Educating Rico: Finding a good real estate agent

Marketplace Staff Apr 20, 2007
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Educating Rico: Finding a good real estate agent

Marketplace Staff Apr 20, 2007
HTML EMBED:
COPY

TESS VIGELAND: Perhaps you’re one of the lucky people in the real estate market who’s buying a home rather than getting kicked out of it. Good for you. You’ll find it’s so nice to have someone in the know by your side to guide you for the process. In this second part of his series about home buying, our own Rico Gagliano discovers how to be smart about picking a real estate agent and how to get that agent to really work it for you.

RICO GAGLIANO:
Last time, I my pal, Rick, had just arranged financing for a new home. Since then, he’s found a 950 square-foot loft in downtown LA. He hasn’t signed the papers yet, but he drove me over to check it out.

RICK:
This is guest parking, and it’s all full. I suspect, oh, that [bleep] took two spaces. That’s not cool. A Mercedes, too. Oh, what’s keyed that car? He can afford to get it fixed. It’ll send him a message.

GAGLIANO:
Anyway.

RICK:
Anyway, I’m sorry.

GAGLIANO:
You can’t blame him for being a little punchy. Now, check this out. To buy a parking space in the garage costs $15,000.

RICK:
What?

GAGLIANO:
Now, when you roll that into a mortgage and when you consider the place is half a million, suddenly, this isn’t quite so insane.

RICK:
But it is insane.

GAGLIANO:
True. But for a swank loft in LA, half a million plus 15 grand a park is a bargain. In fact, finding it turned out to be quite a task, which brings us to part two of buying your first home, the real estate agent. A good agent works hard for the money. Over coffee, Rick and his agent, Jenny Gaio, told me about the search.

JENNY GAIO: He wasn’t sure exactly what kind of property he wanted, so I cast the net wide in his price range to show him single-family homes or income properties, a duplex or a triplex, where he could live in one unit and collect rent on the other.

GAGLIANO:
What did you end up finding?

GAIO:
An income property. Two smaller Craftsman houses built on one lot. Excellent price. It was probably about $50,000 under market.

RICK:
And the last owner who had bought them in, like, 68 had made them incredibly butt ugly. Wood paneling over every conceivable surface on the inside.

GAIO:
Including the closets.

RICK:
And because of that, it was going for a cheap rate.

GAGLIANO:
No problem, right? Except one. As with lots of first-time buyers in expensive cities, Rick’s parents were fronting him a big down payment. And this home, they didn’t like.

RICK:
Long story short, it was gonna cost about 30 grand to get the place up to the sort of standards that my parents who live in suburban upstate New York, our used to thinking as how you should live.

GAGLIANO:
So Jenny had to go back to the drawing board and came up with something the whole family could love.

RICK:
This is my new loft. In two weeks time, it will be mine.

GAGLIANO:
Yeah, Jenny Gaio. But, you know, it was easy for Rick to find an agent of her caliber. He’d been friends with her for 10 years. How do the rest of us choose? To tell us all about agents, I’ve call upon Elizabeth Razzi. She’s the author of The Fearless Homebuyer, which is what I hope one day to become. Hi, Elizabeth.

ELIZABETH RAZZI:
Hi there.

GAGLIANO:
So, firstly, what can I expect an agent to do for me?

RAZZI:
A good real estate agent will earn at their very hefty fees. That’s not just sending you e-mails, telling you, here’s what’s on the MLS. Let me know if you wanna see anything.

GAGLIANO:
What’s the MLS?

RAZZI:
Multiple Listing Service. It’s a database where real estate agents host their homes that are available for sale and offer to share a commission with whatever real estate agent brings them a buyer.

GAGLIANO:
OK.

RAZZI:
You want somebody who does more than just search that. You want somebody who will sit down, go over your budget, may be, and figure out, here’s how much money you need for a down payment. They can help you negotiate. I mean, that’s, I think, the most important part of a whole deal, is having somebody to help you negotiate. Because once you fall in love with the house, it really helps to have somebody who says, OK, well, I think maybe the value is not what they’re asking for.

GAGLIANO:
Now, is there some resource you can go to, the equivalent of like a Morningstar rating for agents?

RAZZI:
That would be a great thing. The JD Power certification of real estate agents. But there isn’t such a thing. And maybe you can make a lot of money doing it.

GAGLIANO:
Yeah.

RAZZI:
There are Web-based companies out there that will refer you to real estate agents, and they’ll say, we’ve screened these people. You really can’t rely on that because any real estate agent can sign up for these referrals. Really, the only way to find a really good real estate agent is the old-fashioned way, getting referrals from other people.

GAGLIANO:
Do you need to narrow down your choices of, like, the type of home you want and the neighborhood? Will that help narrow the agent search?

RAZZI:
What you wanna do is get referrals from people who have bought a home that’s similar to that one that you’re looking for.

GAGLIANO:
OK. Now, Rick, as you heard, said that he wanted to cast the net wide. I actually know that at one point, he was considering everything, from, like, a loft to buying a pre-fob dome house and putting it on the desert somewhere. Everything worked out OK for him, but it seems like you’re saying that’s not so great.

RAZZI:
Well, everybody kind of starts there. You really need to spend some weekends just driving around because there is no real estate agent out there who can help you equally well with the domino desert and a little cottage by the beach or the high-rise condo.

GAGLIANO:
All right. How are agents paid?

RAZZI:
That’s a tricky thing.

GAGLIANO:
Oh.

RAZZI:
Generally, by the person selling the home.

GAGLIANO:
OK, now…

RAZZI:
But that makes no sense, I know.

GAGLIANO:
Right. Isn’t that instantly a conflict of interest if you’re a buyer?

RAZZI:
Well, it should be. The problem is buyers tend not to have any money. And so the real estate agents look to the sellers. Take care to make explicit with the agent that’s driving you around. Let’s go through some paperwork if we need to, but I want you representing me and keeping my secrets.

GAGLIANO:
You just mentioned if you want paperwork, you mean a contract?

RAZZI:
You might wanna sign a buyer’s broker contract. And what you should do is make explicit that you want to see all the homes available. The homes that come up in bank from closures, you wanna see homes their competitor’s offices put on the market, everything.

GAGLIANO:
Now, is it possible to get a good home on your own without a real estate agent?

RAZZI:
Sure, it is. But at the same time, especially for first time buyers, it can be pretty tricky. How much should you put in the down payment? Who’s gonna hold the money? These all can be done without the aid of a real estate agent, but a lot of people really would like that handholding.

GAGLIANO:
Elizabeth is right. For folks like Rick, a real estate agent is as much as psychological investment. And as a financial one…

RICK:
There was this person who was this sort of window do it, and may be, or it wasn’t completely impossible and lots of people have done it. Because there’s part of my brain that still thinks, like, I shouldn’t be doing this because it is a massive amount of money.

GAGLIANO:
Next time around, Jenny helps Rick cut the massivest check of his life and feel OK about it.

In Los Angeles, I’m Rico Gagliano for Marketplace Money.

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