A new Santa Monica resident recently asked this all too common question: “I’ve just moved here from the East Coast and plan to buy a condo soon. Friends have told me that I have to use a broker in this area, rather than representing myself as I’ve done before. Is that true? If so, what’s the difference between an “agent,” “broker,” and “Realtor,” and what are their normal fees?”
Many people use the terms “agent” and “broker” interchangeably, and the usages may vary in different areas of the country. In general, an agent is licensed by the state of California in our market area.
An “agent” is the individual you will work with in the process of searching for a unit, comparing values with others on the market and those sold in the last several months. The agent will then put together and present an offer to purchase for you.
That individual will explain all of the contract terms, customs in the purchase process, and then coordinate the escrow process for you.
The escrow process is a detailed subject you will want to be informed about. He or she will facilitate any inspections you may choose to have done, then perhaps negotiate any credits or repairs, and assist in the obtaining of financing unless you will be paying all cash.
A “broker” in this area technically refers to the company the “agent” works with.
For example, you might decide to work with someone who has placed their real estate license with Coldwell Banker or with Prudential Realty.
In such a case that company would be the actual “broker” representing you even though the “agent” is doing all of the transactional details mentioned above.
An agent can also have a “broker” license but prefer to work with or under the umbrella of another “broker.”
For example, I have had a broker’s license since 1994, but have always placed my license with the company I choose to work with as an agent in their office.
A “Realtor” refers to an agent, broker, appraiser, or other professional who is a member of the National Association of Realtors.
This organization is composed of more than one million people in residential and commercial real estate, all of who have agreed to abide by a detailed code of ethics and professional standards.
As a buyer, you technically don’t have any fees due to your agent unless you sign an exclusive buyer-agent agreement that includes compensation from the buyer.
In general, when a seller sells their property, the seller pays a commission to their own agent through their listing broker. The listing broker in turn divides the commission with the buyer’s agent/broker.
California is one of the states that allow what is termed “dual agency.”
Although it is perfectly legal, some agents have difficulty in representing both buyer and seller of the same property in a transaction.
Some people are not comfortable working with an agent who already has a fiduciary responsibility to the seller who has hired them to sell the property.
There are several obvious advantages in having your own agent represent you as a buyer, especially because that agent would have a fiduciary responsibility primarily to you, not to the seller.
Of course you could represent yourself, as you said was your original idea.
However, I think the questionable benefits of doing so could be far out-weighed by the numerous advantages of having a professional in your corner! Also, any potential cost savings you might anticipate if representing yourself could be more than offset by more effective negotiating expertise and professional guidance of a seasoned agent who may have been through this process dozens of times.
Please let me know if you have further questions about any of these issues, or regarding any other aspects of the purchase process in this area.
Michael Edlen provides real estate counseling services to prospective buyers and sellers. Most of his business is derived from a referral base of nearly 1,000 past clients. More tips and information are available at, www.MichaelEdlen.com. He can be reached at 310.230.7373.
Contact Michael Edlen: [email protected]
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