Much like in any industry, there are people in the real estate industry who choose to compete for clients based on price.

Whether it is a car, a pizza, landscaping, house painting or any multitude of products or services, when the provider chooses to compete on price it means they believe that all of the offerings are fundamentally the same.

If you’ve ever had a bad pizza or seen a poor painting job at a house, you know that the quality of a product or service can vary tremendously.

Within real estate, lower price options are based on the idea that real estate commissions are an expense, not an investment.  It makes tremendous sense to keep your expenses as low as possible, and it makes equal sense to invest your money wisely.

If you believe, as we do, that the commissions earned by your real estate agent are an investment in getting you the best possible result, then you’ll find this article very interesting.  Without further introduction, here are the three big ways your real estate agent makes you money.

Being Honest With You

Honesty is really the best policy when it comes to the relationship with your agent.

While we might all prefer visitors to our home to be polite and positive, your agent needs to be able to view your home through the lens of a potential buyer and identify issues.  By doing so, your agent can save you tons of money by avoiding these mistakes:

  • Over-pricing the home based on wishful thinking rather than market data and comparable properties. Homes that are priced too high sit on the market for too long, require multiple price drops and eventually sell for lower than they could have sold for if priced properly from the start.
  • Under-estimating the impact of any issues on the appeal and saleability of the home. Our clients often do pre-list home inspections to reveal any issues with the home so that we can choose how to present these issues to prevent them being used as a negotiating lever or causing a deal to fall apart.
  • Leaving fixable issues to create a poor impression on buyers. While not all issues with a home can or should be remedied, there are often smaller issues that an honest agent can help you address.  The cost of such work is often a fraction of the benefit.

No home is perfect but your real estate agent needs to be on your side with how to best present the home, at the highest reasonable list price.  When you see properties that don’t sell because they show poorly and at too high a price, you can be sure that the listing agent wasn’t being honest with his clients.

Applying Pressure To The Other Side

The next way in which your agent makes you money is by applying reasonable pressure to the other side.  Whether you are buying or selling, there is someone on the other side, often represented by another real estate agent, and your agent must know when and how to apply pressure to make you money.

On the buy side, this means understanding that being professional and friendly is not the same as being accommodating and a pushover.  Your purchasing agent should take every opportunity to probe for ways in which they can save you money.  Here are a few examples:

  • The listing agent wants a 24-hour irrevocable period to contact all agents who showed the property and drum up competing offers. Your agent can push for a much shorter window of time when the seller and the agent can review an offer and not allow them to put you into competition and pay more for the home.
  • The seller wants a different closing date than originally described and there are likely financial reasons for that change. Your agent can push for a price adjustment based on financial benefit to the seller or financial cost to you as the buyer.
  • The seller wants you to remove a home inspection condition as they are nervous about the uncertainty of a conditional sale. If your main concern was the condition of the roof and we can agree to remove the inspection condition in exchange for a $10K rebate on closing, you have funds set aside for a possible (but not necessarily necessary) roof repair.

On the sell side, your agent must know how to market and negotiate the home to get the best result from a pool of buyers.  Here are a few examples:

  • When a home is fresh on the market and a buyer is interested, your agent must be prepared to push back against eager buyers and their agents, to say that if they want the seller to forego a marketing period and exposure to more buyers, they need to come to the table with a great offer.
  • When the home has received multiple offers, your agent must know how to put pressure on the purchasing agents to increase the appeal of the offers on the table. This often means strategic choices about which offers to reject and which offers to encourage, when to sign back and when to hold off on a deal.

All real estate transactions require willing parties on both sides and aggressive, confrontational negotiations are often not successful.  Despite this, it is a negotiation and your agent has the chance to make or lose you tens of thousands of dollars by how they interact with the other side.  Make sure you chose an agent who has the experience and wisdom on how to be professional but not a pushover.

Being Sceptical

The final way in which your agent can make you money is by maintaining a healthy level of scepticism.

This is often earned by a real estate agent over the course of helping hundreds of clients buy and sell real estate.  Over time, you encounter more and more situations where unexpected things cost your client money.  With experience, or by adopting a certain amount of scepticism, your agent can save you money.  Here’s a few examples:

  • The listing agent tells you that the parking pad in the front pad is legal. Trust that is true, but also verify it with the city.  Paying a higher price for a home with parking only to discover it is in fact not a legal parking spot means when you sell, you’ve lost a key selling attribute.  Discovering this before purchase or closing allows your agent to negotiate a change to the sale price.
  • The brand-new dishwasher in the house with the blue tape and manual still inside doesn’t need to be run during the home inspection as it is brand new, right? Unless, of course, it hasn’t had the plumbing or electrical connections installed and is simply a dishwasher pushed into a gap in the cabinets.  Discovering this prior to signing off on the home inspection condition allows your agent to negotiate an abatement to cover having the necessary installation done.
  • The buyer for your home is only able to pull together a small deposit despite the hefty purchase price they are willing to pay. Their agent assures you they are pre-approved and financing won’t be an issue but when your agent asks for the pre-approval prove, it turns out that they aren’t quite pre-approved and in fact can’t close on the deal.

Whether it is recognizing an existing problem or preventing something from becoming an issue, your agent can make you lots of money by not taking everything that is presented at face value.  A big part of the value of your agent is the experience they have with real estate transactions and knowing how to identify red flags.

When you hire a Realtor to be your agent on the purchase or sale of real estate, look for one that will be honest with you, who knows how to apply pressure to the other side and who doesn’t assume everyone is being 100% honest with how they present situations.

If you’d like to work with an agent who knows how to make (and save) you lots of money with your deal, don’t hesitate to get in touch.