Before you set out to hire a real estate agent, it’s essential to know how the relationship among agents, home sellers, and prospective buyers works in your state. Generally, there are three different kinds of agents:
- Seller’s agent: Also known as a listing agent, a seller’s agent represents the seller exclusively.
- Buyer’s agent: A buyer’s agent represents the buyer exclusively.
- Dual agent: Dual agency occurs when the same agent represents the seller and the buyer, or when two different agents from the same real estate agency represent the seller and the buyer.
To reduce the potential for conflicts of interest, it’s generally best to avoid working with a dual agent, though it’s important to know exactly what the laws dictate in your state. In some states, the buyer’s agent is legally bound to negotiate the best possible deal for the seller.
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Finding a Real Estate Agent
The best way to find an agent is through a recommendation from a friend or an associate you trust. If you don’t have a personal referral, consult the phone book or search online for agents in your area. Once you’ve got a list of promising candidates, contact each agent to request an interview. Always make it clear that you’re considering several agents.
The Agent Interview
Each agent interview should last at least a half hour. It can take place over the phone or in person, though in-person interviews are generally more informative. During the interview, make sure the agent is state-licensed, works full-time in real estate, has at least five years’ experience selling in your area, and is a member of a realtors’ trade association—preferably the National Association of Realtors (NAR). Always ask for references from previous clients and follow up with them. Finally, ask the agent to bring to the interview a list of all the deals that he or she has handled in the past year.
Once you’ve chosen an agent, he or she will likely ask you to sign an exclusivity agreement stating that you will work only with him or her. The most important points to consider in this agreement include:
- Term: Many agents will ask for six months of exclusivity, but you’re better off insisting on no more than three—unless your agent’s agreement allows you to terminate the agreement at any time for any reason, in which case the term doesn’t really matter.
- Commission: Though sellers usually get commissions equal to 2–3% of the home’s sale price, commission rates are not set by law and can be negotiated.
- MLS participation: The agreement should specify that your agent participates in the MLS and will include your home in the MLS database in your area.
Types of Agreements
There are three basic types of exclusivity agreementsbetween sellers and sellers’ agents:
- Exclusive-right-to-sell agreement: You promise to pay a commission to the agent if your home sells—even if you or another agent sells it.
- Exclusive agency agreement: Your agent has the exclusive right to sell the property and earn a commission, with one exception: if you attract a buyer and sell the home yourself, you don’t owe your agent a commission.
- Open agreement: Your agent gets a nonexclusive right to list your home and collects a commission only if he or she sells it.
Most seller-agent exclusivity agreements are exclusive-right-to-sell agreements. If you have any inkling that you might attract buyers on your own—for instance, if you have a friend in mind who might buy your house—or if you know another agent who might help you find a buyer on the side, by all means try to sign an exclusive agency agreement or an open agreement.
Other Professionals to Consult
In addition to your agent, it’s often helpful to have the advice of the following professionals when selling a home:
- Lawyer: Although you’re not required to hire a lawyer to oversee your real estate transaction, it can be helpful to have one review all the paperwork you sign in order to point out potential legal issues that you might not detect on your own.
- Accountant: Selling a home raises various tax and financial issues that you should discuss with a professional before you sell. Your accountant or tax adviser should be able to answer your questions.