Buying a home may likely be the biggest purchase you make in your lifetime, so you want to make sure you have the right person guiding you through. But how do you know if you’ve found the right real estate broker?
The Motley Fool spoke with Bennie Waller, the department chair of finance and real estate at Longwood University, to come up with this list of 5 Questions to Ask Your Real Estate Broker Up Front––questions designed “not to evaluate the professionals’ resumes, but to gauge their real abilities to help you navigate the process and win the negotiations.”
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.
This post can be found in its original form on The Motley Fool.