Advice about Real Estate Agents - Realtors

Hi everyone, I'm not sure if something like this has been posted yet but I figured I'd offer my insight.

I was an agent from 2007 to 2010 in Colorado, so I figured I could offer some knowledge on how somethings work on the agents end.

Agent, Realtor, Broker, what does it all mean?

Broker - In most states a Broker is the manager. New agents are required to work for a Broker for at least two years before they can strike out on their own. To be a Broker you most have a certain amount of experience, plus your required to take more continuing education classes then the average agent. New agents must show any offers or contracts to their managing broker before submitting them. Some states refer to the Broker by a different name. In Colorado their called Managing Brokers

Agent - This is someone who is licensed by the state to represent someone in a real estate transaction. The agent is required to report to a broker until they have met the states requirements to be an independent agent. Most agents remain with a broker. Agents are not lawyers so they can not give legal advice. when it comes to contracts they can only fill out state approved forms. this does very from state to state. Their eduction consist of maybe a month of classes. But they are required to take several hours of continuing education each year

Realtor - Not all agents are Realtors, a realtor is an agent or broker who belongs to the National Association of Realtors. To be a member you are asked to uphold the Associations high standards for ethics. The NAR offers higher levels of education for agents.

Quick note to help you as an investor - If you're working with an agent who is a Realtor refer to them as a Realtor not a Real-a-tor. its drives them nuts when people pronounce it wrong. This will also show you've been in real estate and have learned the right way to pronounce it http://www.youtube.com/watch?v=OZu5b2xTD6Q

Here is a link to a full description regarding the difference between brokers and agents - http://en.wikipedia.org/wiki/Real_estate_broker/agent

Types of Agents

Buyers Agent - represents the buyer
Sellers Agent or Listing Agent - represents the seller
Transactional Agent - represents both (requires a disclose and has a lot of new rules to follow)

Commissions

Some people believe that a listing commission is always 6%. this is not true, it is always negotiable. The agent can say no to a different amount, but it is never a set percentage.

So lets break down how the commissions work

you offer to buy a property for 100,000. both you and the seller have an agent

lets say a seller agrees to pay their agent 7% of the sales price.

in the mls listing the sellers agent said she would split her 7% commission in half with an agent that brought a buyer. So know both agents would get 3.5%

but your agent is a smart one and tills the sellers agent I've got a cash buyer who might be interested. if i show him your sellers property would you offer me 4% instead of the 3.5%. The split is negotiable and the agents can negotiate the split. Some listing agents will offer a bigger split to the buyers agent in order to attract more agents with buyers.

lets say for this example the sellers agent said no and the split remains 3.5%

the deal goes through at 100,000 and the seller pays their agent 7,000. the sellers agent then pays your agent 3,500. it doesn't end there, both agents most likely have a commission split setup with their managing broker. this could be anything or they could keep 100% of their commission and just pay a desk fee. or they could have to split it plus pay a desk fee. desk fees can range from 90 to 2,000 a month depending on their agency and broker. Places like Re/Max 2,000 a month in desk fees is common, but the agent keeps 100% of their commission.

As you can see when is comes to commission everything is negotiable. But believe me if the sellers agent does not offer a split or if the seller does not have an agent, your agent will want to know how and how much you plan to pay them.

Here's a little know fact that might help, agents can receive what is called a referral fee. If you decide to start investing in another area, you can ask your agent if they can refer you to an agent in that area. if they know of an agent, they will send a contract for that agent to sign saying they agree to pay so much per deal if your agent refers you to them. the amount is negotiable and so is how long they'll pay this %. this is a good way to make your agent more money. although its not allowed in every state and some agency's will not allow it either. ask your agent, believe me they will be VERY glad to help.

Hope this helps a little