Another common real estate question: What does it mean to be “Represented” by a REALTOR?

For more great info, check out: Realtor.org, Realtor.com, + PARealtor.org

 

As promised in October 2015, I have written another educational post on the topic of real estate.

If you are a regular PUL.com reader, you know that I typically like to discuss development, local happenings, and all things related to Philadelphia and its Suburban Towns. Let’s mix it up a bit again, shall we.

When we hear the terms “Represented” or “Representation,” it is referring to what is called “Agency.” In real estate, there are all different forms of agency: Buyer Agent, Seller Agent, Dual Agent, etc. As a buyer or seller (e.g. someone who is interested in buying/selling real estate at some point in the near or not-too-distant future), it is important to understand what these different roles mean as well as to learn why real estate agents even have roles at all.

Let’s start with a brief history lesson.

The fundamental principles of the agency relationship date back hundreds of years, and evolved from what was known as the “Master/Servant Relationship” under English common law. If we time warped a few hundred years back, servants owed their masters absolute loyalty. This undying loyalty overruled any/all of the servant’s personal interests, as well as loyalty owed to other people.

This concept is not all that different today, except for the fact that I’m not serving tea at Downton Abbey but I’m helping people buy and sell real estate in the Greater Philadelphia area. Not a huge difference, but one that should be noted.

Today, an agency relationship in real estate is when one person (a buyer or seller) delegates to another person (a real estate agent) the right to act on his/her behalf in a transaction. There are also certain duties that an agent must provide to his/her client, such as: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, and Reasonable Care & Diligence. It’s these duties that create a fiduciary relationship between a buyer and an agent, or a seller and an agent.

Simple enough, right? Good.

If you have bought/sold real estate before, I’m sure this is starting to sound familiar. If you have not, I hope it’s starting to make sense.

Okay, let’s break this post down PUL.com-style:

– “What is a Buyer Agent?”

Simply put, an agent who acts in the buyer’s best interest.

It’s when a buyer chooses to work with a specific real estate agent and broker (by way of a Buyer Agency Contract) who then works exclusively on his/her behalf, even if the buyer agent is paid by the seller (otherwise known as a cooperative transaction, or co-op for short).

When you buy a home, there are traditionally 3 options to consider: 1) Choose a buyer agent, 2) Choose to work with the seller’s agent (who would then also become your buyer agent, aka Dual Agent; we’ll get to that), or 3) Choose no agent at all (which is more common in a private sale or FSBO). Option 1 allows you the most freedom/flexibility as a buyer and entitlement to the fiduciary duties, Option 2 entitles you to limited fiduciary duties, and Option 3 entitles you to no fiduciary duties.

What’s interesting is that in most cases, Options 1 & 2 involve the buyer agent getting paid by the seller, whereas Option 3 will either involve the buyer paying a lawyer/attorney or just representing his/her own interests. This is not in all cases, but it is in most cases when you buy/sell a home in PA.

– “What is a Seller Agent?”

Staying with the simplicity theme here, an agent who acts in the seller’s best interest.

It’s when a seller chooses to work with a specific real estate agent and broker (by way of a Listing Contract, or Seller Agency Contract) who then works exclusively on his/her behalf.

When you sell a home, there are traditionally 2 options to consider: 1) Choose a listing/seller agent, or 2) Choose no agent at all (again, through a private sale or FSBO). Option 1 allows you the most freedom/flexibility as a seller, entitlement to the fiduciary duties, and the highest amount of selling/marketing exposure; Option 2 entitles you to no fiduciary duties and more-likely-than-not the least amount of selling/marketing exposure.

In selling a home, you typically pay for all real estate commissions (traditionally in PA, that amount is 6% and based on the purchase price). If there is both a buyer agent and a seller/listing agent involved in the transaction, that 6% fee is typically split in half (unless specified otherwise by the seller/listing agent).

– “What is a Dual Agent?”

I mean why would I give up on the simplicity theme here, as it seems to be working out so well. It’s an agent who represents both the buyer and seller in the same transaction.

Whoa.

Sounds a little intense, right? In all honesty, it can be.

Choosing to work with a dual agent puts both the buyer and seller in a tight spot, let alone the agent involved. Dual agents owe limited fiduciary duties to both buyer and seller, which means he/she must take a neutral stance in the transaction. In other words, it’s hard to get good advice when someone can’t really advise you.

So why then would anyone choose to work with a Dual Agent? Well, there are some instances where it is more common.

In the case of experienced buyers and sellers, they may even prefer to work with a dual agent as both parties already have a good understanding of the real estate process in PA and it may allow for a more seamless experience. It may even give both parties a sense of comfort due to that particular agent’s level of knowledge, experience, credibility, and professionalism.

So as you can see, dual agency can come into play sometimes, but most times it’s not what buyers and sellers choose to do. That is why single agency exists, to represent clients as either a buyer agent or as a seller agent. It gives both the buyer and seller the opportunity to choose their own agent for all of the various reasons mentioned above.

Bottom line, as I have mentioned in past blog posts, there is a lot at stake in real estate. Buying or selling a home is one of the most important transactions in a person’s life, and one that merits guidance from an industry professional. Someone who has earned a license, and who is qualified to help you make good decisions from start to finish. Therefore, you should expect the unexpected and choose your own agent when you have the opportunity to do so. It provides both freedom and flexibility, and entitles you to fiduciary duties.

Referrals have always proven to be one of the best places to start. If you do not know anyone in real estate, or are moving to a new town, city, and/or state, online reviews will guide you along your home-buying or home-selling journey.

I hope this blog post was educational, and my goal is to post more like it in the future.

Bridging the divide “is not just smart, it is inspired”

Skyline shot courtesy of VisitPhilly.com

 

What “divide” am I referring to?

The Schuylkill River waterfront of course, or the gap between Center City and University City. The quote above was borrowed from the article that produced this post, as I like to give credit where credit is due.

This may seem like a small issue compared to some of the other large ones Philadelphia is currently facing today: public education, competitive business taxes, aging infrastructure, etc. But … sometimes the smallest issues are the ones most overlooked, and in turn, create the biggest opportunities for growth.

A recent article on Philly.com went into brief detail about the transformative idea to put a large, structural cap over the 30th Street rail yards. You know, the rail yards you see while flying down the expressway on I-76 East (on the right, where I-76 & I-676 meet). Yup, that big thing over there.

In my world, those same rail yards are considered prime real estate.

Before we get into more of the details, here are some stats on Philadelphia’s 30th Street Station (which some local pols now refer to as William H. Gray III 30th Street Station):

– 3rd busiest Amtrak station in the US (behind NYC & DC)
– Over 10,000 passengers everyday
– 3 regional rail hubs (including access to Philadelphia International Airport)
– Walking distance to both Center City & University City

Now, some may say that spending all of that time, money, and effort on building new structures above an existing/busy area of approximately 175 acres would be a waste (especially with all of the other development opportunities that exist in Philadelphia today).

Please note, I would not be one of those naysayers; and here is why.

The 2 main reasons that Philadelphia is performing so well in 2016: 1) Center City, and 2) University City. The Navy Yard is a close 2nd, but UCity wins the prize.

So, if Center City & University City are the core of Philadelphia’s economic growth and prosperity in 2016 and beyond, wouldn’t it then make sense to hold accountable the land in that particular area to its highest and best use?

What I also like about this plan is that the rail yards would remain as-is, still carrying thousands of passengers every day between NYC & DC. The stakeholders involved (i.e. Drexel, SEPTA, Brandywine, etc) would be using the air-rights above the current infrastructure to see their vision through.

Some features include 3 walkways across the Schuylkill River (easily connecting thousands of daily pedestrians to both downtown areas), mixed-use buildings (i.e. offices, residences, etc), and new green space (i.e. parks, stormwater solutions, etc).

Not only would this project increase the surrounding property values due to its size and scope, but it would help connect Center City & University City in a more business/pedestrian-friendly way (e.g. those who commute and get around Philadelphia by foot, bike, skateboard, hoverboard, etc). Today, CC & UC almost seem like 2 separate downtowns.

For additional reading, here are 2 past blog posts that discuss 30th Street in further detail.

One of the most common real estate questions out there: What exactly is a REALTOR?

 

For more great info, check out: Realtor.org, Realtor.com, + PARealtor.org

 

Welp, folks, I decided to go the educational route with this post, because real estate is becoming a hot topic at the dinner table once again (… and at the water cooler, the coffee machine, the food truck, the dry cleaner, the barbershop, you name it).

If you are a regular PUL.com reader, you know that I typically like to discuss development, local happenings, and all things Philadelphia and its Suburban Towns. Let’s mix it up a bit, shall we.

What makes this post interesting is that most people throw around the term “Realtor” as if it were the only word to describe a person who has a career in real estate. I would say about 9 out of 10 times when people refer to my occupation, they say Realtor. Even though I am a Realtor and proud to be one, there is more to it.

While there is truth in saying that a licensed real estate agent can be a Realtor, not every licensed real estate agent is, or has to be, a Realtor. It’s an option, a choice, and a specific way to run an agent’s own business. After all, most real estate agents are considered self-employed “Independent Contractors,” which basically means that most agents can run their businesses any which way they want to; which can be both good and bad.

To start this post off right, let’s first define what it means to be a REALTOR (as per Realtor.org):

“The term REALTOR has one, and only one, meaning. REALTOR is a federally registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS and subscribes to its strict Code of Ethics.”

So, going back to one of my earlier points, being a Realtor is a licensed real estate agent’s choice. It means he/she has taken extra steps to make himself/herself a more accountable licensed agent by subscribing to approved ethical practices. In other words, he/she is agreeing to provide a higher level of customer service through honesty and integrity. Now, there are also real estate “brokerages” that mandate their agents become Realtor members, but that is a choice the brokerage made to ensure that the Code of Ethics is strictly adhered to.

Okay, now let’s break this post down PUL.com-style:

– “The Internet has drastically changed the real estate industry … for the better.”

My professional opinion is that the last 5 years have drastically changed the real estate industry … and for the better. Laptops, tablets, and smartphones have become real estate buyers and sellers’ best friends, and rightfully so. They have educated the general public about how real estate works, as more customer information is now readily available with just a basic online search.

Seriously, how easy is it to just Google real estate questions/terms on your phone; it’s almost too easy these days. Now, not everything you read online is 100% accurate, but there are enough resources and industry professionals readily available to answer any questions you might have.

Again, a good thing.

– “The changing real estate industry has increased the need for a better customer service experience.”

Absolutely. With all of the positive changes that have taken place in the real estate industry, it has increased the need for all real estate agents to deliver higher quality customer service to all of their clients. The real estate industry can carry with it a negative stereotype (believe me, I know; it’s what I do), as well as stir up old war stories from your grandparents, parents, friends, neighbors, coworkers, pets (just kidding), etc.

One of the main reasons why, about 25% of all licensed real estate agents are considered “part-time,” which means they already have a full-time job (which they are more proficient at than real estate) and real estate is used to supplement their income (let’s call it a 2nd job). That also means real estate is not their strong suit, and that can affect the overall customer experience. If you select a real estate agent to “represent” you, I am assuming that most people would prefer to work with someone who is an expert in real estate; considering the importance of buying, selling, or renting a home.

In reality, about 20% of all licensed real estate agents make $100,000 or more per year, and the median annual income for a real estate agent is about $40,000. In the local Philadelphia market, that’s about 6-7 closed transactions per year. $40,000 per year is nothing to sneeze at, the point is that a majority of licensed agents are not representing clients enough; it’s a tough business to break into. If inexperience is the norm, it can lead to a less-than-perfect experience for the client.

Use technology to your advantage, and choose an agent that you believe would be the best fit for you. Oh, and make sure they are a Realtor too. You know, for good measure.

– “Although real estate may be an experience that most only go through once or twice in their entire lifetime, each experience should be just as good as the last.”

Since most buyers and sellers go through a major real estate experience only one or two times in their entire lives, it’s not a service you need on a daily, weekly, monthly, or even yearly basis; which means it’s easy to overlook the big picture. You buy a home, you get bad advice, you make mistakes, your closing is a mess, and you tell all of your friends and family what a stressful experience it was. In today’s information-friendly age, it’s very easy to pull up online reviews from people who did not like working with their real estate agent.

The traditional real estate approach was always, “Oh, Uncle Bobby has his real estate license? I’ll work with him.” Now the approach should be, “Does Uncle Bobby practice real estate for a living? I’ll call/email/text and ask him a few questions first.”

Buying or selling a home is one of the most important (if not the most important) transaction of peoples lives. More times than not, it’s the most expensive thing you will buy/sell, it holds the most weight over how you live your life, and it requires the most serious commitment from those who choose to become homeowners.

Bottom line, there is a lot at stake in real estate. Therefore, you should expect to have a solid real estate experience and work with not only a Realtor, but with a Realtor who has produced many happy clients in the past. Run a basic online search first, it’s the smart thing to do.

I hope this post was educational, and my goal is to post more like it in the future.