10 things your real estate broker won't tell you

These tricks of the trade, according to experts, can help you get a better deal when buying a home.

By MSN Real Estate partner Oct 4, 2013 2:10PM

Financial adviser © NULL, Blend Images, Getty ImagesBy Pauline Millard, LearnVest

 

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 homebuying 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 homebuying process.

 

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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, because 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, brokers will ask you upfront 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.

2. My time is money: Brokers work on a 100% commission structure, so it’s not 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 such as 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 clients with unrealistic expectations can lose out on houses.

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 such as 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, 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.

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-percent 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 percent. While an agent will take the listing, the service you receive because of 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.

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.

 

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17Comments
Nov 2, 2013 10:17PM
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I think there are good agents/brokers and bad.  There are honest and dishonest sellers.  There are knowledgeable and no so bright home inspectors.  But the one thing that is not understood by buyers, realtors, lenders, cities, counties, state, or federal legislators is the nightmare that HOAs are bringing to the American home buyer.  CC&Rs are not just about keeping somebody from painting their house pink or raises hogs in their back yard.  After living in an HOA for eight years, I would gladly take either one of those.

HOAs have binding contracts where the buyer is bound to sign away their US Constitutional Rights, become business partners with every one of their neighbors, and guarantee anything the board does with their personal bank account.  I have learned first-hand that boards are comprised of ignorant bullies that use the legal system to try and intimidate homeowners into paying for services not rendered.  I have learned that board members will engage the HOA insurance company legal team that will try to bankrupt the homeowner even though they are well-aware the HOA has breached the contract.  And all homeowners lose property values when the lawsuits and fighting begins.

Fortunately, a retired television investigative reporter and news anchor from Denver has written a book exposing the naked truth about HOAs in America.  It is all documented and it's helping buyers make critical decisions and HOA members are selling and getting out once they know their risks.  This book is a MUST read for realtors, homeowners, buyers, and board members.  The knowledge could save you from the devastation I have now experienced which has ruined me financially and destroyed my health.  "Neighbors At War!" by Ward Lucas.  A priceless book.
Oct 14, 2013 7:00AM
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"Having sold real estate in the early 90's I am amazed at the expectations that are placed on real estate agents today;"

I bought my first house in 1997.  I used a realtor whom I'd known since I was a child - my parents had used her and her husband to buy and sell a few homes over the years.  She was great.  She helped guide us, answered lots of questions, and when we found the house we liked, let us know "slyly" what we should offer.  

Fast forward to 2006 - I teased her that she should give us a discount on her services.  We had to do almost nothing to our house before putting it on the market.  It was only listed for 3 weeks before we got an offer.  And on the other side of it, we only looked at 3 houses with her.  (A fourth one we drove up to and could tell it wasn't worth our time to look at.)  Plus, the house we bought, my wife and I found online and drove by before we told our realtor to set up a viewing.

We talked about how things have changed so much in just 9 years time.  In 1997, realtors didn't want people knowing where the listings were.  They wanted clients to come to them for the info.  Nine years later, realtors realized that if the clients knew the addresses, they could eliminate the ones they had no interest in and save the reator tons of time and money.  She flat out agreed.  

I paid her the full commission because she'd been great to us both times we used her services.  But, the next time I buy or sell, I'll probably use someone else and have them drop their price.  Why pay them when I do the work?
Oct 12, 2013 7:27PM
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Many of these comments show the ignorance of the prospective buyers and sellers involved in this posting.  Having sold real estate in the early 90's I am amazed at the expectations that are placed on real estate agents today; such as, paying to stage a home, the coordination of multiple resources: staging, pest control, home inspection general contractors, specific construction trades depending on homes condition, PG&E inspections, tracking lenders  to name a few.   

For those agents willing to give up 0.5 - 1.5% of their commission rate, these are the people that you would want to put on your B list since they are usually desperate to make a transaction at the sacrifice of not serving their clients best interest.  On the other hand, a qualified agent can definitively enhance your chances of a successful close of escrow.  

These qualified agents bring forth a qualified team such as: various lenders based on your banking, some have hard money/ private loan resources need to bridge a gap between selling a home and buying a new one, qualified title escrow representatives, qualified constructions trades representatives, qualified pest & home inspectors.  If that isn't enough, having to compete on homes in today's market involves strategy.  Do I list at a lower price to get multiple offers?  do I list higher to weed out the look lue's? do I make certain improvements to my home to make it show better?  qualified agents typically know the market and have great relationships with other real estate agents that would rather work with them based on past experiences than an unknown quantity.

In the other hand I can relate to the negative posts since their is a vast difference between one agent to another, Being a licensed home inspector, I have seen many agents that I would stay clear of, ones that overlook many details in the sale only to facilitate a close of escrow that have lead up to future litigation.  

The old saying of "you get what you pay for"  definitely holds true.

Good Luck
Oct 12, 2013 3:49PM
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Seems to me that if a broker wants 6 to 10% of your home's value to sell your home for market value they should  be doing more than fair market for the sell of the home... After all closing is no big deal and abstract companies do all the work there and charge you above and beyond for that. Seems the listing agent, Real estate co and buying agent shouldn't get the same cut. I think 1,1 and 2 should do it for a total of 4% fee. These people are greedy!
Oct 12, 2013 9:43AM
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Sounds like this was writen by a lying thieving real estate agent.
Oct 12, 2013 6:23AM
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R.E. sales agents and brokers (in MA) have a fiduciary responsibility to represent their client (not a customer) with service that is totally non-self-serving to the agent / broker.  Fiduciary responsibility is a lawful relationship, that once entered into encompasses full trust an performance, until legally severed
Oct 12, 2013 6:20AM
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The best way is to find a broker that are friends and wont waste your time either. I have two that ive known for years.
Oct 12, 2013 4:47AM
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If your broker doesn't talk to you about these things, and more! Than you have the wrong broker. I have been. A broker for over 30 years and I find it's best to inform your clients. Arm them with the best information so they can make informed decisions. Guess what... They come back and send referrals to you.
Let me comment one one point. Asking your broker to reduce their commission. Everything in the article was correct. Additionally, the good brokers do not have to reduce their commission secures they have enough business. So you end up with the less experienced brokers who have time to spend. You end up paying the price down the road. Remember the value is set by the market, not by the broker. A good broker can yield you top price in the least amount of time, resulting in a smoother transaction.
Oct 11, 2013 11:05PM
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They have all got their own jargon and they no the ins and outs; however to make money for themselves, cut throat as it is, it is what it is, you are really left to paddle your own canoe.  Try going to the direct lister yourself instead of a 3rd party.  Maybe you and the seller both will come out ahead by leaving these moochers out in the field.  You can negotiate and find out how the values are in the immediate area and talk with your country assessor's office and any government office that may be opened for you, and learn how to purchase on your own.  You know how much you can afford, don't be enticed by these realtors or brokers, it is their living, go figure it out for yourself.
Oct 11, 2013 1:39PM
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This article is so inaccurate!!!  Realtors are only in it for the money (obviously...commission is their income/livelihood, you are a commodity, not a person), whether they represent the seller and/or buyer.  Of course they want you to make a higher offer (more commission for them), of course they don't want you if you haven't been pre-qualified (which is part of their job to meet with you to discuss your options).  Having been a realtor and been told by my agency not to waste time on "tire kickers" I got out of the business because it is so cutthroat and does not provide a service to the buyers/sellers who are putting their trust into a broker.  I felt so sorry for the many people who were taken advantage of by the misguided advice of these "professionals".  Look at it this way...a used car salesman doesn't care if he sells you a junk car, he just want his money.  Buyer beware.  In all fairness, there are some realtors who will tell you the truth about the buying and selling process (like I did, which is why I did not succeed and got out).  Good luck.
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