8 Reasons Why You Should Use A Real Estate Agent

by Mike Holman

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Mr. Cheap & I have published a rather large number of posts where we point out that SOMETIMES real estate agents are not your friend, associate or even on your side and they definitely can’t ALWAYS be trusted. Heck, sometimes people DO use a friend as a real estate agent and SOME agents must be foolish enough to be honest with clients.

That said, neither one of us has anything personal against agents  – most of our complaints have to do with their compensation system which is determined by the large real estate brokerage companies who control MLS (for now).

In fact, I recommend that most people should use a real estate agent for a number of reasons.

1)  Knowledge of the local market prices

Yes, your agent will undoubtedly withhold and manipulate data as they see fit for their own gain, but the fact remains that they should have more knowledge than you regarding local market conditions.  Unless you are willing to spend a ton of time learning the market yourself then it’s worth paying for someone else’s experience.

2)  Knowledge of local landscape

When I bought my first house I had a few pretty nice areas in mind where I wanted to live.  Once I figured out that I couldn’t afford to live there then my agent suggested a couple of areas that were not quite as nice (which is not to say they were bad).  If you don’t know all the areas in your city or if you are new to a city then hiring a local real estate agent can be quite helpful.

3 Access to house details and comparative sales

This is the big reason why MLS is so valuable.  If you are selling a 3-bedroom semi in Leaside then you look at all the recent sale prices and get a better sense for the market.  This info is available from other sources such as city hall but it is very difficult and inconvenient.

4)  Easier access to houses

This is one of the biggest advantages of having an agent regardless of how experienced you are with buying houses.  The fact is that people selling a house are not going to let you in without an agent.  You can contact the selling agent to book an appointment but there is no guarantee they will play ball.  Open houses are a good way to look at a house but they are quite limited.

Another problem is that sometimes buyers without agents are considered “ignorant” and might not be taken seriously.

5)  Transportation when looking at houses

The two agents I’ve dealt with on the buy side always drove me around to look at houses.  Considering I had a car this wasn’t what I would call an overly valuable service but for a house buyer that doesn’t own a car, this would come in pretty handy.

6)  Less stress to close the deal

One thing about an agent is that they will do all the administration for documents, finances etc.  This service might not be worth the money it costs, but regardless, it’s work you don’t have to do.

7)  Renovation ideas

Agents tend to have at least some knowledge of renovation and design ideas so for a client who has a problem with the layout/condition/colour of a potential house, that agent might be able to lend some insight about how to change things.  You have to remember that the agent is doing whatever they can to get you to buy the house so they will estimate potential renovation costs WAY on the low side.

On the sell side, the agent should be able to know what buyers are looking for and can make suggestions to the home owner on what parts of the house to fix up for sale.

8) You are going to pay anyway.

Even if you do the dual-agent ripoff thing you will still be paying for an agent anyway since the “dual” agent will just collect twice as much commission so you might as well get some service out of it.

So there you go – all the reasons you need to get a real estate agent, hold your nose over the fees and get going on your real estate adventure!

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{ 24 comments… read them below or add one }

1 Sampson

I wonder if this post will be as controversial as the “don’t use agents” posts?

Sometimes I liken this type of decision to investing. DIY can be for some, but definitely should not be for most – I have the same view when it comes to RE agents and you’ve pointed out many of the good reasons to use them.

2 Mike

Sampson – I doubt it.

3 Sampson

It seems pointless for me to argue the other side, when I know you’re already of the same opinion ;)

4 Mr. Cheap

Sampson: You should argue the other side, and cite previous posts we’ve written to support your position :-).

5 Four Pillars

For the record – we’ve never advocated not using an agent. We’ve only been very diligent on pointing out the various conflicts of interest etc. :)

6 David

It seems most of your reasons to use an agent are only relative to buyers, not sellers. Does this mean you think using an agent to buy is a good idea, but using an agent to sell is not such a great idea?

A few things I need to say on each of your points;

1) Knowledge of the local market prices
2) Knowledge of local landscape
>>For these 2 points, I think you are correct when you say the agent may manipulate data for their own gain. They will show you data to support their cause; “closing the deal” and withhold data which won’t help close the deal. I have seen it happen before. People you need to always search around for your own data, look at the market yourself, investigate using everything you can.

3)Access to house details and comparative sales
>>Here again I would have to say some agents may withhold certain data and just show you comparisons to get you to close. Really anyone can get this data, in Ontario you can go through mpac and see any sales you want, I did, and I was telling agents recent sales they didn’t even have, or they weren’t disclosing.

4) Easier access to houses
>>I don’t agree with this, agents will gladly show any buyer a house, if they don’t have an agent that’s a bonus for the selling agent since they may be able to act as a dual agent and get more commission. I recently bought a house without an agent, and every agent I called for a showing was more than happy to show me, and of course represent me as a dual agent if the seller agreed.

5) Transportation when looking at houses
>>This is no reason to use an agent, but your analogy is good, agents are basically glorified chaufers.

6) Less stress to close the deal
>> Perhaps this may be true, especially for first timers, although I have used an agent and not used, and the stress was probably the same.

7) Renovation ideas
>>I don’t think agents have any better skills at reno ideas or decorating, you are probably better off talking to skilled people or watching HGTV. Besides the fact, most agents have no idea what can or cannot be done inn terms of structural changes or major renos, since they are not engineers or even tradespersons skilled in this area. They may give you ideas, get you dreaming, and tell you how cheap it will be to change this or add that, but let’s face it renos always cost more than you think, and you almost never get your return on investment.

8) You are going to pay anyway.
This is somewhat true, although from my experience not using an agent to buy I believe I did get a better price. If there are 2 agents involved the commission is greater than if there is one dual agent involved. I went in with the attitude and told the agent and seller that they had better knock $10K off the asking price right away since I was saving the extra fees of not coming in with an agent, and that we would start negotiations from there. The agent soon agreed and talked the seller into this. I ended up getting 25K off the ask, not to mention lots of inclusions. I really don’t think the price would have been the same if I came in with my own agent. I think if I had an agent he/she would be pushing my harder to raise my bid all the way, or telling me this is as low as they will go, this is a great deal! blah blah

With all that being said, I am not saying people should never use an agent to buy, some will always need to and should. Certainly for first time buyers, people that don’t have time, lazy people or people who don’t like to DIY an agent is a good idea. Just remember they may not always have your best interest in mind.

7 Four Pillars

David, great comment.

I think some of the points apply to selling as well (local market knowledge, access to comparable data, reno knowledge etc).

I should add one point though – I think sell by owner is still a tough sell since most buyers just aren’t interested (or are scared) of dealing with something different.

I would say that at this point in time most sellers are probably better off with an agent. An exception might be if you live in a hot area and can easily get a buyer (a friend of mine did this).

As for saving money with 1 agent, I suspect in your case it was the seller who paid the extra commission (which is good for you).

8 Mr. Cheap

David: I second Mike’s response, great comment. Out of curiosity, are you able to get MPAC’s data free or did you pay for access? The last time I looked at it they charged for every listing you looked up.

9 The Rat

I am presently living in my 3rd house since 2003 and I have never used a real estate agent for selling or buying in each of the three cases (they were all considered my ‘principal residences’). In fact, the last home I sold, it was done privately on auction and it worked quite nicely. There was a greater disparity between the 1st and other bidders, but it worked out good in the end.

I think that buying and selling your principal residence can be advantageous for all involved in a lot of ways provided you know what you are doing and both parties are comfortable with the process. You can easily eliminate the commission that a real estate agent will be grabbing for and you have to respect that the agent’s job is to make a buck too, but if you know the local market you’re living in, you can definitely go-it-your-own and save thousands.

Some people don’t want to have the strain of having to show their homes, or negotiate, or even be involved in the sometimes tedious process in closing the deal, and it may actually make a lot of sense for a lot of people to go with real estate agents. I have had great relationships in the private sector and doing business exclusively with certain agents, and they can certainly make things happen, and that is fine. However, when it came to my personal home, I always tend to deal it myself. To each his/her own I suppose!

10 David

@Four Pillars -I agree, you are correct, FSBO is still tough, and many people will shy away from it. However a buyer can still come into a FSBO house with an agent if they like, and if the seller allows it. The seller can choose to offer them some commission, or they can tell the seller they will need to provide the agent with commission on top of the purchase price. I think if the CREA rules change as the competition bureau is trying, and we can get widespread flat fee MLS service, this will open up the market for everyone.

@Mr Cheap – regarding mpac, if you already own a property in ontario you can login and get certain info for free, including searches, sales, and assessment reports of your neighbours etc. You can also pay for additional info and reports. There are other pay services out there as well, but I believe they are costly (ie. teranet.ca)

11 nobleea

Until they open up MLS to outsiders, I would use an agent to Sell a house.
I would never use an agent to buy a house, unless it was in a new city and I had little knowledge of the areas. Though in that case, I wouldn’t be buying anyways – rent until you find a neighbourhood you like.

The property tax folks in Edmonton provide a printout of all sales and land title changes in your area at tax time (going back for the last 3 years). It’s quite eye opening. I haven’t hunted through the city’s website, but I suspect you could get it somehow as a buyer.

12 Mr. Cheap

David: Hmm, well, I own property in Ontario, and when I contested my assessment, they gave me access to look up 12 properties. It seemed like you had to pay if you wanted to look up more than that (or if you weren’t contesting your assessment).

I’ll have another look, thanks!

13 J. Money

Having once been a realtor myself, I can tell you that it’s ALL about the individual you choose to work with! I’ve known super lazy and super shady agents, but also incredibly helpful and *caring* agents all under the same broker roof. Some are in it for the money only, and others are retired and doing it for pleasure and to share their knowledge with people :)

If you don’t trust your agent, check around and get another asap.

14 Four Pillars

J. Money – thanks for the inside info. I didn’t know you used to be a realtor.

15 Nolan Matthias

Mike and Mr. Cheap,

Thank you for finally taking a look at the other side on this. I completely agree with you guys with respect to double ended deals. They suck! For everyone but the realtor. I will never partake in a double ended deal again, if a buyer wants to buy my place they will have to have their own representation, period (btw you have the option to demand independent representation, and a realtor that acts contrary to that instruction can get themselves in trouble with their local board).

I do believe there are those who are sophisticated enough to sell without a realtor. Lawyers, mortgage professionals, and sophisticated real estate investors (own more than four properties or have transacted on more than four deals in the last two years) would be included on that list. For the average Joe however I think there is just to much liability involved. The $10,000 you save by not using a realtor could realistically cost you far more if you were to unknowingly do the wrong thing. Unfortunately ignorance of law is never a valid defense when it comes to mistakes made on any type of transaction involving a contract.

Another aspect that I for one would appreciate in a future article could be the perspective of mortgage lenders on for sale by owners. Many who do not believe in dealing with realtors might be surprised at how tough it is getting to finance a FSBO. Banks do not look at them in good favor and they will definitely be highly scrutinized. This affects both potential sellers and buyers.

Cheers,

Nolan

16 youngandthrifty

Great thread. Helps me reconsider my viewpoint of “Me against the Realtor” One point I’d like to add is that there should be some caution using a realtor who will show you new condos (brand new condos) because there really isn’t anything that they can do for you in that aspect (for used condos, they can get the meeting minutes from the Strata etc).

Oftentimes you’re paying a different price that the realtor will easily pocket (easy peasy money for them) to the developer. I was checking out a new condo the other day and the developer told me he could cut $27,000 off the price because it was a direct sale.

(so that if we bought and used the realtor, he/she would pocket $27,000! wow, huh!?)

17 Mike

Y&T – Don’t ever let your guard down against real estate agents! They are your main adversary in the real estate game. :)

18 David

Nolan: “For the average Joe however I think there is just to much liability involved. ”
@Nolan: How exactly does using a realtor cover your liability?

Nolan: “Many who do not believe in dealing with realtors might be surprised at how tough it is getting to finance a FSBO. Banks do not look at them in good favor and they will definitely be highly scrutinized.”
@Nolan: I don’t believe this at all, banks do not care about this. Realtors don’t have anything to do with this, this is all dealt with by lawyers and if you use one a mortgage broker. I asked my broker about this, and he said banks could care less if its a FSBO deal, they are all about the numbers, and legal stuff which is all coming from your lawyer. I agree this could be a good topic of a future post, perhaps we can get a mortgage broker to chime in with some advice about this.

19 Nolan Matthias

David, The good news is that a mortgage broker has chimed in already on this for you. My company does over $50 million worth of mortgage transactions per year, I am personally one of Scotia Banks top 100 brokers (no I do not work for them), and Scotia is the largest lender in the broker channel. Yes it is much tougher to get a FSBO financed than an MLS listed property.

FSBO’s go through far more scrutiny because they are more often involved in fraud, or are favorable to one side of the transaction instead of being fair to both parties. FSBO’s to answer your other question, are also more dangerous in the banks eyes because they are not being transacted by professionals who know how to make sure that things like financing conditions and full disclosures are in place, as well as how to create a non-frustrated contract. Did you know that there are certain things realtors are required to disclose if they are aware of them that a FSBO may not? These disclosures protect both buyer and seller. There are also assurance funds held by all real estate boards in case something does go wrong and a settlement needs to be made. If you are a FSBO you will be fighting it out in court my friend, if you can afford the lawyer (the lawyer that transacted on your deal will have to excuse themselves from representing you).

Scotiabank, CIBC, and TD all scrutinize FSBO’s mortgages much more than they do MLS listings. CMHC and Genworth do so as well. Oh, and if you are self-employed, buying as a rental, or have tarnished credit, it will make it even tougher. Most of the other lenders flat out have “no FSBO” policies, or do them on an exception basis only.

I would ask your broker friend to call some lenders to find out what there policies actually are. Perhaps you can post them here.

20 Mr. Cheap

Nolan: By any chance do you mean “recuse” instead of “excuse”?

Perhaps there’s some merit to this idea of using lawyers for legal advice and services instead of real estate agents or mortgage brokers… ;-)

21 Nolan Matthias

Nope, I’m pretty sure I meant excuse “to seek or obtain exemption or release for (oneself): to excuse oneself from a meeting [or defense in this matter].” Although recuse would have been an equally valid word. Wasn’t making any sort of attempt to speak legalese (hit or miss finding recuse in an English dictionary, some have it some don’t, funny enough my books publishing company’s standard reference doesn’t), or pass myself of as a lawyer.

Don’t get me wrong, I’m not suggesting one should take legal advice from anyone but a lawyer, I’m saying that what you think you are paying for with a lawyer on a real estate transaction is probably not advice, it is more likely paperwork. Advice costs far more.

So Mr. Cheap, why don’t we do an article on lender perspectives with regards to FSBO’s? Would be happy to do the research for you and get you the contact info to confirm the details I provide, you can write the article.

Cheers,

Nolan

22 bigben

I agree with none of this, my mother who can barely speak english sold her house privately 2 years ago for market value, and it cost her $1200 in lawyer fees. Agents are not needed and hopefully with be phased out in the near future. They are nothing more then middlemen eating into your profits.

23 Sustainable PF

I’d like to add what I mentioned at the Canadian Money Forum:

Many agents can help you identify the “dangerous” or “deal breaker” items in a home such as lead/galvanized plumbing or the interior plumbing that is prone to bursting/eroding. They can also help you with understanding things like knob and tube electrical or the existence of asbestos.

Our agent, having been a general contractor and builder foreman for 7 years was great as he pointed out many issues in homes and even steered us well clear of some houses after he got his flashlight out to check out the nasty dark recesses of some houses. He was also very knowledgeable in terms of helping us envision major reno items, such as changes to building structure and what the costs involved would be.

Agents are not always necessary, but they can be useful.

24 cindy wiener

Unfortunatly, you must not know what Dual Agency is. It is now called limited representation. However, I really means that the Realtor is representing both the seller and the buyer. It DOES NOT mean that the Realtor is going to be collecting twice the money.

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