Have you ever wondered what does a real estate agent do? Well the answer is a lot but not as much as they once did.
There is a whole generation that remembers how real estate used to be. Only 20 years ago, real estate agents who would meet home buyers carrying a book as big as a phone book, filled with homes for sale and the prices. This was called the MLS book. Sometimes the agent would rip a page out of the MLS book so the consumer could see what homes were for sale in a neighborhood. Old school!
Back in the pre-technology era, that was a huge time saver over finding a For Sale sign planted in a front lawn, writing down the address, and asking your broker friend for the price of the home. Back in the day, agents had to type contracts on typewriters so they could get carbon copies. They would fax agreements to other agents.
The commission back in those not-so-good old days, was typically 6% or 7% of the sales price of the home. This was the same time period when you could fill up your gas tank for $5 or so, the traditional real estate commissions didn’t seem so bad when homes were priced at $20,000 or $30,000.
Today more than 90% of consumers start their home search on the internet.
According to a survey by the National Association of Realtors, more than half of all home shoppers say that finding the right home is the MOST DIFFICULT STEP in home buying. However, sites like Zillow and Trulia have changed the way consumers search for homes. MLS books as big as phone books? Heck, there’s a whole generation of home shoppers who have never opened a phone book and may not even know what one is.
And today’s commissions? Still typically in the 6% range. So what do real estate agents do to earn a $24,000 commission on a $400,000 home? Are the services agents offer worth 6% of your home’s value?
Here’s a snap shot of what a real estate agent actually does:
- An agent can help you find a lender in order to initiate the pre-approval process.
- An agent can advise you on the price of a home you can afford to purchase, based on your income, employment history and credit score.
- They can comb the Internet and find a home that fits your pocketbook, the size you desire, and the neighborhood.
- An agent can give you insight about a neighborhood, such as the cute coffee shop or a grocery store that carries sushi and organic baby food.
- An agent can tour a home with you, pointing out various features, such as granite kitchen countertops and the number of bathrooms.
- The agent can provide you with information on comparable homes in the area.
- If homes are a bit too pricey in the neighborhood of your dreams, the agent can recommend other neighborhoods where you might get more bang for your buck with your home buying dollars.
- Once you’re ready to pull the trigger, an agent can help you determine the price to offer, inclusions to ask for, etc.
- After the inspection takes place, an agent can help you come up with a list of things you want fixed before you sign on the dotted line.
- If you are selling the home, an agent can help you come up with a price, give you tips on de-cluttering and presentation, and market your home.
That is quite an impressive list – and those are just the services the agent is providing you. Without a doubt, the agent is sure to be spending even more time building his or her own business by sending out flyers to existing homeowners, researching information about home prices in neighborhoods, and possibly even posting blogs on everything from interest rates to hot trends in home design.
“Indeed, many REALTORs spend most of their time prospecting for clients than actually selling houses” – Alex Tabarrok, Economist
No one denies that the a real estate agent’s services are valuable, but the bigger question consumers should ask:
Are the services a real estate agent provides worth paying 5-6% of my biggest financial asset?
First off, do you really understand how real estate commissions work and how a real estate agent gets paid? This is the starting point. Once you understand that you can put these services under the microscope, and decided if there is enough value to pay a traditional agent thousands of dollars in commission. With today’s technology, consumers increasingly are doing much of the searching and homework themselves but agents are making more than ever while often doing less work.
Need to scope out a neighborhood? There’s no problem viewing hundreds of homes with photos and videos available online on sites like Zillow and Trulia.
Need to know “how much house” you can afford? There are plenty of online tools that can help you with that.
Will the agent give you some incredible insight into a home by walking around it with you? With the popularity of shows on every aspect of the house hunting process on HGTV and other networks, consumers know more about what to look for in a home than anytime in history.
The same is true for home sellers. Do you really need an agent to tell you that popcorn ceiling needs to go before you list your home? Heck, that was on HGTV’s “Designed to Sell” a decade ago.