, that can mean two people doing more work for less money, and no one wants that.

8. I have no idea how much your rent—or interest rates—will go up: A broker can give you a range of how much these things might go up, but no one can tell you what’s going down a year from now. The best advice brokers can give is to live within your means—even if that means not maxing out your budget.

RELATED: Buying a House: How Much Can You Afford?

9. Some of the best listings never make it to the public: Even with all the online resources available, brokers say that some listings never make it into the multi-listing service, and then to the public.

Brokers talk to other brokers and if someone just got a great listing, and someone else in their office happens to have a client that it’s perfect for, it’s going to be shown and bid on without ever getting into the public market. This is why you need a seasoned broker, especially when you’re buying a home. A good broker’s network of others in the business could be your magic bullet.

10. Sometimes you have to miss out on a property: “There will always be people who will insist that they know more about real estate than their broker,” Golden says. “But these are often the same people who lose out in bidding wars over and over again.”

If your broker tells you not to make an unreasonable bid, or that there are five other offers coming in for one home and to be aggressive in your offer, believe them. Brokers know the best tactic for each case, and this is the insight that could get you into your dream home.

  • Ellie Sanders Drury

    I am a long time broker associate in Florida. This article has excellent information that the public needs to know and understand. And, for goodness sake, don’t work with more than one broker at a time! That would be worse for you than asking a broker to accept a discounted fee. They’ll pick up on the fact that you’re not being forthcoming and that will hurt you worse than anything.

  • MH

    Mostly good info, though I do want to point out that when an agent asks for pre-qualification, it’s not just to weed out less serious buyers. It is more for the buyer’s best interest. If a buyer sees a house they love and takes a few days or a week to get prequalified, that house is often in contract by the time they’re actually prepared to make an offer and they’ve lost out on the opportunity. It’s not just to weed people out because we’re too busy! A good agent won’t brush anyone off, but will educate them on what steps they need to take to successfully prepare for the goals they want to achieve.

    And lastly, please, don’t ever, ever try to sell your house on your own! The contracts are complicated and agents pay for insurance to cover the potential liabilities that can come up in a transaction. I’ve seen For Sale By Owner deals end badly and wind up in court over disputes that could have been avoided had the parties understood the contracts they were signing. It is simply not worth the risk! Also, statistics show that the majority of For Sale By Owners end up selling for about 16% less money but take longer. There is a reason agents are required to be educated and licensed in this business.

  • sandy weinstein

    i have never had an honest realtor…..i am still dealing w/ the many and when i say many problems my realtor left me with this last house….it has cost me over 20k so far just this yr….in atty fees and still nothing is settled. if she were alive today i would be going after her, i have property lines that dont match up, electrical, there was hole in roof, even w/. it passing inspection, covenants that were not true, nasty neighbors, etc. it has been one headache after another. i have to file w/ several other companies to get things settle b4 i can try to sell this and move out of state. my opinion of realtors fall in the same group of attys, car salespeople, etc.

    • Rich W

      If you’re so sure your late agent was the cause of all your problems, you should try suing her real estate agency (brokerage company). However, it sounds like the surveyor, home inspector, homeowners’ association, neighbors and others are to blame.
      Oh, I’m sorry, you don’t like lawyers, either, so you probably won’t try suing. You don’t even like the state you’re living in. Good luck to you.

      • sandy weinstein

        there is no homeowner’s assoc. i have already spent over 20k in atty fees, had the property surveyed 3 times, which costs over 4k since i have over 11 acres., i tried to sue the realtor and home inspector when i bought the house but the atty screwed up and costs me 5k. i am filing a complaint w/ the head ceo of the realty co. b/c i already contacted them – the local branch and they said too bad, not their problem.