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First-time home buyers guide: Using a real estate agent

Gina Pogol
The Mortgage Reports editor

In this article:

A real estate agent is a licensed professional who assists buyers and sellers of real property. A good real estate agent can help buyers in several ways.

  • The right real estate agent specializes in your price range and neighborhood. He or she previews likely properties on your behalf, saving you time
  • A skilled real estate agent possesses negotiating skills and experience, helping you stay focused and calm
  • Experienced real estate agents know the required paperwork and the process so well that they can keep your purchase on track and help you close on time

Note that there is a difference between a buyer’s agent and the agent who lists the home you buy. It’s important to know who an agent represents, and this distinction is very important.

Verify your new rate (Nov 12th, 2018)

Real estate agent vs REALTOR®

A real estate agent is a licensed professional who assists real estate buyers and sellers. His or her qualifications vary by state. For example, Colorado requires agents to complete over 160 hours of education, be fingerprinted, then pass two tests and a background check.

Related: Hiring a real estate agent when you buy a home (mistakes to avoid)

Kansas, in contrast, requires licensees to be 18 years old, have a high school diploma or its equivalent, and complete 30 hours of pre-license classes before taking the exam.

A REALTOR® is simply an agent who is also a member of the National Association of REALTORS, or NAR. The association does have a code of ethics that its members are expected to uphold, and it does make additional education available to its members (but does not require it).

Before calling a real estate agent

Buying a house is exciting, and it’s easy to get caught up in the process. Before you know it, a Sunday drive can turn into an open house visit, and a chat with a friendly agent over cookies can turn into a serious conversation, and the next thing you know, you’ve got someone representing your interests — someone you didn’t even know two days ago.

That’s not the smartest way to use an agent, or buy a house.

Related: Why every homebuyer needs a pre-approval before shopping for a home

First, you have to do the less-fun work. Check out your finances, determine a payment and price that you can live with, and get pre-qualified or (better) pre-approved for your home loan. Home sellers will take your offers more seriously, and you won’t put yourself and everyone else involved through hell trying to buy a house you can’t afford.

Next, you choose an agent, based on his or her experience, good reviews, personal referrals, and a quick background check with the state Department of Real Estate. Do this before your mind gets clouded by cookies and condos.

Buyer’s agents versus listing agents

Going out unprepared can cost you. If you show up at an open house without representation, and then decide to buy that property, the agent involved represents the seller. Not you.

Related: beware of “double agents” when buying a home

And there is no way that your interests and the seller’s interest will be the same. You want the house for the least amount you can pay. The seller wants to get the most you can pay. And the real estate agent’s commission increases with every dollar you pay. So whose interests are not being protected here?

Get your own agent. Before you start your search.

Find a neighborhood specialist

One reason for getting a mortgage pre-qualification or pre-approval first is that it helps you narrow down the neighborhoods you can afford and want to see. Then find an expert who can help you spot the true bargains in your chosen  location.

Related: Homebuying tips (How to choose the perfect neighborhood)

This person may be aware of properties that have not yet “officially” hit the market and may not be found on the local Multiple Listing Service (MLS). Or he or she may have “pocket listings,” which the sellers prefer to keep private because they don’t want everyone to know they are selling or moving.

Using a real estate to negotiate your deal

Your buyer’s agent should be skilled at negotiating your best deal. Understand that in a seller’s market, your best deal may even exceed the asking price. “Best” is not necessarily the lowest price, either. Especially if you need some concessions like seller-paid closing costs, a longer escrow, or you’d like them to throw in the snowblower.

It’s important for you to communicate the most important priorities for you when negotiating for a home. For instance, if a 5 percent price reduction is a reasonable concession, you might prefer the agent to negotiate 5 percent towards paying your private mortgage insurance premium, buying down your interest rate, or covering other closing costs.

Related: Getting sellers to pay your closing costs

Note that the home must appraise for its purchase price, and that most mortgage programs place some limits on seller concessions.

Other issues that might arise include major repairs. Suppose that the home inspector finds that the dishwasher has been leaking behind the wall, and mold is growing. That could be an expensive and extensive repair, and your standard contract probably does not require the seller to fix it. 

However, a good real estate agent will have drawn the agreement so that you can either cancel the deal or renegotiate the price. Ditto with issues like your mortgage taking longer-than-expected to close. A good agent will have built in an automatic extension into the contract, so you don’t have to go hat-in-hand to the seller or risk losing the house.

Paperwork

A real estate transaction requires a fair amount of paperwork. In addition to the initial offer, you’ll probably deal with counter-offers, addendums, lists of known problems with the property, and getting estimates for improvements you’d like to make.

Related: What are contingencies in real estate contracts?

You’ll almost certainly want an inspection, and you may have HOA rules to go through to make sure that you aren’t inadvertently buying horse property or that your RV will be allowed on site. A good agent should already know those things and can help you plow through these disclosures.

Your agent will also open escrow, most likely with a title company. As the buyer, you get to choose who will inspect your title and insure it. And in some states, title companies don’t all price their services the same way. So get your agent’s input for this service. If costs can vary, however, shop around yourself.

How to find a good real estate agent

Chances are good that you know many real estate agents. Your local bartender, yoga instructor, dog walker and half of your Mom’s friends sell real estate on the side.

But don’t let friendship determine who represents you in this expensive decision. Look for:

  • A full-time professional, preferably with some years in the business
  • Agents can demonstrate additional commitment with extra education and additional designations, such as the Accredited Buyer’s Representative or Certified Residential Specialist
  • Someone who has not jumped through several firms in town
  • An agent who is well-liked and respected
  • An agent who specializes in working with buyers may have an edge
  • Look for someone with great reviews (Yelp, etc.) and no complaints with your state Real Estate Division
  • Make sure your agent is licensed and with a firm in good standing in the community

Finally, choose someone who does not gossip. You want an agent you can trust with your private information. This person will be communicating with mortgage lenders, the seller’s agent, and other players. And finally, choose someone whose communication style matches your preferences. If you just want a daily text, 10 phone updates a day will drive you nuts.

Should you get mortgage rates from your real estate agent?

Your real estate agent is likely to have contacts in the mortgage industry. You should certainly give these people an opportunity to earn your business. But they are not entitled to it just because they have a relationship with your agent. Use their rates as a basis to compare the quotes you get from other lenders, online and in person.

Verify your new rate (Nov 12th, 2018)