Note: This is the second of a 3-part series on real estate myths. There are many misconceptions when it comes to working with Louisville real estate agents that are valuable to understand. If you have more specific questions, feel free to contact the LHB Editor.
Previously, we published Top 3 Real Estate Myths for Louisville Home Sellers to help clear up a few misconceptions that many hold regarding best practices in selling your home. Today we’re looking at a few myths that need busting regarding real estate agents. Think you haven’t been fooled? Let’s find out!
Myth #1: Louisville real estate agents make a ton of money.
The reason I chose this myth to start with is that it’s a very widely held opinion. Louisville Homes Blog published an article last year looking at real estate agent income for 2010. What we found surprised even me!
You can read the piece yourself but what it boils down to is that the top-performing 5% of real estate agents make close to 1/3 of all the revenue. The top 10% make 54.2%!
While the average gross income for a Louisville real estate agent in 2011 was $27,364, the median income among Louisville agents was much lower at $12,825. This goes to show just how much higher the incomes of the top producers affect the average.
» Important Note: Just because a handful of agents are making incredible salaries, it doesn’t mean that’s typical for the industry. Some agents work harder than others. Many are only part-time. All of these things factor into the reality of what an agent makes in real estate.
Myth #2: Agents have to do everything their client tells them.
The definition of agent, as applied to real estate:
“One who is authorized to act for or in the place of another; a business representative.”
A real estate agent may, or may not, be a Realtor. A Realtor must first be a licensed agent who then also adopts a higher level of service through the Realtor® Code of Ethics. Realtors are called to a higher standard, even though the client may not understand the difference.
When a client works with a real estate agent, their behavior is dictated by the applicable statutes and codes to “protect and promote the interests of their client.” Here are the three kinds of requests that Louisville real estate agents should not heed.
- Any request that is against the law. This includes Fair Housing statutes.
- Any request that may be legal but is not in the best interest of the client. The agent’s training and experience give them the authority to discern the difference.
- Any request that may be in the best interest of the client but is above and beyond reasonable service. Simply because the client wants to see 42 homes in one day doesn’t mean that is reasonable for the real estate agent. Or, in this case, the laws of nature.
» Important Note: As it does in most of life, common-sense rules. The best agents want to serve their clients so well that those clients will refer their friends, thus increasing business for the agent. But if a client’s request puts the agent’s license in jeopardy, then it isn’t reasonable for the agent to perform that request.
Ideally, the real estate transaction is a symbiotic relationship where both parties receive something positive from the experience.
Myth #3: Agents get referral dollars from lenders, appraisers, home inspectors and all the rest.
This one is fairly easy to debunk. By law, a real estate agent is only allowed to receive a referral fee from their own broker and no one else. That broker is only allowed to receive a referral fee from another broker. No other situations are allowed.
Here’s the most common situation where an agent can receive a referral fee. Agent Amy has some great clients who she helped purchase their current home several years ago. Now, this family needs to move to Wyoming. Why Wyoming? Have you visited Wyoming?!?
Anyway, Agent Amy can help this family by locating high-quality, full-time agents in Wyoming. Then she can interview them and select the best agent for her clients. In exchange for this service, the agent’s broker in Wyoming must agree to pay Agent Amy’s broker a referral fee. (All fees are negotiable by law.) These fees are perfectly legal.
» Important Note: Find a Louisville real estate agent you can trust. Word of mouth referrals is the most reliable way to find a trustworthy agent. If you hear someone say, “You scratch my back and I’ll scratch yours” then run for the hills. It’s not worth potentially derailing the new home purchase by using someone willing to skirt the rules in order to make a few extra bucks.