If you decide to sell your house, the first person you’ll probably call is a real estate agent. Real estate agents can often help sell your house faster and for a better price, and they can also be very useful when you’re searching for your new house. Ultimately, though, real estate is a business, and a real estate agent needs to make money from the sale of your house. Unfortunately, this sometimes leads to underhanded tactics. It also means that real estate agents will sometimes keep information from you to convince you to sign with them. Here are twelve secrets of the real estate industry that your agent would hate you to know before you sign a contract with them.
1) You Might Make More if You Sell It Yourself
Real estate agents hate to admit it, but sometimes, you’d make more if you simply sold your house by yourself. In 2007, Northwestern University conducted a study about this in Madison, Wisconsin. They found that homes sold by the seller themselves netted the same amount as homes sold by an agent. Since the sellers who sold their homes on their own didn’t have to pay a commission to an agent, they were able to get more money overall. However, the study did also find that it often takes longer for a seller to find a buyer on their own. If you have the time, before signing with an agent, try selling it yourself. If weeks or months go by without a buyer, then it may be time to sign with an agent.
2) Agents use Open Houses to find new Clients
Most sellers believe that an open house is just for prospective buyers to come and view their house. While this is true, real estate agents also have another motive: they use open houses to find new clients. Agents know that only one out of every five or six people who enter your house are truly interested in your house. When they learn a prospective buyer isn’t interested in your house, they’ll offer to show them some of their other listings in the area. Even though everyone who enters your house won’t be interested in buying it, it’s still a good idea to hold an open house. Many sellers have found their buyer through an open house. Open houses are useful for selling your house, but it’s important to know that for a real estate agent, that isn’t the main purpose of it.
3) Agents Often have Little Control over Selling Time
Real estate agents want you to think that if you work with them you’ll sell your house faster than you would on your own. That may be the case sometimes, but there’s no guarantee that working with an agent will result in a faster selling time. Some agents, though, do have a faster selling time than others. This could be because they’re better at putting keywords into their listings that get them noticed by buyers. Or, they may simply have more connections that they can use to get you a buyer. Before signing with an agent, ask how long it typically takes them to sell a house. Then, check that time against the selling time for other real estate agents working in your area. This will help you decide if the agent is the right choice for you.
4) Agent’s Commission Negotiable
Many buyers think that an agent’s commission rate is non-negotiable, but this isn’t true. By law, agents commission rates are negotiable. In some parts of the country, the standard rate is 6 percent. In other areas, the rate is typically 5 percent. If you live in an area where the rate is usually 5 percent and your agent asks for 6 percent, you’ll have a good chance of negotiating them down. Be warned, though, if you negotiate the agent down to a very low commission rate, they won’t have as much incentive to work hard for you. Try to find a commission rate that won’t cost you a big chunk of your money. At the same time, it should give your agent incentive to try to sell your house quickly for the best price.
5) Agent Might tell Buyer’s Agent About You
When you’re selling your house, your real estate agent may give you some hints about what your buyers are thinking of doing. At the same time, they may also tell your buyer about you. Or, if your buyer is working with another real estate agent, your agent might tell their agent what you’re thinking. They could give hints about what you’re thinking of counter-offering, or if you’re close to a decision on their offer. This isn’t something that all agents will do, but it’s still good to think about. If there’s something you don’t want your agent to tell your buyer, let your agent know that the information you’re giving is confidential. This will give you peace of mind and will allow you to talk openly with your agent without worrying about who else will know the information.
6) Read the Contract for Hidden Fees
Before you sign a contract with a real estate agent, read it over very carefully. Double-check that the commission is what you agreed upon and that all your terms are there. Also, be sure to check for hidden fees. Some real estate agents will add these extra fees. These could range from anywhere from $250 to $1,500. These fees are used to cover the administrative costs that go along with selling a house. Like a commission rate, this fee is negotiable, so be sure to haggle with your agent to get the fee down to an amount that you find reasonable. Carefully reading over your agent’s contract will help you understand what you’re getting into by signing with them. It will also help you get a better idea of what your agent will do for you and the fees they will charge in return.
7) Some Agents May Oversell your House
When you’re shopping around for real estate agents, one of the first things you’ll probably ask is what price the agent will list your house at. It’s tempting to sign with a real estate agent who tells you the highest listing price, but this isn’t always the best way to go. For example, let’s say that you’ve appraised the market and decided that your house is worth around $250,00. Three agents agree with you and say they’ll list your house for $250,000, but one agent tells you they’ll list it for $300,000. Your first instinct will probably be to go with the agent who will list your place for $300,000. This is called “buying your listing.” If you go with an agent who prices your house too high, you’ll have a much harder time selling it.
8) Renting may be the Better Choice
If you’re in an area with a tough real estate market, renting out your house may work better for you than selling it. A real estate agent won’t want you to know this, though. If you rent your house, they’ll lose out on the commission that comes with selling your house. Renting your house offers many benefits for you, including getting an extra income. Renting isn’t for everyone—you might not want to deal with finding tenants, or paying for the upkeep for the house. If you’d like, you can try selling your house first, and if no buyers come through, you can then start thinking about renting. You could also rent with the option to buy. The decision is yours. However, if you’re looking for a way to make a little extra cash, it could be worth it to give renting it a try.
9) Listings May Be Misleading
Real estate agents know that some houses aren’t going to attract a buyer without a little help. To get potential buyers to look at a house, the agents fill their listings with words and phrases that are designed to mask flaws, which could be misleading. Real estate agent Sandra Rinomato says that some common ones include “partial view,” which typically means that the view is hidden behind another building. “Cozy” also typically means small, and “awaiting your touch” means the house needs updates. Some agents may also say that the place is “bright” when it has fluorescent lights. To really get a feel for the house, you’ll have to go see it. That way, you’ll be able to look behind the sales speak to see what the house is really like.
10) You Could Have Gotten a Better Price
When you close the deal on your house, your agent is always going to tell you that you did well. While this may be true, there’s almost always a better price you could have gotten if your agent held out longer. The book Freakonomics found that agents often get higher prices when they sell their own homes, and they take longer to sell their house. Because of that, the author of Freakonomics concluded that agents will hold out for more money when it’s their own home, but they won’t encourage their clients to do the same. Not all agents agree with him—many say that they will encourage their clients to hold out. Before you take your house off the market, ask your agent if you think you can get more for it. If they admit that you might be able to, keep your house on the market longer.
11) Agents Won’t Disclose New Neighborhood Problems
Some real estate agents have admitted that they won’t tell buyers about problems in their potential new neighborhood. Other agents have said that they’ll tell clients that a neighborhood schools are better than they are. Agents also aren’t allowed to discuss who lives in the neighborhood under fair-housing laws. Because of that, try to do some research on your own. Check out crime statistics on Neighborhood Scout, and look at your potential town on AreaVibes. It’s also a good idea to visit the neighborhood a few times. Go on your own, and knock on some doors to meet your potential neighbors. Also, go once on a weekday and once on the weekend. This way, you’ll get a good feel for your neighborhood, and you’ll know if it’s the right area for you.