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Real Estate Reading Room [Agents and Brokers]
Articles and Advice about Agents and Brokers from Real Estate Reading Room

Should You Use a Realtor?
by Al Susoeff

Holy Smoke! Once again I am AMAZED by the morons out there! I came across this question at http://answers.yahoo.com while doing a search for something else. Although the question is a good honest question the answers are such a blatant billboard to stupidity that I feel I MUST copy the whole thread and put my own two cents worth in. This is exactly what worries me sometimes about information online; so much of it is in no way, shape or form rooted in reality. A person posted the following question:

“I live in Washington, and am getting ready to buy a house. Someone told me some information that I don't know if it is true or not, I couldn't find any details on my own. He told me that realtors don't necessarily know about all the houses out there, and that it’s possible to get a better deal on the houses that they don't deal with. 2 examples are:

1. He said there are sometimes mass built housing communities that sell their houses direct at cheaper prices, without allowing realtors access to sell them or get commission on them.

2. Bank foreclosures, and similar. Do realtors have all access to these and try to sell them?

So is there any truth to either of these things? Or are they untrue?”

I will deal with this guys question at the end, but right now I want to post the answers and then look at each one in turn.

Answer #1

“I recently bought a house and from that experience I believe a good realtor is worth every penny of their commission. First of all you can do some looking without a realtor and yes there are houses that are for sale by owner and you may save some money. However you have to do a lot of work to find those houses and coordinate with the owner for a showing. In the end you may find that your time is worth more than you saved in a purchase price. Generally a good realtor (one that does it full-time and has been doing it for several years) is going to know more about the market then you possibly could. It is there job and if they are good at it, it will show. Good realtors will know of houses that are about to list, were listed but delisted for some reason, and just the general trend of the market in which you live. There may be some big companies that are building whole developments who have an open show house that you can go and look at, ultimately though if these houses don't pre-sale they will get MLS listed. Realtors work pretty hard making appointments for you and showing you around and with the state of the market right now my guess is you could save just as much by using a realtor to find a "motivated seller" who is willing to knock 5-10% of the price instead of going around the realtor.”

Well I agree with this guy …sort of. A good realtor may or may not be worth every penny of their commission. This person suggests that the realtor is some sort of expert on the market. That sort of thinking is what has us in this economic mess we are in today! You and only YOU are responsible for your due diligence. I suggest you talk to not just one realtor but SEVERAL realtors. Also you should talk to the neighbors in the area where you want to live. Visit with people who own businesses in the area, especially the “mom and pops’ businesses. They can tell you more about what stuff is worth and the quality of the neighborhood than anybody else because they live and work in it. Get online and pull demographic data.

If you depend on a realtor for your info, you may or may not get what you are paying for. Remember, in most states it takes about $250.00 and 40 hours of class time to become a real estate agent. Don’t think for a minute your agent is a real estate guru or YOU will be having a class of your own… in the school of hard knocks! That being said, I am totally not opposed to a realtor doing some of your leg work for you. Why not call half a dozen realtors? I know they are each going to want you to sign a contract granting them “exclusive right” to work with you, but simply tell them “NO”. Hey, if they can bird dog a property for you, great, like this guy says…it will save you time, but in the end you are going to pay the realtor 5%-7% of the sale. Yes, I know…the seller pays that part. Right. So, Who gives the seller the money to pay it? The buyer…DUH!

That was the part that made me chuckle about this guys answer. The realtor will find a “motivated seller” who will knock 5%-50% off the cost of the house. Cool. That will cover the realtor’s commission. You just paid within three percent of what you would have paid without a realtor.

Oh, yeah….read this guys’ answer again. He apparently does not know the difference between “there” and “their”, and it is pre-SELL not pre-SALE.

Answer #2

“No one is REQUIRED to use an agent and if the home is not in the MLS they have no way to know about it except through eyeball contact. However, NEVER purchase real estate without a professional at your side making sure your butt is covered.”

Again, I agree with parts of what he said. While it is true that there is no law requiring the use of an agent, the whole bit about the MLS and eyeball contact is totally crazy. Get online and do a Google search on the term “FSBO”. This stands for “For Sale by Owner”. You will find about a gazillion sites dedicated to folks trying to market and sell their own home. I know because I list houses on many of them. Go to craigslist.org, plenty of listings there too. Check the paper. You DO NOT have to waste time and gas driving all over town praying to see a FSBO lawn sign.

Of course, I totally recommend that you drive the neighborhood where you want to buy, but that is not necessarily for finding a house as much as it is for approving the neighborhood. As for having a professional at your side I would ask any prospective realtor how many deals they did last year and how much money they made. If they did not make more than me, then they probably would have a hard time convincing me that they were very “professional”. Oh, and one more thing; how is the agent going to “cover your butt”? If you believe that ANY agent is going to stick their neck out for you, and/or stand up for you in court you have another thing coming. More on that in my reply to answer #4.

Answer #3

“Realtors can only sell homes they are contracted to sell. If a house is for sale by owner you will save a lot of money.”

This answer is False and False. Realtors can sell a home, buy a home, or do anything else with a home they want to. They are people just like the rest of us. Now, in my experience, realtors typically only sell homes that are on the MLS, but even then, the chances are, that they do not have the contract to list on the house they sell; that after all is the whole purpose of the MLS. It gets all the houses out there listed by different agency’s available to ALL the agents. If this person’s statement were true, you would have to go to a different realtor for every house you looked at, because they would all be listed by different realtors and none of them could sell the others house…absolutely ridiculous.

The second part is false as well. Many times, I have found that a private owner wants more for his house than what the realtor would list it for, and in some cases they think their house is plated with solid gold. Just because it is a FSBO does not automatically mean you are getting a deal, and thinking like that will get you screwed. Do your “due diligence”.

Answer#4

“As a buyer, you don't pay a Realtor, the seller does. You MAY be able to get a cheaper price if the seller doesn't have to pay the Realtor. The seller sings a contract with a Realtor agreeing to pay them if their house sells within a certain amount of time. Mass built housing often sell houses from within so that they don't have to pay a Realtor.

Banks often sell properties that are foreclosed on. Houses can be dangerous buys, though, because they aren't always in great condition. Look on the websites of banks in your area for foreclosed properties if you are still interested. You can get a good deal, but it is a gamble as you don't know how much money will be needed to fix potential problems.”

I think he meant that the seller signs a contract, although I HAVE been known to sing after really making a great deal.

As for the silliness about the buyer paying the realtor, well we covered that in answer #1. Then this answer gets really stupid. Though it may not be true for all states, most that I know of require that the sales people in large developments like the one this person is talking about be licensed realtors. Just because a person makes salary or salary and a bonus instead of straight commission does NOT mean that you the buyer are not one way or the other paying for it. Again BIG …..DUH!

I have yet to see a bank that will sell a home they own to a private party without the use of a realtor. I’m not saying it isn’t possible, I have just never seen it; and I have been a real estate investor since 1990. Banks DO unload properties to investors in what we call “Bulk REO” packages, but that is a different scenario altogether from the one that the guy with the original question has asked.

My Answer:

Ok, now that I got all my ranting out of the way let me answer this guys question. First off, I have to say that realtors don’t know about MOST deals that are out there, but that is NOT a valid reason to not use them. I buy maybe 20% of my homes from realtors. The rest of the sellers are generated through various marketing techniques that I have learned over the years. If you are interested in learning those techniques, then I can train you or you can go to some other guru’s courses or seminars, but if you just want to buy a home to live in like this guy, then that is probably more time and money than you want to spend.

Where the mass built subdivisions are concerned, you will just have to look. In this market, deals are great just about everywhere you look, but always remember that you and you alone are responsible for getting the best deal. Your realtor isn’t interested in the best deal for you; hell, the more you pay for the house, the higher their commission. The banker is not looking out for you, they have a hard enough time looking out for themselves; all the banks with “going out of business” signs lately should tell you that. The title companies will help you get clear and marketable title, but even that has its limitations. The appraisers want you to be happy so the appraisal will probably “just squeak by” regardless of the price. I have seen the same home appraise for 175k and 150k the same week. So which appraisal is true? The home inspectors need to justify their existence so they will find something wrong with the house, I promise. And the list goes on. Let me say it again: YOU ARE RESPONSIBLE FOR YOU OWN DUE DILIGENCE.

With regards to the bank owned, foreclosed and other properties of that type, I have to say I totally agree with the person who answered that part in answer #4, even though he didn’t have a clue in the first part of his answer. If you have no idea how to do an inspection, if you have no idea what it costs to do a rehab in your area, if you do not know how to hire contractors and how to get a construction job completed, then you have no business buying a house that needs work. Just go get yourself a home you like, at a retail price and live in it 20 years. Along those lines, I wrote a book about that very subject called, “Stop Contractor Rip Offs Now” that may be helpful. You can get a digital copy at www.ASusoeff.com/products/ or if you want to pay a bit more for a paperback you can go to lulu.com or Amazon.com.

By the way, why are you so worried about getting a deal anyways if you are going to live in the house yourself? It’s not like it is an asset. Assets are things that put money INTO your pocket every month. Your house, your car, your boat….these are things that SUCK money from your pocket every month. It is not an investment folks, it’s a liability. The house that is an investment is the one you buy and flip for a 40k profit 3 months later, or the one you collect 950 a month rent on, but the debt service and maintenance only cost you 500 per month. These are investments, not the home you live in.

So my final advice is this…If you are buying the house to live in, just buy what you like and can reasonably afford the payment on, realtor or no realtor. If you are buying with the expectation of making money, then you better enroll in one of my courses or one of the other courses of countless others out there who know how to do this business. If not, no realtor (or anybody else for that matter) will be able to help you. How do you think I know that?


Al Susoeff, Jr. is a Real Estate Investor, Trainer, Coach, Author and Civil Engineer from Central Arkansas. You can read more of his articles at www.ASusoeff.com

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