5 Questions to Ask Your Real Estate Broker Up Front

Anyone who has ever bought or sold real estate can tell you that the process is never simple. With hundreds of thousands of dollars at stake, it can be downright overwhelming to manage the reams of paperwork, legal contracts, salesmanship, and hardball negotiations while maintaining your sanity.

That's where professional real estate agents and brokers come into the picture. These pros make a living helping individuals buy and sell real estate, whether it be a home purchase or an investment property.

How do you know that your real estate agent knows what he or she is doing?
With so much money at stake and so much influence in the process resting on the shoulders of your real estate agent, it is absolutely critical to make sure your agent is truly an expert. 

To find some best practices, I talked with Bennie Waller, the department chair of finance and real estate at Longwood University. Waller has had a long and distinguished career in real estate, owning investment property and holding a real estate license, in addition to his academic work in the field. He understands the theory, and he knows how to put it in practice.

He was able to boil everything down to five simple questions that every real estate buyer or seller should ask an agent up front. These questions are designed not to evaluate the professionals' resumes, but to gauge their real abilities to help you navigate the process and win the negotiations.

Enter Dr. Waller
1. How long has the property been on the market?
 
Waller said that "typically owners of properties which have been on the market for extended periods of time are more likely to negotiate." For the prospective buyer, your agent should recognize this and guide you to a more aggressive negotiating stance. If you're the seller, your agent should prepare you for these tactics and provide you with supporting market data to justify your list price. It's important to remember that the definition of market value is the price at which a willing seller and a willing buyer agree to transact. It takes two to tango.

2. Is the owner a licensed real estate professional?
"If so," Waller says, "you likely will have less negotiating power." Why? Because the owner will be a more experienced negotiator with a deeper understanding of the market than the typical seller. If you are selling your property, this also indicates that it's worth taking the time to independently research the market. Your agent or broker can help, but don't be shy about calling local appraisers or bankers as well. Most will be more than happy to help.

3. Is the property vacant?
According to Waller, a vacant property is an indication that the prospective buyer has more negotiating power. A vacant property is providing no income or living space to the owner and is therefore a cash-flow drain. The owner is more likely to sell at a lower price, because every day the property sits on the market is another day of interest expense paid to the bank with no value to the owner.

4. What is the original listing price? How many times has the price changed since the property was originally listed?
Yes, question No. 4 is actually a double question, but it speaks to the same issue. If the asking price has been reduced significantly or repeatedly, then the seller is probably more willing to negotiate even lower. An effective real estate agent or broker will recognize this and negotiate accordingly. For the prospective seller, your agent should advise you of this psychology and assist you in avoiding this pitfall.

5. What should you watch for in regard to dual agency representation?
This is a situation whereby the real estate broker is representing both the seller and the buyer," Waller says. "Keep in mind that the real estate broker is likely receiving a commission which is paid by the seller. Caveat emptor" -- let the buyer beware. Essentially, you want your agent to represent your interests and your interests alone. These people are professionals and assist buyers and sellers to make a living. By ensuring your agent represents only you, you are preventing a big commission from clouding his or her judgement. The agent should work to get the best deal for you, not for him- or herself.

Hire slow and fire fast
Buying or selling real estate is a big deal. Large amounts of money are at stake -- not to mention that, in the case of a home purchase or sale, there is generally a lot of emotion involved as well. 

Hiring the right real estate professional is absolutely critical to successfully doing business in real estate. Take your time, interview several candidates, and ask around to understand the reputation of each. Talk to appraisers and to bankers. Take your time before signing on the dotted line. 

And don't forget: You're the boss. If your agent or broker isn't getting the job done, it's entirely within your rights to seek out a new agent to help you through the process. 

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Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 03, 2013, at 11:47 AM, aza400 wrote:

    Save yourself 6%. It doesnt matter what side of the transaction the agents are on they are against you. Agents fire customers just as often as customers fire agents dont be a pain. Dont use an agent sell it yourself. Let the buyer pay the agent. Call a Real Estate lawyer and ask them to handle the transaction. There is enough free advertising on the internet (Zillow) where you can post your house for free. Put a contractor box on the door and let agents show it. Hold your own open house buy a cheap Open House sign at Lowes or your local Realtor store. You can get the paperwork from the lawyer if the other person doesnt have an agent.

  • Report this Comment On November 03, 2013, at 12:33 PM, broker wrote:

    Are you serious? Any moron who walks in a vacant house can see its vacant- duh! The more likely question would be how long its been vacant and why. If the seller is a broker they are REQUIRED by law to disclose this about being a b roker. Any broker worth their grain of salt would automatically disclose this and explain dual agency all at once. The truth of the matter about dual agency. If you have an ethical broker they will step back and do dual facilitation disclosing to ALL parties that they are doing this. The questions you say to ask are ridulous! Some good questions be

    How long has the broker been licensed in this area

    How many homes have they sold in the past year

    What is their education? If they zero designations or 10 which one would you pick. I have been a broker for over 16 years , have 10 designations and certifications- that's what clients should be looking for-

    Also another little note- don't always look for the biggest brokerages because many people do but instead look for the broker who has the experience. Just because one is with a highly recognized brokerage doesn't mean that they don't sell just one house a year.

    You want to get an aggressive broker who knows their stuff.

    If you want a good column and questions call me , I will write it-

    Who writes these things?

  • Report this Comment On November 05, 2013, at 8:33 AM, fdolski wrote:

    Are you kidding! Most if not all if what is on here is not realistic. First, a vacant house is obvious. Second, a buyer or seller is looking for a Broker/Agent with a proven track record of success. Designations and education are critical because a better educated Realtor means added value to their clients. Hire slow and fire fast is a ridiculous statement. My time is valuable and I too am careful of the clients that I take on as their must be a mutual understanding that I too am working hard for their best interest. Referral based leads, recommendations and the agent's profile should all be taken into consideration when hiring a Realtor to represent you.

    Finally, price changes and days on market are irrelevant in this market as it is much different than a few years ago. Sellers should price their homes correctly but keep in mind that location, amenities, schools and much more add value to a home or area.

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