The first thing you need to know about real estate brokers is that they typically work for
the people selling the home -- not you. The standard practice is for the seller to hire a
broker, who then takes over marketing the home and seeking out potential buyers. For this,
brokers usually are paid around 6% of the sale price, which gives them a built-in incentive
to find the seller the highest price they can.
That sounds simple enough. But as you begin to drive around town with seasoned agents,
you'll quickly find that they act like they are, in fact, working for you. So don't get too
cozy. You will probably be tempted to tell an agent the highest price you are willing to pay
for a house or the size of down payment you can afford. Don't. The agent is obligated to
pass those details on to the seller, which could hurt you in any negotiation. Also, don't
feel obliged to buy a home through one particularly helpful broker. Use several to have the
widest selection of possible homes.
You don't need to use a broker at all if the house you want is being sold by an owner
himself. Indeed, you'll have a lot more room to negotiate on price if the broker's 6% fee is
absent from the equation. It's also not that difficult to sell your house without a broker,
though it is a significant commitment of time and energy -- one you may not be willing to
make.
Are all brokers bad? Of course not. A good agent can be very helpful, if only because he or
she has access to a large database of listings in your neighborhood of choice. Agents can
also recommend schools, local contractors, and mortgage brokers. (Although, you shouldn't
rely too heavily on their advice; they've been known to take kickbacks.) And they can often
help steer you through the home buying process, while smoothing out bumps in the
negotiations. Remember this, too: An agent's fees are always negotiable. Are you and
a seller at loggerheads over who's going to repair that damaged furnace? Maybe it should
come out of the broker's fee.
In the past few years, so called "buyer's brokers" have become more popular in certain parts
of the country. Unlike traditional real estate agents, they work for -- and are often paid
by -- the buyer. They are supposed to help assure you get the best deal. They can be
invaluable if you are moving to a town or part of the country you are unfamiliar with or
have little time for house-hunting. Like a regular broker they are a font of listings.
The problem is, their terms often require that you use only them for a set time period.
That's fine if you trust the broker and just want someone to screen homes for you. But it
can leave you hamstrung if you'd like to go out and do some looking on your own or if you
want to use a number of brokers. Also, compensating a buyer's broker can be tricky. Paying
by the hour adds up, but paying a percentage of the purchase price gives a broker the wrong
incentive: Getting you to pay the highest price returns the most to him. Sometimes, a
buyer's broker will settle for splitting the fee with the broker who has the listing.
The 2 Basic Loan Types: Fixed and Adjustable