The short answer is, it depends.
There are many situations where it makes perfect sense to use a friend or family member to buy or sell a home. However there are many other reasons why it doesn’t. This article will hopefully help you better understand how to navigate this complicated and political situation and will also give you some tips on how to best handle it, to try and keep the relationship intact, if you choose to go with someone else.
There are some situations where it’s a given that you’re going to use them. You’re ok to give a direct family member the opportunity to gain experience – and by direct family member, I strictly mean a child, grandchild or a sibling. But all other extended family – aunts, uncles, cousins, and friends should not be given a free pass without answering the questions below. When you are working with a direct family member that does not have any experience, it’s important that you remain very hands-on and I highly recommend you have your Realtor’s Broker of Record review any Purchase & Sale Agreements before you sign.
In my opinion, there are 6 questions you need to explore to make an informed and wise decision. I’ve also created a handy flow chart to help with the process and let you know when you’re good to go, when to proceed with caution and when to pull the plug and look for another realtor.
Question #1 - Are they a full-time Realtor?
The first question you need to ask, is whether they do real estate full time. If they don’t, this is a clear cut situation – do not use them. Are you really going to entrust the purchase or sale of your biggest asset to someone who doesn’t do this for a living full-time? Why would you, when there are plenty of highly qualified and great agents out there where this is their sole function day in and day out. Would you trust investing your finances with an advisor that only does it on the side and actually is a teacher full-time? If your answer is that you’re worried about hurting the relationship – don’t, they have a full-time job and stable income. It’s not your job to fund their vacation piggy bank.
Question #2 - Do they have experience selling real estate?
Ideally you want to be working with someone who is selling at least 1 property per month and has been working in real estate for at least two years. Super successful agents are selling at least one property per week. Also, remember that years in the business does not equate to experience, if they’re not actually selling very much real estate. Experience comes with volume, not years.
People who haven’t sold real estate, don’t know, what they don’t know. They think they’ve got great marketing ideas or strategies, maybe they’ve bought and sold a few places themselves and think that gives them experience, maybe they’re a designer or have built homes and they think that’s the ticket to success. The reality is that real estate requires a broad range of general knowledge & skills, but true experience requires industry-specific knowledge that you don’t learn in courses and can only learn through conducting real-life transactions and many of them. Any successful realtor will know exactly what I’m talking about. No two deals are the same and you would be floored by how much can go wrong when buying & selling real estate.
Let’s take an example and give you an exercise! You’re selling your home in one of Toronto’s highly popular neighbourhoods. Houses seem to sell themselves and go for hundreds of thousands over the ask price. You set your offer date and get 12 offers! A few low ones, a bunch all around the same price and one lone-wolf winner that is $100k over the next highest offer! You’ve won the jackpot right?! Maybe not.
Here are just a few facts about their offer: 1) their deposit cheque is ‘upon acceptance’ for $25k 2) it’s conditional on finance 3) the closing date is in 120 days 4) there is a representation that the seller had permits for renovations they completed. Do you accept their offer? If you’re the realtor, how would you instruct your seller and what considerations should be taken into account? What questions should you be asking the buyer’s agent?
Feel free to let us know your thoughts in the comment section or send us an email and we’ll let you know if you considered everything you should. This is just one example of thousands that you’ll face when selling real estate. It’s not as straightforward as you may think and one wrong decision can cost you huge dollars. As the realtor, it can at best ruin your reputation and at worst land you in a lawsuit or your loss of license.
So what is enough experience? That’s a tough question to answer, but I would say at minimum they have done at least 12 transactions on both the buy & sell side. In addition to that, they’ve worked on a team or directly under the supervision of a top-producing agent. At our office we do round tables every team meeting where each of us shares what has gone on in our business, mistakes that we’ve made and best practices that we’ve learned. It really helps when you bring collective experience together. Agents need to check their egos at the door. If you’re brand new to real estate and you’re not working on a team or with a successful mentor, you’re a ticking time bomb and you better tread very carefully. I’ve been at this 10 years and still have monthly episodes where I feel the need to check-in with someone else on the team, to get a second opinion.
Question #3 - Have they worked with Buyers AND Sellers?
Buying and selling is the same thing isn’t it? No, it’s not at all the same thing. They are like having two completely separate and different jobs. They require totally different skill sets and totally different experience. I cannot stress this enough and again, experienced realtors will know exactly what I’m talking about.
When Buying a home, your realtor needs to be very educated in a variety of areas, to ensure they are protecting your best interests. They need to have detailed knowledge about how homes are built and be able to identify areas of concern, maintenance considerations and associated costs. When showing you homes, if they can’t point out basic issues like knob & tube wiring, asbestos, kitec plumbing, potential structural problems, signs of a buried oil tank, sump pumps, sewer back flow valves, sewage ejection pumps, efflorescence and so much more, that should be a huge red flag that they are operating outside of their expertise. Keep in mind that although real estate courses will cover what these issues are, they do not teach students how to identify them!
In addition to this, your realtor should be asking the listing agent a variety of questions to ensure all relevant information is being disclosed by the sellers. Remember Caveat Emptor or Buyer Beware. It is up to you and your agent to ask the right questions. If you ask, the seller must disclose. Lastly, there is the issue of buying different types of properties. Condos are a beast unto themselves and Toronto is inundated with horribly built & terribly managed buildings. Using an agent that doesn’t know the juice on a building you’re considering, could land you on a floor filled with prostitutes or rowdy Air BnB guests.
When buying a property, your realtor needs to have a cool head, effective negotiating strategies, an ability to read people and good experience understanding property values. It’s also very beneficial if they know all the ‘usual suspects’ in the area. What does that mean? Every neighbourhood has a group of agents that tend to list the vast majority of properties. In my neck of the woods, I know exactly who I can trust, who’s full of it, who hasn’t done their homework & who will be unethical at every opportunity. When in a competitive multiple offer situation, having experience is imperative or you risk either drastically overpaying on a property or losing out on house after house. Just last night I was in competition on a home with only one other buyer. They won and paid $100k over the asking price. An agent that lets their buyer offer that much, when only competing with one other buyer, screams newbie.
If we turn the tables over to what is required when Selling a home, your agent needs to be very detail oriented, organized, creative, strategic and savvy with marketing and social media. There are huge dollars at stake when selling a property – after all, it’s likely your biggest asset. Time and time again, sellers underestimate how much can go wrong and the dollars it can cost them. This is even more true in a competitive sellers market. Think your home is going to sell for top-dollar just because it’s located in a popular pocket in Toronto? Not necessarily! A mismanaged sale can mean the difference of a hundred thousand dollars if your agent is not experienced in handling multiple offers, pre-emptive offers and the industry best practices to ensure they’re protecting you. There are some big NO No’s when handling offers and this stuff is not taught in school.
This is by no means an exhaustive list of what is required to successfully buy and sell real estate, but it will give you an idea of how required expertise differs when buying and selling.
Question #4 - Have you interviewed them & compared to other Realtors?
I’m not suggesting you don’t give your brother’s best friend a chance, but be smart about it and interview him like you would anyone else. If he turns out to be the best person for the job, then by all means go for it. Also, it shocks me how many buyers do not interview agents. You are entrusting an agent to guide you through the biggest purchase you’ll ever make – it’s worth asking them a few questions first!
So how do you best structure the interview? The first rule of thumb, is let them run it. If selling, they should be coming to you fully prepared with a comprehensive Listing Presentation that highlights their experience, strategy, property evaluation, pricing recommendations and a marketing plan. If buying, they should be able to clearly articulate their process, knowledge, services and local expertise.
If they don’t come prepared with a well thought-out presentation, that’s a red flag and I suggest you move along. Here are some of the questions you need to ask:
- do you have any other jobs besides real estate?
- how long have you had your license?
- how many properties have you bought and sold in the last 2 years?
- did you work on a team or under a mentor?
- do you have a robust website, social media presence and a comprehensive marketing plan?
Do your own homework as well:
- ask them for 3 recent references
- check for public reviews on Google, Facebook, Yelp, etc. (As a side note, if you are planning to hire your local realtor that sells a lot of properties and you just assume they’re good because everyone uses them – check their reviews! If they don’t have any or they’re just high ratings, but with no comments or testimonials, that’s a warning sign.)
Question #5 - Are they an RCHB??
One of my favourite real estate books that I make every new realtor who joins our brokerage read, is Sell with Soul by Jennifer Allan-Hagedorn. She brilliantly dumbs it down on what it means to be an RCHB or a Reasonably Competent Human Being. RCHBs are generally perceived by everyone as being reliable, knowledgeable, ethical and hard working. If you’re going to work with a friend or family member, they better at least be an RCHB.
When you think of this person in their day to day life, there are 5 simple signs to look out for, if they’re an RCHB:
- They are always on time.
- They return phone calls, texts and emails promptly.
- They have error-free written communication.
- They are emotionally mature and not a drama-queen/king.
- They do what they say they’re going to do and don’t over promise and under deliver.
These are the basics folks and if your potential realtor is not delivering on these signs in their day to day life, that’s a sign to move along.
Question #6 - Are they giving you a commission discount or rebate?
I will be unpopular with other realtors here, but if they’re new to real estate, they have no business charging full commissions. Just because they have passed their real estate exams, does not mean they have the experience, knowledge and expertise to justify charging 2.5% on either the buy or sell side. It should be no different than other industries, where your compensation increases over time, as your experience grows.
So if you’re willing to give a friend or family member a chance that is new to real estate – they better be discounting their commissions on the sell side or rebating you on the buy side. Then it’s a win-win. You’re taking a risk using them, but you’re saving some money. They’re getting valuable experience and making some money at the same time. Win-Win.
Outside of being a newbie, many agents have (or should have in my opinion) a friends and family discount. Realtors can argue with me until they’re blue in the face, but there is PLENTY of margin available in commissions to provide a discount.
At a Glance Infographic
If you don’t have time to read all of the above or listen to the Podcast, below is a handy flow-chart which will help steer you in the right direction and remember, you don’t owe anyone anything. Are you really going to risk your most expensive asset to prevent hurting someone’s feelings? Give them a chance for sure, but do your homework and make them do theirs!
If you decide to use someone else and they choose to let it affect your relationship, then that is THEIR problem and clearly the relationship wasn’t very important to them.