Home Buying in 92691>Question Details

Sherbear, Renter in Laguna Hills, CA

When buying a home, is it better to use an agent or broker? What is the difference and advantage of one over the other? Thanks!

Asked by Sherbear, Laguna Hills, CA Tue Apr 26, 2011

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27
Sherbear,

I have two words for you:

Brokerage Fees...

Agents who work for an owner of a real estate brokerage (the broker of record) can pay a significant amount of the buyer's agent commission, the commission that YOU will have to pay as part of the total home purchase price, in fees to the brokerage for which the agent works.

I have seen these fees as low as 10% of the buyer's agent commission to as high as 50% and typically between 25% to 35% on average. (This fee can vary from agent to agent and brokerage to brokerage with potentially lots of hidden fees added in...franchise fees, monthly office fees, "technology" fees etc.)

What does that mean to you?

If we assume the average price of a home in your area is $500,000 and the buyer's agent commission is 3%, it's likely that 1% of the total home purchase price is going to your buyer's agent's broker as brokerage fees.

What does this hypothetical $5,000 get you as a buyer?

That's a question I asked my broker repeatedly transaction after transaction until I finally decided to open my own brokerage to avoid having my customers pay these fees which I felt were largely unnecessary.

In my opinion, there are only a handful of places in which a broker, as a supervisor of a real estate agent, adds real value to a buyer's real estate transaction.

1. The broker should be reviewing the agent's paperwork and documentation towards the end of a transaction to make sure that the paperwork is in order. (As a broker, I can tell you that this takes an hour or two at most.)

2. Providing a source of errors and omissions insurance which the agent cannot buy on his or her own. (Approximately $125 a transaction regardless of the purchase price.)

So, for a few hours of work per transaction and a $125 out pocket expense for insurance, the broker, in this example, will collect $5,000 from you.

Now, there are multiple things a broker CAN provide a real estate agent:

1. Fancy office space (Unnecessary if the agent is in the field showing and listing homes and owns a computer for preparing paperwork.)
2. An office phone (Unnecessary if the agent has a cell phone.)
3. An office fax machine (Internet based fax services are available for $10 a month.)
4. An internet connection (Unnecessary if the agent can reach a coffee shop with WIFI.)

And the list can go on and on...

Bottom line, for any agent/broker you choose, I recommend you ask the following questions:

1. How much of a total commission will I as the buyer be paying when I purchase a home. Where does this money go and how EXACTLY does it benefit me?

This next question will be much harder to get a straight answer. (It always was for me.)

2. How much of the total commission will I as the buyer be paying when I purchase a home is spent on brokerage fees. Where does this money go and how EXACTLY does it benefit me? How many hours of work and value added services does this fee represent?

Always know exactly where you hard earned money is being spent and why and how it really benefits you.

I hope this helps you make informed decision.

Let us know how your home buying experience works out.

Thanks,

Edward

--
When It's Time To Sell Your Home, Over Paying Is Over Rated
Sell Your Home Or Investment Property-$4,995 FLAT FEE
Full Service At A Reasonable Price

Edward Sorensen
Broker/Owner
Sorensen And Associates
DRE# 01724671
1 vote Thank Flag Link Tue Apr 26, 2011
Hi Sherbear,

I think most of the agents / brokers answered your question very accurately. In short, I've worked with good agents and bad agents, and good brokers and bad brokers. With regard to customer service, know-how, and serving your needs, the bottom line is that the "title" of agent or broker really doesn't matter much. As most agents / brokers commented, you really need to find someone with experience, know-how, and solid negotiating skills. It all comes down to interviewing several Realtors, checking into their credentials and experience, and then letting your gut will guide you from there. All the best!
Web Reference: http://www.HighcrestRE.com
1 vote Thank Flag Link Tue Apr 26, 2011
Theoretically, "using" an agent...is "using" a broker, since the (employing) broker is deemed with the task of supervising the agent. It is kind of like the difference between the sales & marketing staff compared to management. But at the end of the day, regardless of how many classes, how much education, how many certificates & awards either a broker or an agent has...It is all about how much you like & TRUST who you are working with on what could be the biggest transaction of one's life!
1 vote Thank Flag Link Tue Apr 26, 2011
There really is no difference when using a broker or an agent. It all depends on finding the right person for you. A broker just means they have taken additional testing so that they can open their own office. There are many agents that have more experience then brokers.
The most important thing is that you feel comfortable with the agent/broker you hire.
1 vote Thank Flag Link Tue Apr 26, 2011
Hi Sherbear,
How is everything with you? I see you are still looking for a home. Please remember me if you should decide to look in North Orange County.

The basic difference between a broker an an agent is that a broker takes a few more courses than an agent and passes the DRE exam with stricter regulations. The broker is held responsible for any agents working under them. You must have a brokers license to work in the state on your own. An agent must work under a brokers license; which is what the common situation is. You are protected and cared for just the same with an agent as with a broker as the agent also has a broker who represents you. So in essence you would have 2 people responsible for you instead of 1. A broker does not necessarily have more experience or knowledge than an agent. Anyone with ANY degree can take very few real estate courses and apply to take the brokers exam. So you could potentially be working with a broker who has never done a real estate transaction. Would that be better than an agent with 100 transactions under their belt?
Interview your agents and see who works best for your needs, weather they are an agent or a broker!
Have a great day,
Connie Bramble
Prudential CA Realty
714-337-8718
1 vote Thank Flag Link Tue Apr 26, 2011
A Broker is also an agent, but an agent must have more training or experience to be a broker. There is also a designated broker, Broker-in-charge or Principal broker (which ever they are called in your state) that is the boss of the other agents in the office. ALL listings belong to this broker, not the agents whos names are on the sign and that broker is the one who is responsible for them.

So basically the difference is training and experience, but some agents can have more experience than some brokers.
1 vote Thank Flag Link Tue Apr 26, 2011
it is always advisable to use an agent. The purchase of real estate is a complex transaction that requires disclosures and details that are not obvious to the general public. A relator works for a broker and is the front line of the transaction assisting both buyers and sellers.
0 votes Thank Flag Link Yesterday at 6:15pm
Hi There,
An agent always works for a broker and a broker works for themselves or another broker as an affiliate. Either way you are buying or selling your home through a broker or brokerage. As long as you trust who you are working with (broker or agent) you will be fine. Best of luck!

Thanks!
0 votes Thank Flag Link Yesterday at 6:10pm
Hi Sherbear
I am a Real Estate Broker and have been selling Orange County Real Estate since 1976.
It is important to find an agent or Broker that you believe will have your best interest in mind...and find you a great value.

Most of my business comes from past clients and their referrals...Please let me know if I can assist.
0 votes Thank Flag Link Wed Nov 14, 2012
Sherbear,

I think your best bet is to pick THE best agent/broker you can find - regardless of their license type. Possible advantages for a broker would be: 1. assuming their commission split is higher as Edward mentions below - that could be an advantage in the right situation; 2. brokers go through more education than an average agent.

But - it does not mean that a broker is better than an agent to help you. I am not effected by the two "advantages" I mentioned because I have the experience and education to assist and compete with brokers. And I'm sure a good amount of my colleagues on here can say the same.

Best of luck with your home purchase. I'm here if you need more questions answered.

Felix
0 votes Thank Flag Link Mon Jul 16, 2012
Eliminate the "middle-man" so to speak. Go with someone who is the broker of their brokerage. It's like asking which mathematician would you rather consult with on a difficult calculus program... The one with a masters degree or the one with a Ph.D? Likely your best best is the more educated individual, no? Disclosure: I have a broker's license.
0 votes Thank Flag Link Fri Jul 13, 2012
There is a very big difference between a “Broker and an Agent”.

One difference is that most brokers have many years of Real Estate experience. Many work or have worked at a large national franchise. Brokers earn the highest form of Real Estate Sales license that the State of California offers. A broker offers you years of prior salesperson experience and must meet higher educational standards. Some become licensed to allow them to legally employ sales persons.


Brokers are required to have a minimum of 2 years of full time Real Estate experience prior to sitting for the exam. Real estate agents are not required to have any previous experience.
A sales agent must work for a broker by law.


The passing grade for the Agent exam is 60% vs. 70% for a Broker to pass the exam. The test for a broker is 7 hours long and much more in depth than an agent’s test. While 65% of applicants pass the agent exam only 54% of experienced applicants pass the Broker exam.

Since providing clients with excellent up to date information and knowledge is both of our jobs, I think it is important to strongly consider your agent or broker’s education, experience and commitment prior to making a decision of who to hire to represent you. Naturally, a great fit is a necessary part of the equation.


So do yourself a favor “cut out the middle man!”, give me a call/text or email, and find out what an experienced “Real Estate Broker “can do for you.

OCJOHN

John Mussen

CA Real Estate Broker License # 01394449| NMLS # 379742
Past Awards-Re/Max REO Multi-year Top Producer, Member Re/Max Hall of Fame, Re/Max Chairman’s Club, Re/Max Platinum Club, and Re/Max 100 Percent Club.
“OCJOHN” John Mussen is featured the book World of Winners


Some quick facts. Number of licensees at peak in 11/2007 = 549,244. Number of licensees at end of 1/2012 = 429,883. One for every 31 California households about 1 in 3 is a Realtor. In the 2005 - 2006 fiscal year – 185,381 took the sales test. In 2010 – 2011 Fiscal year – 30,406 took the test (imagine what that means to a real estate education company). In January 2012 – 63% passed the sales test. In January 2012 – 54% passed the broker test. Fiscal year to date – 77% renewing broker licenses. Fiscal year to date – 58% renewing sales license.
Web Reference: http://www.ocjohn.com
0 votes Thank Flag Link Wed Apr 18, 2012
You probably won't notice too much of a difference between the service of an agent or a broker and of course there is no cost difference. A broker may have more experience and all agents have to work for a broker, but there are great agents that may give you even better service than most brokers. Its really comparing apples to oranges.
0 votes Thank Flag Link Fri Apr 13, 2012
Though it is more difficult to become a Broker, so it is assumed that they may be more helpful. BUT I have met Harvard Grads that could not help anyone with anyone and met High School drop outs that were genius and could guide you in any way you desired. Bottom line is that you want to work with someone you feel comfortable with and someone you trust. Just make sure that they are accomplishing YOUR objectives and NOT theirs. Good luck!!!!
0 votes Thank Flag Link Sun May 29, 2011
Hi Sherbear,

I'd like to respond to the concern that agents were out there telling buyers "it's a good time to buy." When you work long enough in this industry, you will work during the booms and the busts. Each type of market offers some opportunity and some risk....I never tell someone that "it's a great time to buy/sell" I don't view my profession in that manner. I believe that the buyer/seller is the one who can determine if this is the right time in their financial situation to buy or sell....I'm there to make sure they get the very best deal they can for the market we are in.

I also will talk about interest rates and trends and comps...the current information the client needs to analyze the situation...information is critical to make an informed decision.


During the boom...there were still buyers who wanted to buy, and I helped them do it....but certainly didn't push. This is not a good time to sell...historically...but there are those who want/need to sell. I see my job as working to get the best possible price and terms available. It's really the same concept as buyers buying in the booms. It's not my job to push anyone to do anything...but to give them the best iinformation I can so they can make a good decision for this time span.

I Hope that helps?


Karen
0 votes Thank Flag Link Sat Apr 30, 2011
Hi Sherbear,

Although I do know lots of very honest and trustworthy Realtors who will give you solid advice as to when to buy that best serves YOU and not THEM, there are still agents out there who, frankly, may not give the best advise for whatever reason. And unfortunately, this is true of most professions, including doctors, lawyers, etc.

When prices were skyrocketing back in 2004/2005, I know some Realtors were advising clients to buy, even though prices were high, mostly because the prices were still climbing steadily, so perhaps they thought that it was a good time to buy as opposed to 6-12 months in the future, when it looked like prices may climb even higher. Not that I'm justifying it, but I think that's what was happening in some cases.

With regard to today's market, I personally believe that it truly is a good time to buy right now. Since about 2005/6, prices have come way down, and it is the general concensus that prices are at about the bottom, or near the bottom. Is it possible that they could still come down a bit more? Sure. Or, they could remain steady. A lot too depends on the area, the amount of inventory in a particular development, the condition of the property, etc.

With that said, one of the most important factors is the low interest rates still on the market. They've stayed quite low for awhile now, but it is also widely believed that they will soon rise. So there are some buyers out there who are waiting 6-12 months for home prices to come down a bit more, but the "danger" is that rates may be substantially higher in a year, which would end up costing the buyer more in the long-run.

So in short, home prices are "about" at the bottom, and rates are extremely low, so I can honestly say that this is a good time to buy. All the best!
Web Reference: http://www.HighcrestRE.com
0 votes Thank Flag Link Fri Apr 29, 2011
Thanks for the replies, I guess I'll have to do more research at there seems to be some controversy.
It's hard these days to trust. I've had people tell me, "don't believe anything they tell you!"

For instance...I was just looking at the price history of patio home that was recently sold in The Village of San Juan.
Back in '06 it sold for 575,000, then less than a year later some poor bloke bought the thing at 643,000.
Looks like a flip perhaps?
Less than a year later, it was forclosed and sold again at 291,000
So I ask you... who told the buyer that "now is a good time to buy"?
Because anytime I've spoken to a realtor the past 8 years, they told me it was a "good time to buy" and even told me we could get in on an interest only loan.
When I look at these price histories, I just want to cry, and grateful I couldn't stomache paying a HALF MILLION dollars for a condo even if I could get manipulated in!
Explain yourselves...PLEASE, 'cause I'd like to trust again!
Thanks!
0 votes Thank Flag Link Fri Apr 29, 2011
I'll add one layer to the excellent advice you have been given.

If you are working with a Broker who is independent, such as one working out of their home, a small office, etc.. there is no one watching over this Broker and in the unfortunate event of an issue there isn't anyone in that office to go over their head. Your issues would then have to be directed to attorney, and the real estate board.

I am a Broker Associate. Meaning I have a Brokers license, but I work for a Brokerage. I must follow the office rules and be accountable to our Managing Broker. So there is another layer over me. I can't set my own rules.

An independent Broker has much more flexibility to offer you concessions on commissions if they deemed appropriate without having to get permission from their "boss".

Experience, education, and skill are very important and these come in all packages.
Web Reference: http://www.terrivellios.com
0 votes Thank Flag Link Wed Apr 27, 2011
Sherbear; I am not sure what this guy Edward is talking about. Even I got !!!!!!! sign all over my head. Some of what he says the fees and stuff is correct but these all has nothing to do with the buyer. BUYERS PAYS NOTHING BESIDE THEIR CLOSING COST. Seller is paying the agent/broker commission.. This Broker from Davis is talking about the Broker and Agent split and broker's cost to keep and run an Real Estate Brokerage office and the way it will effect the agent commision. YOU DO NOT PAY AGENT COMMISSION. 99.99% sellers pays the commission. Now if you sign a contract with the agent saying if the seller does not pay any commision to the buyer's agent then the buyer would pay XYZ amount is a different story. Whatever the broker deal is with his/her agents is nothing to do with the Buyers, period. I, even got confused by what this broker from Davis - CA is talking about!? for the last time YOU DO NOT PAY ANYTHING TO THE BUYERS AGENT. BUYER'S AGENT AND SELLER'S AGENTS ARE BEING COMPONSATED VIA THE SELLER, UNLESS OTHERWISE IS WRITTEN IN THE CONTRACT.
Again,
Good Luck

Shadi Kian
Broker
0 votes Thank Flag Link Wed Apr 27, 2011
Edward Sorenson,

Are you saying the commission a buyers agent receives from a transaction is actually paid for by the buyer? Or am I reading your post wrong?

Thanks.
0 votes Thank Flag Link Wed Apr 27, 2011
Hello Sherbear;
I am a Mortgage and Real Eastate Broker in South O.C. I see that you have some answers to your question. The best is to find a good Agernt or Broker to represent you. Meaning, if you decide to work with an Agent or a broker to help you finding your next home, you have to make sure they have good reputations. You can ask arround and also if they have website you can check their testimonials. As far as the advantage of one over the other, is that some agents sometimes can do knowingly or unknowingly to hurt your transactions, This can hardly happen in Brokers, why? because although that agent will be held responsible to the mistakes they may do, the majortiy of liabilities will fall in the Brokers who they are working under. In Brokers situations, it they make mistakes they are hurting thier own business and they are expected much more than Agent when it comes to legal remedies. So they at least try to stay more fucus and make less mistakes and be more honest since their punishment by law is much more sever. Yes that is right some Agents have more experience than some Brokers. Not all the brokers know what they are doing, so please check their background. You can visit my website http://wwww.deltamaxmortgage.com and go to my testimonial section and see what my other clients said about me. You should do the same with every Agents or Brokers that you would like to work with.
Good Luck
Shadi Kian
Broker
0 votes Thank Flag Link Tue Apr 26, 2011
Yes, it is true that a Broker has done extra training and taken a state exam in furthering their education. However, don't let that confuse you with experience. I know plenty of Broker's that have done less transactions than I have. I have taken all the Broker classes and decided not to take the exam because my fees would go up and I hang my license with a Broker of record anyways.
You need to interview local Realtors both broker and non because experience is what matters. A designation that I would look for if I were you is the ABR - Accredited Buyer's Representative.. That is a designation given to a Realtor/Broker who has done extra training with verified experience to represent and specialize in working with a Buyer.
Ask the people you interview if they are full time? How many years experience? How many deals per year?You need a agent with confidence and other deals in the pipeline so they are not desperate to get you closed. How do they go about negotiating a deal for you? How do they communicate with their clients? (does that work for you) Have they ever had ethics complaints against them? Do they have references you can call? Ask those people if they agent/broker delivered as promised.
Good Luck.
0 votes Thank Flag Link Tue Apr 26, 2011
Agreed...Tim did a great job explaining it...I would go with whichever agent/broker you feel most comfortable with. I've worked opposite some agents that were amazing and some brokers I couldn't believe they'd gotten as far as they have...this business is really, person by person...

Best of luck!
-Meredith
0 votes Thank Flag Link Tue Apr 26, 2011
Hi Sherbear:

As you might imagine, this is a topic that comes up now and again. Here's my response (there are 33 additional responses):
http://www.trulia.com/voices/Home_Buying/Is_it_better_to_hir…

Best, Steve
0 votes Thank Flag Link Tue Apr 26, 2011
Most Realtors in your local Real Estate Office will be "Agents". An agent must have a "Broker" and hang his license with that broker to conduct real estate transactions here in California. Brokers can also be a working "Broker/Agent" but usually they are what you might call the Boss or the Office Manager. The Broker is required to complete more training and testing before they can earn the title of "Broker". But, some agents have more on the job experience than some brokers.

My advice is interview as many Realtors as you feel necessary until you feel comfortable with that person. That person is going to be your best friend for a while and hopefully for life. This person is also your voice when negotiating with the listing agents. So pick someone you feel comfortable talking to and that you know has the experience to represent you.

Feel free to contact me if you have more questions and happy house hunting!

Mike
0 votes Thank Flag Link Tue Apr 26, 2011
Brokers have typically been in the real estate market fo longer. A broker is the same thing as an agent except they've done more classes and taken the State broker exam. If you want to see everything for sale in Laguna Hills go to our website http://www.bcre.com. We show everything for sale in Orange County!

Thanks,

Scott Bingham - Beach Cities Real Estate
Web Reference: http://www.bcre.com
0 votes Thank Flag Link Tue Apr 26, 2011
Tim did a great job in explaining it.
0 votes Thank Flag Link Tue Apr 26, 2011
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