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The Realities of Real Estate: Is your agent an expert?
By BOB and DONNA McWILLIAMS, For The Capital
Some buyers and sellers believe that real estate agents are somewhat of a commodity, and as such, fairly interchangeable when it comes to completing a real estate deal. In reality, the differences between agents is significant and something you should consider when looking to buy or sell a home. Furthermore, there are a variety of aspects on which agents can differ, and some are more critical than others.
Agents are licensed by the state. As a result, an agent with a Maryland real estate license can legally sell essentially any kind of real estate anywhere in Maryland. But, and this is an important but, that doesn't mean all real estate agents are necessarily qualified to sell everything under the sun. If an agent attempts to represent a client in an area of expertise outside the scope of their knowledge or in a geographic location where they normally don't do business, they could run afoul of ethical standards that require them to not venture beyond their experience and abilities.
The most common limitation is geographic in nature. Although our real estate license might permit us to sell a house in Deep Creek Lake, we would never think of representing a buyer or seller in that location because we lack an intimate knowledge of the area. To properly evaluate property, it is necessary to sufficiently understand the important real estate nuances that exist in all communities. We actually got married up at Deep Creek Lake and have visited there many times, but that doesn't give us the skills and abilities of a local agent. Those agents know the ins and outs of why a house located on one part of the lake might be substantially better than one situated in another area. Conversely, a Deep Creek Lake agent won't know the merits of various neighborhoods around Annapolis. So, if an agent is representing clients in a particular location, they should have a reasonable understanding of that area or previous experience in doing business within the community.
Another dimension on which agents can differ is with respect to the type of property being bought or sold. Here, the most basic division is commercial versus residential real estate. A commercial agent usually doesn't dabble in selling residential property and vice versa. We're residential agents, so if someone came to us with a commercial piece of property to sell, we'd refer them to a commercial agent we feel would represent them with the quality of service and expertise we would expect from ourselves.
In today's complicated real estate world, there are additional areas of specialization for agents. For example, the recent downturn in home prices has resulted in a surge of what we call short sales. A short sale is when a seller owes the bank more than their house is worth. Under certain circumstances, the bank will permit such a sale. For real estate agents, this type of transaction is extremely time consuming and to be successful, an agent must fully understand the short sale process. Complicating matters further, different banks have different procedures for short sales, and within each bank, the methods for completing or approving a short sale are constantly changing. Consequently, we now have real estate agents who have started to specialize in short sales.
One such agent is Michael Davis. He has worked through a large number of short sale transactions, and by doing so has learned the techniques necessary to effectively get these sales to settlement. As agents, we can take classes on how to handle short sales, but a class doesn't always make you an expert. Like many professions, there's no substitute for practical experience. Since Mike can legitimately lay claim to being a short sale expert, and many of our readers might be facing the need to sell as a short sale, we thought it would be helpful to relay some of Mike's knowledge on the subject. If you're a candidate for a short sale and are looking for an agent to list your house, here are the top 10 questions Mike recommends you ask to determine if the agent is really up to the task:
1. What is the agent's experience in representing sellers on short sales? How many such sales have they closed, and what is their success rate?
2. Have they completed short sales that involve multiple loans on the property?
3. Have they closed a sale with the lender or service that holds your loan?
4. If your loan is held by a government entity like FHA, Fannie Mae or Freddie Mac, has the agent had experience working with those organizations?
5. Does the agent recommend you have one contract signed and submitted to your lender, or do they suggest you submit multiple offers and let the lender decide which one to accept?
6. Can the agent help you develop a financial model to help the lender see why approving your short sale may be better than foreclosure?
7. How does the agent recommend pricing the property based on market conditions and the balance of what you owe on the mortgage?
8. If your lender decides to request the agent reduce his/her commission, ask them how they would handle such a situation.
9. Does the agent intend to handle the entire transaction, or are they going to outsource some of the process to a third party?
10. And finally, ask the agent why they would consider themselves an expert in short sales.
By these questions you can see that with specific types of transactions there's a lot more at play in selling a house than just putting a sign in the yard and loading the thing into the multiple list system. Some home sales have very unique and complicated issues that are better handled by an agent who's familiar with the rules of the road governing such specialized deals.
So, when you decide on which agent to select, remember that all agents are not created equal. Do your homework, and ask around to make sure that your agent of choice is properly equipped and experienced to help you realize success.
Bob and Donna McWilliams are practicing real estate agents with more than 20 years of combined experience in the Annapolis area. Their Web site is www.BobDonna.com, and you can e-mail them at McWilliams@BobDonna.com.