We have used the best apps to find a home and picked out a place that we like. We’ve interviewed a few agents to see who is best qualified. Then we remember that a friend is a Realtor and could help us through the sale process. Is that a good idea?
Do You Trust This Person With Your Money?
You know your friends a lot better than you know a stranger, which can be a double edged sword. While you know the good qualities about the person, and why they are your friend and acquaintance, you probably know about their bad tendencies too.
I know quite a few real estate agents in my hometown, and I certainly would not trust all of them with my money. A home purchase is one of the biggest financial transactions you will ever undertake in your life. When you are spending hundreds of thousands of dollars and a negotiation mistake could cost you tens of thousands of dollars, you need to really trust the person guiding you through the transaction process.
Before you jump and hire your friend, think about your history together and their history with money. If they are financially responsible and trustworthy, move on to the next question.
Will They Act Professionally?
A friend may be a great person to party with in Las Vegas or spend the day with on the golf course, but drinking, partying, and playing games well does not qualify someone as a great real estate professional.
What does qualify someone? Professionalism, courtesy, communication skills, negotiation abilities, and knowledge of the local real estate market.
I had one friend who I always enjoyed partying with. He worked as a real estate professional, and was very successful. However, that didn’t mean I trusted him to be professional in my transaction. When I needed an agent, I looked elsewhere.
It is easier to be blinded by your friendship when choosing someone you know as an agent, but it is very important to be as objective as possible when you decide who to work with. Remember, they will still get paid by you, usually quite a lot, for acting as your real estate agent. Don’t pick someone who will blow your needs off because they have known you a long time.
Will They Put Your Interests First?
Any real estate agent has a legal and ethical obligation to put their client’s interest first. However, as a study in Freakonomics tells us, that does not always happen in practice.
This video gives some great, interesting information about selling a house. Buying a home is a different story. You are hiring an agent to get you the lowest price possible, but the agent is incentivized to sell at a higher price. This is true with all agents, not just friends.
But a trustworthy agent knows that even if they help you lower the price by $10,000, their commission is only down by about $300, a small percentage of the total cost. And if they do a great job for you, you are likely to refer them to other people where they will make that $300 ten times over again in just one transaction.
Make sure your friend is a great agent and a trustworthy one who will put your financial interests first when you are looking to buy your new home.
Depending on how well you know someone, it isn’t always easy to be the best judge of character. However, it is easier to decide if you can trust a friend or acquaintance than a stranger you just met, so look at your friends first, but try to judge objectively.
No matter how good a friend your friend may be, problems do occur when working with friends. Your friendship may give your agent friend an opportunity to push your needs aside due to other obligations because they know you’ll forgive them. Friends are also harder to fire.