Among brokers there is this old saying: "I don't sell houses. People pick houses." Yet a broker still has undeniable influence over the biggest and most complicated purchase you will ever make. The most devilish will steer you to houses that they want to sell. And even the best may drive you crazy, demanding that you leave work at an awkward time to see "a cozy house, for a very special person, that just needs some TLC." Translation: a small house that's a real mess.
Every broker has a style. Some will cast a wide net, hoping one property or another will reveal the key to what you're looking for. Other brokers do an extraordinary amount of research and take you only to the few properties that they think are perfect for you.
Meanwhile, you must be absolutely forthright about your reactions. If the broker is missing the mark, tell him. If he's on the right track, make sure he stays there. And if you are sure that you are saying what you mean, and your agent continues to show you houses in the wrong neighborhood, price range, or style, you have the wrong broker. Get a new one.
But if the broker is good, don't be disloyal and slip off with another one out of curiosity. Brokers have a very effective grapevine, and you will be found out, with some loss of goodwill.
It's worth learning how to communicate with a broker without confusing or alienating him. Your effort will pay off again and again through the long and winding process of buying a house.
To work most effectively with a broker, you need to know -- really know -- what size and style of house you want and in what location. Or, if you prefer, you can be really clear about what you're sure you don't want.
Even so, a high percentage of buyers will describe one kind of house and wind up buying something completely different. For example, many people like the idea of an old house, but they don't like the reality of one, and they misspend a lot of time before they figure that out.
So start your search on your own. Drive through neighborhoods you like and study the possibilities. Check out realtors' websites; there are hundreds of thousands of listings. Visit an open house or two to see what's on the market and to meet a few agents. Sign nothing. Make no commitments.
Note which agencies dominate sales in your area, big national groups like Century 21 and ReMax, as well as smaller local agencies. And note their specialties; many focus on a particular neighborhood, price range, or type of house.
Then interview your shortlist. Never forget that brokers make their living by trading information, and that their profession involves no oath of confidentiality. Listen to your instincts; you'll know within minutes if you've found one you trust.
If you're not serious about continuing the relationship, leave quickly but courteously; the agent you reject brusquely today may turn out to have the exclusive listing on a house you desperately want two weeks later.
Though your intuition is important, there are some very specific questions to ask a broker:
What have houses in your category sold for recently?
How long do houses usually remain on the market?
What percentage of the asking price is usually paid?
What's the most anyone has paid for a house on the street you like? What's the least? And when?
Any good broker should know the answers to these questions, if not immediately, after a quick search on a computer.
In some states you may be asked to sign a contract saying that your broker will represent you exclusively; decline this if it is optional, and if it isn't, insist on adding the phrase, “Either party can void this contract at any time.” More often, while you're shopping for a house, the relationship between you and your broker is not contractual. Indeed, a real-estate broker is paid by the seller, and therefore legally responsible only to the seller, not to you. So don't equate your broker with a friend. You may be asked to sign an acknowledgment that the broker "works for" the seller. Or you may be given the choice of asking the broker to represent you in negotiations, even though the commission is paid by the seller; this is an excellent option. Or -- a popular option in California -- you may be given the chance to pay the agent to represent you; there are fees for locating a house, finding a mortgage, or doing the closing.
When you find the house you want, the negotiations begin. Set a range, with a top limit, and use the same judgment that you'd use at an auction.
Most opening offers are about 10 percent below the asking price, assuming the house is fairly priced, a fact your broker can determine by looking at comparable sales in the neighborhood. You can offer much less, but you will risk alienating the seller.
If at any point during negotiations your broker says, "I have to know your answer right now," your reaction should be, "I'll let you know tomorrow." It is the very rare deal that cannot wait a day to be resolved.
Sometimes negotiations get stuck on a few thousand dollars, just a fraction of a percentage point of the sale. When both buyer and seller hunker down like this, it's usually about egos. Take a step back from the situation; there's often an easy way out if your broker wants to make it work. You might, for example, offer to pay the disputed few thousand dollars, but in return ask for greater access to the house before the closing or request that a piece of furniture be left behind. But it's the broker's call, and it is very bad form to pressure him by saying, "If you take less money, we'll have a deal." It is much more diplomatic to say, "This is my absolute limit. Can you and the seller try to work something out?"
The last bit of flexibility in price -- truly the last resort -- is the commission. No commission is fixed by law. A broker will sometimes shave a percentage point or round down a commission for a really good reason: The season is slow and he needs any and all income, or the sale is a particularly important one that the agency wants to claim as its own. The traditional commission on the sale of a house is 6 percent, paid by the seller; in other words, for every $100,000 of house, the commission is $6,000. But it's not that straightforward. If the broker works for an agency, about half of that $6,000 usually goes back to the agency. If he is selling a house that he found for the agency, he's called the "listing broker" and usually gets an extra commission. But if he sells you a house "listed by" or "exclusive to" another agency, or what's known as a "cobroke," the commission is split yet again, and the broker may make only $1,500 of that $6,000.
Now consider this: It takes roughly the same amount of work to sell a $100,000 house as a $1 million house, but the commission is $6,000 on one and $60,000 on the other. Which of these customers are you? Try to respect your broker's time; the payback will come as your house-hunting progresses.
Before you sign the contract, you will hire many people to look after your interests. Someone -- usually a contractor or a retired local building inspector -- will have to certify the physical condition of the house and estimate any immediate repairs. His report may even help you bring down the selling price. If your broker recommends one, proceed with caution. It's generally better to hire an independent inspector, along with your own lawyer to represent you legally in the transaction.
What your broker can help you with is your mortgage and appraisal, and keeping the ball rolling until the closing. Every bank mortgage department has a reputation as speedy or slow, sympathetic or unsympathetic, competent or clumsy -- and your broker will know it, so follow his advice. If you expect to have problems getting a mortgage, ask your broker to recommend a mortgage broker, who will find someone, somewhere, willing to tailor a mortgage for you.
At some point, the bank will send an appraiser, whose job is to protect you from paying too much. Appraising, however, is not an exact science. If your first appraisal is too low, and you are absolutely sure there is value in the house that the bank isn't seeing, ask the bank for another appraiser -- and ask your broker to work with him.
And on closing day, when all there should be left to do is sign paper after paper, you may find it's your broker who saves the day when too many egos gathered in a single room start to bicker. And at that moment, you will have to admit, he has earned his commission.