When is it a good idea to hire your real estate friend to help with a Home purchase or Home sale? Safe to say, almost everyone knows someone with a real estate license . So “ Is it a good idea to hire your real estate friend for a real estate transaction involving dozens of serious legal issues and hundreds of thousands of dollars ? And of course, what do you do if you have two, three, four or more real estate friends with a license to sell real estate. Which real estate friend should you pick? Here are a few tips on working with Real Estate friends.
With the Real Estate schools literally packed with thousands of individuals taking the six week course to get a real estate license almost everyone has a FRIEND with a real estate license. The friendly girl at the Starbucks where I get my morning coffee has a license and has offered to help me find me a house. My friend Laurie, has a brother who does Real Estate part time, my trainer just got his license and I just met a nice guy at my open house who just got his license 5 days ago; he is out showing property and advising buyers later today, lucky buyers !!
Here is a very important fact, As much as we love our friends and appreciate their precious value in our life; Real Estate is learned profession; experience and talent is of utmost importance, consider this; do you know a single individual who would hire their friend to do a life threatening surgery when their was a more experienced professional available for the job ? probably not...but for some reason, Home buyers and Home sellers are trusting the most important investment of their life to their real estate friend who in many cases fairly recently finished a six week course OR does Real Estate PART TIME, interestingly , the real estate course covers almost NONE of the hundreds of issues or negotiations that typically need to be addressed in a Real Estate transaction.
There is ONLY one time, when it’s a great idea to hire your Real Estate friend to advise , counsel and guide you through any real estate transaction and that is when your real estate friend is
“ respected, experienced, talented and absolutely the most qualified Realtor for the job “. There is absolutely no other time that a “friend” should be considered for a very serious job that involves one of the most legally intensive, data rich, experience driven jobs in business.
Why is hiring the most qualified Real Estate agent of critical importance?
In all instances without exception, IF the real estate agent or real estate agent friend you select is NOT the MOST qualified real estate agent for the job, at the very minimum you are #1. risking thousands of dollars on the purchase or sale of your home, the #2 potential loss of the friendship and the #3 increased possibility of future lawsuits.
What to do when deciding between two or more friends that are licensed Real Estate agents.
Understanding many buyers and sellers will move forward with a friend; regardless of the increased risk and any solid points in this article; I will suggest a few tips.
#1. pick your very best friend, some would say "bestie" the one friend you have the most fun with , the one you would literally GIVE $10,000 to $200,000 to on any given day of the week, not loan thousands $$$$$$ to but give … because that is what you are risking anytime you hire less than the VERY BEST REALTOR for your real estate transaction.
#2. The real estate friend you hire should also be one that no matter what conflict may arise during the transaction... or as a result of some conflict during the transaction, you will be able to forgive them. Consider this, after the fun of home shopping is over, legal issues and monetary issues come up during the transaction and your friend may be at odds with you or you them. For example they may not be successful selling your home for the amount you wanted or purchasing the home you wanted at the price you felt was fair . There may be a conflicts with one of hundreds of other issues that come up during preliminary contract negotiations or during the transaction period. In addition, #3. select the fun- loving friend who has earned your respect by demonstrating expertise, talent and integrity in previous transactions and situations you’ve seen them negotiate; because like a TRUE friend, a Realtor’s #1 MOST important fiduciary-priority is to put the client first, Let me reiterate, The Realtors Fiduciary- goal -obligation is above all else is to work towards the client's highest good. I emphasize this because home sellers and buyers rely on the wise and experienced counsel of their Realtor during these incredibly high stakes transactions and the commissions involved are high, so the Realtor must be beyond allowing any amount of money affect his / her wise counsel, in terms of the purchase or sale of a property. If all the boxes above are checked, Great ! the final criteria #4 is. Pick the Real Estate friend you would want to go into business with because in a sense that is what you are doing, ‘ going into business with a friend as your professional guide and counselor to acquire or sell a very expensive investment.
How much should my Real Estate Agent friend be paid?
Now that you have decided to do your friend a favor by hiring him/her over a potentially more qualified professional; what amount of a discount is fair, if any? I think any discount request is a personal decision, assuming you are hiring a friend or family member out of a sense of love and kindness ...and not because they are the best most qualified, experienced agent for the job, I would have the compensation question addressed upfront. One of my clients hired his niece to be his real estate agent (she worked in the business part time ) . Based on relevant sales, he overpaid for the home he purchased with her guidance by nearly $50,000 this was also demonstrated when some other factors did not work out and he had to sell the home a few months later, at a total loss of almost $75,000. The niece received a full 3% commission for representing the buyer (her cousin) and because she needed the money, my former super sweet client did not ask for any of the funds towards closing cost or purchase price. So in this case; with the family member loosing $75,000 on the purchase, what amount would have been fair for her to credit of her commission or return, if any ??? again it would be a personal decision. In the case above it would have been far cheaper for my former client just to write the niece a check for $60,000 rather than hire her. Typically a buyer's agent will receive a 3% commission of gross sale price , a portion of that almost always goes to the broker (the real estate company) unless it is a discount broker that only charges their agents a relatively small flat fee per transaction. Many newer and part time agents work under these discount brokers so if your Real Estate friend works with a discount broker they should have more flexibility in offering closing cost credits and funds which can be used, should there be an impasse between buyer and seller during negotiations. In either case, since you are hiring a friend, depending on the closeness of the friend, the friend might offer a commission of 1.5% rather than 3% to a minimum of 1% of the 3% would be reasonable if they are working with a discount brokerage house; If your real estate friend is working with a NON-discount brokerage, a discount of between 1.5% of the 3% to 2.5% of the 3% might be considered reasonable. Of course you may not want to ask your friend to share the love and of course your friend may not offer. Either way, have this discussion upfront, this is just the beginning of items to come up, so might as well get this out and cleared up first.
I have heard dozens of stories of Home sellers hiring their friends with the same results. Losses of thousands and thousands of dollars below obtainable net proceeds. The very best Realtor, most talented Realtors know how to earn you TOP dollar for your home...Buy you're friend dinner, buy them a car, send them on a Caribbean cruise because all those options are very likely less costly than having a lessor experienced agent represent you in the sale or purchase of your most valuable investment.
Summary
I write the article above because behind the scenes, I have seen and heard of so many nice people trying to do the “right thing” by hiring friends or family members, not considering all the legal and detailed complications involved in the selling or buying a home. Often times dear friends are lost or the relationship severely strained... or I hear sad stories of overpaying for a home or underselling or getting short changed on one or more of dozens of other issues involved in buying or selling an expensive home. Most times the buyer or seller does not realize the mistake and may think everything is perfect. Bottom Line, The only time I would hire a friend for ANY job is because they are the most qualified for the particular job. Any true friend will want you to have the best talent behind you! and any licensed Realtor will respect and appreciate your carefully considered decision. You can sever a relationship with a Real Estate agent who is under -performing but not a dear friend. I hope this helps .. and Good Luck !!
Please feel free to call anytime, Michael Chaisson I am at 480-450-4632 - Specializing in luxury and architecturally significant homes in Scottsdale, Paradise Valley and Arcadia Arizona.
