Most buyers struggle to find a quality realtor to assist them in buying a house, and it’s the realtors’ fault. The national, state, and local associations are so adamant about protecting the new agents and giving everyone an equal chance, that they provide no help whatsoever to the general public.
Their message? When trying to find good help, you’re on your own.
So how do you get what you need?
Everyone tells you to ask around, get referrals from friends, go to open houses, go with a big company, go with a small company, new agent, old agent, kickbacks, etc., that it probably doesn’t matter where you get a realtor, what matters is how to evaluate them.
Here are my things to look for when evaluating a realtor’s ability to help you buy a house:
1. ASK ABOUT THEIR RECENT TRACK RECORD OF SALES – Let’s cut to the chase, shall we?
Has the agent been able to successfully guide others to the finish line this year? The best answer is 1-2 closings per month, if you want an agent who delivers personal service. Any agent who sells four or more per month is slamming people into houses, and those at zero, well let’s face it, they don’t have anything of value to add to the equation. Get a testimonial from a past client, and/or at look at the sales they’ve done and judge them to see if they were good deals. (I’ve assisted 10 buyers with closing their sale this year).
These current market conditions are unlike any seen before. If your agent has been closing some buyer transactions this year, they must have something of value to share. Here’s what to look for:
2. ASK THEM, “WHAT/WHERE ARE TODAY’S HOT BUYS? How they answer that will tell you just about everything you need to know. If they give you a smart-aleck answer, they probably aren’t the right agent for you, only because they aren’t in the game. If they can name one, at least they are looking at properties, and those are agents who can provide value – ideally your buyer’s agent is previewing property every day, in person.
3. THEY SHOULD ASK YOU QUALIFYING QUESTIONS – If they jump in the car without asking questions, their time must not be too value to them, and this isn’t a business where wasting a lot of your time makes for good quality realtors.
4. THEY SHOULD KNOW ABOUT FINANCING – I guess it’s alright if they just hook you up with their lender to get pre-qualified, but if they can ask/answer the qualifying questions themselves, it might help when it comes time to structure an offer.
5. HAVE THEM SHOW YOU SOME HOUSES – Go in their car, and if they don’t need a map to get around, you’ve found an experienced veteran. It’s not guaranteed that they can help, nor is it required, but it’s a good indicator. If they are pointing out specific sales/listings along the way (theirs or others), then they know the comps too, which is another great indicator.
6. EVALUATING THE PROPERTY’S CONDITION – They don’t have to be a general contractor, but they should be able to educate you about the property’s condition. If all they do is point out that “This is the living room”, they’re not going to have much to offer in terms of added value, unless you don’t know what a living room is.
7. HAVE A VENDOR’S LIST – Successful agents know professionals to call to fix stuff – the more thorough the list, the more problems they have encountered.
8. DO THEY CHARGE FOR THEIR SERVICE? – Ask about “transaction fees”, “processing fees”, or “compliance fees”. These are junk fees used to pad their bottom line, and are not required.
9. DO THEY INSIST ON HAVING YOU SIGN A BUYER-BROKER AGREEMENT? – Pass on those, unless you got married after having one conversation too.
10. “FORECLOSURE SPECIALIST” – Be very leery – we are all foreclosure specialists now. Any agent who tries to make it sound like they have some special “foreclosure ability” is blowing smoke, unless they are listing REOs and not putting them on the open market. If they don’t mind breaching their fiduciary duty to their bank-seller, they’ll sell you down the river in a heartbeat.
11. SHORT SALES – I personally see 2-3 short sales every day that have already found their buyer before MLS input, and it is VERY frustrating. These agents don’t care about their own reputation amongst their peers, and that alone should make you wonder.
12. OFF-THE-GRID – Ask about what agents can do to find properties that aren’t on the regular websites. Any positive response would be a good indicator, and any examples of closing one would be even better.
If they can get through those questions and you still like them, you found a good agent!
NEW AGENTS – A new agent’s zeal and availability can really help buyers who don’t have the time or willingness to search for properties themselves. Want somebody to do the legwork for you? Put a new, hungry agent on it, but there may be some struggle clinching the deal if there are competing offers.
OUT-OF-COUNTY AGENTS – You’ll be doing all the work yourself, so your own proficiency in being a realtor needs to be up to par.
RELATIVES – Many deals crash and burn, and hearts are broken over houses. Want a relative to help you? Make sure that you’ll accept never wanting to talk to them if they cost you the right house, at the right price.
“GREAT TIME TO BUY” – If you hear that catchy phrase, just walk away.
The inventory of quality homes at good prices is EXTREMELY LOW, causing the buying experience to be full of frustration and disappointment. You can look for weeks or months without seeing anything attractive, so I don’t know why any agent would call that a great time.
REALTOR TEAMS – No problem, but don’t interview the big dog and then get passed off to the assistant without asking the same questions. You want to be clear about who is helping you, and what you can count on. In my case, I may have Richard or another KR realtor help me on occasion, but I’m still the main person in charge, and am responsible for your success.
Jim, Great post! Many thanks for this one.
Good ones. I will say re #9 that my last realtor wanted one although it wasn’t an exclusive right to represent. Her company (large, national chain) had some policy of charging a fixed amount (say $200) per transaction as a fee at closing. Annoying? Yes. But, the realtor apologized for the corporate overlords, said she would credit us that amount of her 3%. So, generally those agremeents are bad, but you need to read through what they say. Some are more offensive than others.
I would add the following: What is your strategy/philospohy for dealing with a “hot property”? What bidding tactics do you think are most effective. My last realtor had some pretty novel approaches and in the end we got the property even though someone else bid more.
Great list, it’s hard to find good agents but I’d say it’s more important to avoid the bad ones.
I wonder how many realtors know the historical aspects of the “living room” vs. the “family room”.
Jim,
Your website has done more to promote the professionalism of realtors than ALL the work of NAR.
It seems brokers would want a few good realtors rather than a bunch of clueless folks running around making clients mad.
“if they don’t need a map to get around, you’ve found an experienced veteran.”
Years ago I was transferred to Phoenix. New to the area, we met with a local agent who took us to see a home. I asked her, “which way is downtown Phoenix?”, and she pointed toward what we discovered later that evening was Camelback Mountain.
We found a new agent.
We were west of Camelback mountain.
I’m sending this list to our daughter up in Tracy, Ca.
Or, you could just take my word for it since Jim is closing our third transaction for this year. I have worked in and around this business since 1988 and you will not find anyone better to make your deal happen. 99.9% of those who call themselves “Realtor” have no business doing that. Very professional, competent, and a freakin hilarious guy.
Realtors need to be choosy of the clients too. Being a new, hungry, eager agent, I have had many clients wasted my time and money. Some even have the nerve to ask me to give them half of my commission. Live and learn.
what about redfin?
Opinions?
Redfin, zip, etc. have agents who work for less.
Generally-speaking the best, most-experienced agents don’t work for less, they provide enough quality service that their clients appreciate it, and would rather get that, then a kickback.
There are good agents at many shops – there is a zip agent I’m trying to hire right now. But she doesn’t feel comfortable leaving, because the lead-machine is so productive there.
The zip website alerts their realtors to the buyer’s search patterns. When you are hitting the same property more than once, and then hitting the payment calculator, it knows you are getting serious – and notifies the agent accordingly.
But because they only make $2,000 to $3,000 per deal, she has to do bulk to survive, and as a result, is hooked on the lead-machine.
How does that affect buyers? Expect that they’ll want to sell you a house early on, and keep moving.
Of Bubbles Past: A Chronological Listing of News Headlines from the Last Housing Bubble in Southern California from:
There’s been some confusion about just what went on during the last housing bust in Southern California. I was there then; I lived through it, I owned property, and I can tell you it was no fun at all. Then, like here, like now, people were saying things like “housing has never gone down here before (so it won’t ever go down)”, “housing always goes up”, “houses aren’t like stocks”, “we’re special”, etc., etc., etc.
Below you will find a chronological listing of selected Los Angeles Times articles originally published between the years of 1985 and 1997 (inclusive) culled from their archives. The similarity among headlines from then and now is quite informative.
http://www.rntl.net/history_of_a_housing_bubble.htm
From NMN:
Remember the $600 million nonperforming loan portfolio that Wells Fargo recently sold to Arch Bay Capital of California? Apparently, Wells inherited the portfolio from Wachovia which it bought late last year.
One investment banker reminded me that not only was Wachovia running an active subprime trading desk but it was a major warehouse provider to NovaStar Mortgage and Accredited Home Loans. (The $600 million that Wells sold – for a reported 37 cents on the dollar – came from those two firms, among others.)
Now for the big question: How much more in nonperforming subprime mortgages does Wells have on its books courtesy of Wachovia? “Tons,” our source told us. But just how much is tons? In its 2Q earnings statement, Wells tells us that it has $7.6 billion in nonaccruing home loans on its books and another $7.5 billion in nonaccruing commercial loans. Wachovia was also a major player in commercial mortgage finance.
I have a question Jim. When you are selling a house is it normal to sign an agreement with the realtor?
Yes, it is normal.
I feel a loaded question coming on here….
Why wouldn’t you do it on the other side? I will never do a buyer-broker agreement because I don’t know if I want to be attached to you. Once in writing, the buyer will have heavy expectations of me, and if you desire an oceanfront house for $100,000, I can’t help you, and no agreement is going to change that.
Was that the question, or am I fishing?
Jim, why no mention of buyer brokerage as a criteria?
Why would it not be important that the agent is representing me, rather than trying to peddle his/her own listings?
In my opinion that is one (of the many) “practices” that got us into this mess. “Agents” peddling “product”, with the buyer be damned.
It’s 2009, and high time to step out of the “saleman” mode and into the “buyer representative” mode, heh?
Cheers!
Your website has done more to promote the professionalism of realtors than ALL the work of NAR.
I’ll second that. Every time I see an NAR commercial I want to throw a brick through the TV. OTOH, Jim educates, entertains and give us the feeling that someone out there really is looking after our best interests, even though he’s not (yet) even formally representing us.
Nathan,
Great link! Those quotes from ’92 sure sound a lot like the “green shoots” nonsense bouncing around this year.
@Nathan and others: I actually used that same archive of headlines to “predict” the housing crash starting in 2006. It’s fascinating to see how it’s nearly identical this time around:
http://www.erica.biz/2006/ticktick/
This year says:
“Desperate political efforts being made to encourage house buying. Rock bottom prices and lower mortgage rates encourage some purchasing.”
$8,000 tax credit? Check. Rock bottom prices encouraging some purchasing? Check…
A history lesson in the making. What’s interesting is that in 16 years it will all happen again (but probably not quite as crazy as this time.)
-Erica
‘In my opinion that is one (of the many) “practices” that got us into this mess. “Agents” peddling “product”, with the buyer be damned.’
Yes, I see that all the time. I always research the houses and make the decisions and so should all buyers, because many realtors just want to se ll you anything asap.
I haven’t found a strong correlation with the brokerage factor – buyers agents will push you to buy regardless if it’s another person’s listing or your own. The concept is the same because they’re paid by transaction comission, not how well or how much they serve you.
There are agents who act in your interest, but they’re harder to find these days. Jim’s rule of thumb of 1-2 sales per month is spot on.
Excellent advice, Jim. Thanks for all the work you’ve put into informing and entertaining us here. 🙂
Realtors who can spell, or better yet, realize that there is a spell check program on a computer is a plus! Realtors who can use a camera to the best of their ability can really help too. It amazes me how many typos there are in listings, its hard to find one without typos. Digital cameras now are so good and so easy it amazing that photos that make it on the internet of homes can be so horrible.
Jim,
Not meant to be a loaded question:) I’m actually just curious how things work as I have never sold a house. My wife told me that it normal to have an agreement when selling and I thought it wasn’t but it sounds like I was wrong. I wouldn’t want to want to sign an agreement when buying because I would feel like the realtor is just looking out for his interests only.
One of the more interesting aspects of Realtors acting as “buyer’s agents” is compensation. Percentage based remuneration is not exactly the best incentive to negotiate the best possible deal.
Erica, that is amazing that you nailed it in ’06. so are you still going to buy in 2010?
“What’s interesting is that in 16 years it will all happen again (but probably not quite as crazy as this time”
Actually, it is possible and I am considering an moneyed interest that SD and LA do not recover for 30 or more years.
This time, it really may be different.
John P.,
The sellers are signing an employment contract – hiring our services. They agree in writing to pay the listing brokerage the full commission if the house sells, and then the brokerage splits it with the buyer’s-agent brokerage.
Jim,
I think I mentioned this before, but since you brought it up, I’ll mention it again.
I see a scenario that might unfold, where banks, like Wells Fargo, who need cash, sell distressed assets (non-performing loans) at pennies on the dollar. The buyers of these assets can turn around and put them on the open market for a slight markup, but still well below the price that the banks have for their other assets still on their books. They could wind up shooting themselves in the foot. By trying to raise cash, they could ultimately devalue the rest of their assets.
It’s almost comical…
http://www.nytimes.com/2009/07/26/weekinreview/26streitfeld.html?_r=1&ref=business
They are upset — at the unyielding banks and often at their free-spending selves — and are pre-emptively defaulting. They could continue to pay for a while longer but instead are walking away. “You reach a point where you embrace the darkness of default,”…
****
“They’ve done the math on their account and they’re very angry,” said Corey Calabrese, a Fordham Law student who is an administrator of the school’s walk-in clinic for debtors at Manhattan Civil Court. Public sentiment is on their side, she added: “For the first time, Americans are no longerblaming the borrower but are looking at the credit card companies.”
(That’s certainly true in the mortgage crisis. According to a Quinnipiac University poll in February, 62 percent of those polled blamed lenders “who loaned the money to people who may not be able to pay it back.” Only a quarter blamed homeowners.)
****
Collectors are noticing a shift not only in ability but in willingness to pay. “With all the bailouts the government is giving everyone, no one has any personal accountability about their own debts,” said Roger Knauf, who runs a trade group of debt-buying firms.
Many of today’s debtors were maxed out long before the recession. Much of this debt was of course in the form of junky mortgages on wildly overpriced houses, and it was here that people first began to rebel.
Countrywide Financial, the country’s biggest and most aggressive lender, surveyed its customers about why they were defaulting in the summer of 2007. One of the leading reasons was “low regard for property ownership.” In other words, people concluded that owning these houses was a bad deal.
That people would intentionally default on loans they never should have gotten in the first place took lenders by surprise. “I’m astonished that people would walk away from their homes,” Bank of America chief executive Kenneth Lewis said in late 2007.
Nineteen months later, walking away from mortgages is widespread if impossible to quantify, and no cause for embarrassment. Rather the opposite: it shows savviness. “I’ll walk away before I take a loss,” a Dallas financier recently boasted to Barron’s magazine about his efforts to sell his $6 million vacation estate.
From RM’s post:
Countrywide Financial, the country’s biggest and most aggressive lender, surveyed its customers about why they were defaulting in the summer of 2007. One of the leading reasons was “low regard for property ownership.” In other words, people concluded that owning these houses was a bad deal.
That people would intentionally default on loans they never should have gotten in the first place took lenders by surprise. “I’m astonished that people would walk away from their homes,” Bank of America chief executive Kenneth Lewis said in late 2007.
——————————
Funny that these executives and “financial wizards” were paid so much because of their perceived intelligence and understanding of their industry. For us bears, it was predicted with 100% certainty that people would willingly walk away if paying their mortgages ever became uncomfortable, once prices stalled.
Why? Because when you get something for nothing (no/low down payments, easy qualifying), you don’t value it. There’s the myth that home ownership makes people more responsible. That couldn’t be further from the truth. Before all the fraud and easy lending, only the most responsible people could qualify to buy a house. They’ve got the cause and effect mixed up. The masses of people who were buying in the 2001-2007 period were the very same folks who would have been renters under “normal” credit conditions.
All the price movements during the 2001-2007 period were artificial. The peak bubble prices are NOT something we should aspire to again. What we need in order to solve the housing crisis is LOW PRICES, high down payments, and fixed-rate mortgages so that people will be able to afford their homes. It was the high prices that caused all the foreclosures, because people were never able to really afford those prices in the first place. Once the inflation stalled, everyone ran out of options (refinancing, cash-outs or HELOCs, etc.). They were drowning in debt all along, but the price increases masked the distress for many years.
CA renter,
True. True. True.
“Realtard” banned on Zillow
JtR, Thank you very much for this post. Being very frugal savers, trying to buy our first house in this “post-burst” enviroment is extremely frightening. From reading this blog and watching your vids I already recognize defeciencies in my buyers representation. Problem is, we have formed a relationship in the time we have already spent looking at inventory, however unsuitable. I can answer most of the questions about our realtor just from our time spent together so far, but I’ll need to slip in question #1 even if I’m not sure I can trust the response(but I have a feeling I know the answer)because they want to ensure confidence, and that is understandable. At the very least, JtR has given me the knowledge to make up for what I am not getting from my buyers representation, to make an inteligent decision. Now if I could just figure out how to arrive at a proper figure to offer on the challenged properties we seem to be favoring, where there are no real comparable packages due to great differences in lot size,usability and structure size,age,condition,view. We will persevere!
Thanks again for this post, I feel this will be passed around many channels, because finding proper buyer representation is a dark science.
Or just hire JTR & he’ll carry the load for you.
“Or just hire JTR & he’ll carry the load for you.”
If that was directed to me, I would do that instantaneously if I was looking to buy in North County SD. A true “No Brainer”!(I’m Looking in OC)