So how do you choose a service provider of anything when you don’t have anyone to refer you to that provider? Obviously, you, and most others, have begun with the internet. The internet has its own issues as a research tool and we all know advertising is just advertising. So, perhaps the better question is what constitutes a good real estate agent.
First, be aware that real estate operates differently in different parts of the country and certainly in different parts of the world. So, I speak only to the metro Twin Cities real estate market.
These are the things you are buying (because buyers do not pay buyers agents, they are compensated by the cooperating brokerage system in our town):
1.Knowledge – of the housing stock, or current market conditions, of neighborhoods, of re-salability.
2. Negotiating skills – don’t forget this is the biggest financial transaction of your life. If the agent doesn’t have #1, they can’t possibly be good at negotiating.
3. Listening skills – helping someone buy a home isn’t about selling them anything. This is a counseling process and it begins with listening to what a buyer wants and educating them about the possibilities.
4. Communication skills – because this process of relocating and buying a home is so much about giving and getting information that is often fraught with problems and with potential for misunderstandings of small details, clarity of communication is essential.
5. Project management skills – It is critical that someone is managing the details of your transaction. How smooth the process will depend in large measure on the skill of the person managing these details for you.
How do you determine that someone has the above skills? Let’s start from the bottom of the list.
5. Project management – This is the easy one. Ask the question. “Do you have an assistant taking care of the details?” If they don’t, then THEY are the assistant. That doesn’t match well with the requirement to be out on the street gaining continual market knowledge.
4 & 3. Listening and communication skills – These are also pretty simple. Your every conversation with an agent should confirm your evaluation of their listening and communication skills.
2. Negotiating skills – This is harder to evaluate. But to simplify: the proof is in the pudding. If the agent you are considering is doing 5 or 10 times what the average agent is doing in terms of numbers of houses sold, then you can conclude that they are a good negotiator. By-the-way, the average agent does 6-8 deals a year! A nice part time job, but not one that will develop solid market knowledge and competent negotiating skills!
1. Knowledge – This is the critical one and the hardest to determine prior to hiring. Remember this: unlike your other service providers, from plumbers to doctors, who went to school from 3-10 years to become skilled at their professions, real estate agents have a few weekends in a licensing class to help them learn about compliance with laws. So, how is market knowledge, housing knowledge neighborhood knowledge developed? Strictly in the school of experience! It takes years of experience (10+) for the average agent to have seen enough property, dealt with enough transactions and been through enough market changes to understand the cycle of the market. HOWEVER, while experience is a necessary condition, for a good agent, it is not a sufficient condition.
In sum, here are the questions to ask when interviewing – and do NOT hesitate to ask for proof.
1. How long have you been in the business?
10+ years is the preferred answer
2. How many deals do you do each year?
At least 50 is what you want to hear. An agent needs to do 30+ deals to make it worth their while to hire an assistant.
3. What percentage of your business is based on referrals?
At least 60% is what you need to hear. As the numbers of deals go up this number could go down for some reasons unrelated to service, but you can bet if 30+ people every year tell others about an agent, that agent is doing something right.
4. What areas of the metro do you work in?
A skilled real estate practioner will not take you outside of their area of expertise, but an effective top producing agent will make it their business to familiarize themselves with multiple areas of the metro. Cautionary note: If you want to look in the city neighborhoods of Minneapolis & St. Paul, it is critical to have an agent who has extensive experience in the city neighborhoods. City valuation is more complex and can change block by block. Suburban valuation is more broad and therefore less complex.
Let me summarize by saying this: choosing a real estate agent is a process to which you should bring careful consideration. Hiring your best friend who just decided to get a real estate license is not a savvy thing to do.