Takeaways
- Real estate agents are licensed professionals who help you buy or sell your home.
- Real estate agents analyze the local real estate market and manage marketing efforts.
- Real estate agents are instrumental in helping to negotiate purchase and selling prices.
- Real estate agents usually work on a commission’s compensation structure.
- Not all buyers need one, but a buyer’s agent can help you navigate homebuying.
Navigating the homebuying process can be a complicated process most people don’t want to deal with. If you are toying with the idea of buying or selling a home soon, you will most likely work closely with a real estate agent. A great real estate agent will help guide you through the twists and turns and emotional highs and lows of any real estate transaction. Learning the ins and outs of what a real estate agent really does will help you find the best one available.
What is a Real Estate Agent?
A real estate agent is a licensed professional who assists individuals and businesses with buying, selling, or renting properties. They represent their clients in negotiations, facilitate the transaction process, and provide valuable historical and real-time market insights.
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Importantly, real estate agents are incentivized to work hard to get you the best deal possible. That is true whether you are a seller looking for the highest price or a buyer looking to purchase your dream home. Your real estate agent is essentially your biggest advocate during this process and should have your interests every step of the way.
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What Do Real Estate Agents Do?
Real estate agents wear many hats when buying or selling a home. For instance, if you are selling your home, a real estate agent analyzes the local real estate market to help you set a competitive price for your property. They do this by researching comparable properties in the area. Additionally, they manage the entire marketing process for your home. Real estate marketing efforts include crafting appealing descriptions, arranging professional photography, staging your house, hosting open houses, and networking to promote your listing.
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For those in the homebuying process, real estate agents help search to identify and vet properties that align with your needs and financial constraints. Real estate agents can also tap into specialized tools and professional networks to uncover homes before they officially enter the market. This can give you a competitive edge in knowing what is coming to market or snagging a property before it is even broadly advertised.
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Once you find the perfect home or receive an offer on your home, your agent serves as a skilled negotiator. First of all, if they are a seasoned professional, they have negotiated for clients who come from all different financial backgrounds. This helps the real estate agent understand what plays and wants don’t when negotiating a real estate transaction. They advocate for your interests to secure the most favorable deal possible, whether that involves a higher sale price or a stronger purchase agreement.
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Great real estate agents know what their clients want. Some home sellers might not need the highest price for the house but could instead value time to sell. In this case, the real estate agent is incentivized to close the deal as soon as possible. For prospective homebuyers, it could mean only putting in offers that make them financially comfortable and knowing when not to push the buyer to maintain their working relationship. An excellent real estate agent knows how to work within these confines.
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Finally, real estate agents handle the extensive paperwork and legal intricacies of real estate transactions. They ensure all documents, from the initial offer to the final closing papers, are accurate and compliant, protecting you from potential issues. Additionally, they might help recommend banks or mortgage lenders they have worked with before.
How Are Real Estate Agents Paid?
There are two main ways that real estate agents get paid: commission and flat fee. Historically, real estate agents have mostly worked for commissions. For sellers’ agents, this works well because it aligns the incentives of the seller’s agent with their clients. A typical real estate commission for the sale of a home is between 5% to 6% of the homes selling price, with the seller and buyer’s agent splitting the commission. This means the selling agent receives 2.5% to 3% and the budget’s agent receiving 2.5% to 3% of the selling price. However, for larger properties, real estate agents and brokerages offer flat fee structures to their clients to gain a competitive advantage.
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The pay structure for real estate agents has been evolving over the last decade with the explosion of online listings, which has allowed prospective buyers to peruse most of the listings online. This reduces the traditional use of a real estate agent and has shifted some real estate agents to a more a la carte pricing structure based on their client’s knowledge and needs.
Buyer’s Agent vs. Seller Agent
Terminology in real estate can be confusing if you haven’t heard the vocabulary before. The good news is that sometimes definitions can be quite intuitive. One of the most explored avenues for finding a real estate agent is to get a buyer’s agent or seller’s agent. So, what is the difference?
- Buyer’s Agent: A buyer’s agent works directly for you, the buyer. Their top priority is finding you the perfect home that suits your needs and fits within your budget. They use their insider knowledge of the market to uncover even those unlisted gems and be fierce advocates during negotiations.
- Seller’s Agent (or Listing Agent): A seller’s agent represents the seller of a property. A seller’s agent concentrates on getting the seller the highest possible price for their home. They handle all the marketing, promoting, and negotiating offers with your best interests in mind.
Can one agent wear both hats? Technically, yes, something called “dual agency” exists. However, it is vital to understand that in this situation, the agent must remain neutral and cannot fully advocate for either the buyer’s or seller’s side.
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So, which one do you need? This depends on whether you are buying or selling. If you are in the market to buy a home, a buyer’s agent is your best friend. If you are ready to sell your property, enlisting a seller’s agent will make the process much smoother.
Real Estate Agent vs. Realtor
Some other terms you might hear are real estate agent and Realtor. But unlike other real estate terminology, these two are used interchangeably, more so than most others. However, there is a critical difference between the two. Let’s take a look:
- Real Estate Agent: This is the broader term. A real estate agent is anyone licensed by the state to help people buy, sell, or rent properties. To become an agent, they must pass an exam and fulfill specific requirements.
- Realtor: A Realtor is also a licensed real estate agent. However, they are part of the National Association of Realtors or NAR. As part of the NAR, they abide by and agree to uphold a Code of Ethics [1]. The code of ethics is a strict promise of professionalism and fair practices within the industry.
Does it matter which one you choose? While all real estate agents are licensed professionals, Realtors demonstrate an extra commitment to ethical standards. Being a part of the NAR also provides agents access to additional resources, network connections, and market data.
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Real Estate Agent vs. Broker
A realtor is not the only title confused for a real estate agent. Broker is another one. Here are the differences between a real estate agent and a broker:
- Real Estate Agent: This is someone licensed to help clients buy, sell, or rent real estate properties. To get their license, a real estate agent needs to complete specific education requirements and pass a state exam. All real estate agents must first be supervised by a licensed broker for a specific period. You can think of this as a sort of training program.
- Real Estate Broker: A broker is essentially a real estate agent with extra qualifications. They have completed additional coursework, passed a broker’s licensing exam, and have experience actually working with clients. Brokers can work independently or manage their own real estate firm, overseeing other agents.
All brokers start as agents, but not all agents become brokers. If you are working with a broker, you know they have extensive real estate knowledge and are legally qualified to manage their own business if they choose.
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Smart Summary
Finding a great real estate agent is no small task. Shopping around for a listing or buyer’s agent you get along with is a smart money move because buying or selling a home is one of the largest transactions you will ever have to complete. Most people find the process to be maze-like, so selecting a seasoned real estate agent with superb communication, a seasoned negotiator, and a legacy of successful transactions will work in your favor. Above all, you want to be comfortable with the house you buy and ensure it fits with your budget and long-term financial goals.
(1) National Association of Realtors. The Code of Ethics. Last Accessed February 14, 2024.
