The pros and cons of hiring a real estate agent
When considering buying a home, you might look for ways to cut costs or avoid some of the hefty fees associated with real estate purchases. Finding the perfect location, building a mortgage loan and settling closing costs are expensive steps towards homeownership, leading to savvy buyers and sellers seeking out ways to save money and get the best possible deal.
Commission payments for real estate agents make up one of these expenses. Usually 5%-6% of the home’s sales price, these commissions can be a heavy burden for buyers and sellers already on a tight budget. Hiring a real estate agent is not required by law, but it is expensive, which may lead you to ask yourself, “Do I need a real estate agent?”
Selling a home is never an easy process, so before moving forward without a real estate agent, it’s important to understand the pros and cons of hiring a real estate agent and how managing a sale on your own could cost you even more down the line.
Navigating local regulations, negotiating prices and finding the perfect place for their clients makes these professionals the best resource you have for a successful home purchase.
What does a real estate agent do?
For both buyers and sellers, real estate agents bring know-how to the mortgage process. Housing market trends, local regulations and proper documentation are a mystery to typical buyers and sellers. Without a background in real estate, tackling a home sale without one of these experts on your team can quickly leave you overwhelmed.
Beyond knowledge of mortgage jargon and the loan process, real estate agents provide important services that help all parties get the most out of a complicated venture.
Both buyers and sellers will usually have their own agents, but the services provided for each of these parties differs.
Real estate agents for buyers
For buyers, a real estate agent helps narrow down options by establishing a price range and matching their clients to a property that suits their needs.
Once a prime location has been settled on, a buyer’s real estate agent will assist in negotiating the right offer. After attending the home inspection and communicating with the seller’s agent throughout the process, your real estate agent will know exactly how to present an offer that is both affordable and appealing to the other party.
Finalizing a home sale is never as easy as signing a few documents. Settling a property’s closing costs is a detailed step, involving unexpected fees and last minute negotiations. It’s important to have a professional on hand who can navigate every aspect of closing and ensure the best possible arrangement for the buyer.
Real estate agents for sellers
For sellers, real estate agents play an important role in establishing the sales price of the home. With a deep understanding of the area’s history and current market trends, these agents are able to strategically price a home that will appeal to buyers while getting their client the maximum possible value.
Agents for sellers also have access to marketing tools that can help your property stand out in a crowded real estate market. Quality photographs, interesting listings and knowing where to invest in marketing for the home are essential in finding an interested buyer and getting the best possible offer. A seller’s real estate agent will know how to execute these marketing strategies and draw in attractive offers as a result.
Real Estate Agent vs Brokers
Real estate agents require state licenses in order to sell property and are required to work for a larger real estate firm.
If an agent wishes to operate independently, they will need to secure a brokerage license. A brokerage license grants someone the option to work as an independent agent or open their own real estate firm. As a broker, these agents would be able to manage their own real estate sales, structure their own commissions or open a larger firm and hire additional agents.
While it is difficult to become a broker, real estate agents that choose to pursue a license will have more professional flexibility throughout their careers.
Pros of working with real estate agent
- Experience on your team
- Time-saving strategies
- Coordination between the buyers & sellers
Experience on your team
Without any experience in managing real estate, you might quickly be overwhelmed with the many details involved in completing the sale. Finding the right home is hard enough, but negotiating an offer, hiring an appraiser and filing the required paperwork all necessitate a skill set that real estate agents have spent their careers building.
These qualified professionals can be your best resource in securing a new home.
If you plan to manage a home sale on your own, you should anticipate a longer process than expected. The typical buyer would need to overcome a steep learning curve to successfully complete a home sale, and failing to fully grasp the many facets of a mortgage can easily delay or prevent a sale from moving forward.
Real estate agents spend years studying for certification to prepare for whatever complications the mortgage process can throw at them.
Less than expected appraisals, unexpected fees or ownership disputes can be spotted ahead of time and solved before they develop into a larger issue.
Coordination between the seller and buyer
Throughout every stage of the home sale process, details change. Complications are inevitable in real estate, so it helps when someone on your team can keep everyone on the same page.
Sellers, their agents, their attorney and your attorney are just a few of the parties who need to be kept informed of any developments that could alter the transaction.
Real estate agents are experts at understanding how any change in the sale’s agreement will impact the deal down the line. With this knowledge, they can ensure that you, your seller and their agent are up to date on all home details and are able to negotiate the sale on appropriate terms.
Cons of working with a real estate agent
- Real estate agent cost
- Not always the sole focus
- Communication complications
Real estate agent cost
Real estate agents have the homebuying know-how to guide you through the mortgage process, but that expertise comes at a price. In addition to appraisal fees, property taxes and homeowners insurance premiums, working with a real estate agent adds yet another cost to an already expensive endeavor. These fees are usually around 5%-6% of the home’s sales price and cover the commissions for both the buyer’s and seller’s agent.
However, real estate agent fees are typically paid by the seller, so buying a home without a real estate agent won’t save you money outright. These costs are usually worked into the property’s sales price and are settled as part of the home’s closing costs.
This gives buyers who don’t use a real estate agent an extra negotiating tactic. Since sellers won’t need to pay the additional cost at closing, those savings can be worked into your initial offer.
Not always the sole focus
Just like any other line of work, real estate agents can get busy. Good agents especially, likely have a number of clients in different stages of the homebuying process.
Buying a new home is a major financial decision and can seem like the most important thing in your life. Your real estate agent, however, might not view the sale with the same significance. As just one of many clients, you won’t always get your agent’s undivided attention and scheduling conflicts are inevitable.
While real estate agents are responsible for cooperating with all parties involved in the sale, including yet another person in that line of communication could complicate the process.
Numerous emails, questions and last minute reviews of documentation all require a team that is responsive and confident that all parties are on the same page. Since you won’t be the sole focus of your real estate agent, there is a possibility that certain communications could fall through the cracks and cause issues down the line.
If you prefer efficiency and maintaining a single point of communication for the sale, working without a real estate agent might provide the simplicity you’re looking for.
While managing a real estate sale on your own could potentially save money, hiring a real estate agent helps ensure that the mortgage process can continue without complication or interruption. Before opting to continue without one of these professionals, you should be well aware of the services they provide and how capable you are of filling their shoes.
If you’re still looking to cut costs while shopping for a home, the advantages of living in a condo might win you over.