When you’re selling or buying real estate, whether residential or commercial, hiring the right agent can make the difference between sale or no sale.
Presently we’re involved in a commercial purchase transaction, with a purchase price of more than $3 million. Unfortunately the appraisal for the property came in $800,000 below the contract sale price, leaving both the buyer and seller scrambling, trying to figure out how to proceed.
There are circumstances in which real estate agents advise their clients that their expectations are too lofty and that comparable past sales figures don’t support their asking price. That, however, was not the case in this situation. Regardless of whether the agent misread the comparable sales figures or just wanted the listing and went along with whatever asking price the seller suggested, the agent has done a disservice to their client. On the other side, the buyer’s agent should have raised a “red flag” as well, alerting the buyer that the asking price seemed high based on the comps and current market conditions.
I won’t pretend that appraisal issues don’t pop up on a regular basis, but for the value to come in 25% below the contract sales price leaves the agents looking somewhat incompetent. If the parties in this transaction proceed based on the value established by the appraisal, the real estate agents will each receive a commission of $72,000. For many people, that’s more than a year’s salary and certainly not what you’d expect to pay someone who’s either giving you bad advice or no advice at all.
Regardless of whether you’re selling or buying a house, your real estate agent is most likely being paid a respectable commission. Even a bad real estate agent can open the front door to show you a property and fill in the blanks on a standard agreement of sale. If the job were that easy, it would probably pay $25 an hour. A real estate agent wears many hats during the course of a transaction; sales person, financial advisor, real estate expert and yes at times psychologist. If you find yourself interviewing an agent whose skill set and knowledge begin and end with sales person, keep looking. Settlement/title companies are a great resource for finding qualified real estate agents. When you’ve been involved in thousands of real estate closings, you get a feel for who the good agents are and who you would recommend staying away from.
Before you hire your mom’s boss’s daughter who just got her real estate license to earn some extra cash, understand that a real estate license alone does not make you a qualified real estate professional. You’re probably about to spend more money than you’ve ever spent in your life. Don’t get pressured into hiring the wrong person for all of the wrong reasons.
~by Frank Dowd, Title Insurance Agent, licensed in PA and NJ Principal at Associates Land Transfer Company, LLC
Visit www.ALTtitle.com for a complete and accurate title quote.
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