New Foreign owners, and those from the Mainland US, often don’t have knowledge of the complexities and differences of real estate transactions in Hawaii. It’s up to the REALTORS® in Hawaii to educate these new owners on the process to ensure a smooth and stress free transaction.
Ethics in Real Estate
We often hear: “I wish someone had explained to me the benefits of working with only one real estate agent at a time, and how real estate agents are paid.” Some foreign buyers think working with different agents at the same time yields better results. However, that’s not the case. Most real estate agents get their listing information from the same source, the Multiple Listing Service (MLS).
For example when you go to an Open House, the hosting agent asks if you’re already working with a REALTOR®. If you say yes, they will honor that relationship and not solicit your business. If you’re not currently working with an agent, this is a great opportunity to interview them and find out if you’d like to work with them. Whether buying or selling, you choose one agent and that agent represents your interests in the transaction and will work hard to help you get the best deal possible.
How Are REALTORS® Paid?
Another issue that is often misunderstood is who pays the real estate agent’s commission? There are usually two parties to a transaction – the seller (represented by a listing/selling agent) and the buyer (represented by a buyer’s agent). It's quite common for the seller to have a listing agreement with their agent and agree to pay them a commission. In a normal transaction, that commission is split 50/50 between the buyer’s agent and the seller’s agent. Occasionally, there are agreements between the buyer and their agent where the buyer will compensate their agent.
National Association of Realtors (NAR)
In the U.S., most real estate agents are members of the National Association of Realtors (NAR) and are bound by a strict Professional Code of Ethics. The National Association of Realtors has a system of grievance and if a person isn’t satisfied with the performance of its members, they can file a complaint against the errant member. So whether you are buying or selling, it’s CRUCIAL that you find ONE great licensed agent who’s a member of NAR to work with and represent your best interests in a real estate transaction. Non-members aren’t bound to the same standards and ethics.
At Locations LLC, we have a Buyer’s Agreement that buyers sign when they’ve chosen the agent they wish to work with. This document spells out the scope and obligations of both parties. By signing the Buyer’s Agreement, the buyer is “hiring” that particular agent to represent them and the agent promises to give their 100 percent effort when working for the client.
What happens if the relationship sours? If you’ve decided you no longer wish to work with that agent, just give notice in writing that you want to end the Buyer’s Agreement and you’re free to work with another agent. When ending the Buyer’s Agreement, be upfront and honest with the agent first. This is their livelihood and their reputation, and posting negative comments in social media before speaking with the agent can cause a lot of damage.
How Do You Find a Great Real Estate Agent to Work With?
One of the best ways to find a great REALTOR® is asking family and friends for referrals. Of course, if you’re a foreign buyer it’s a little more challenging. In my case, since I didn’t know anyone when I first arrived on Oahu, a friend referred us to a REALTOR® on Maui who then introduced us to his friend on Oahu. Looking back, our biggest mistake was skipping the interview process and missing the opportunity to speak with other agents and enquire about their experience, areas of expertise and see if their personalities matched ours. These days, research over the Internet is easy and you can email a REALTOR® on the other side of the world and get an answer quickly.
The point is, even if family or friends refer a real estate agent, it’s imperative that you take the time to meet and interview the agent, go over their qualifications, experience, expertise and knowledge. Bear in mind the average real estate transaction takes about 45-60 days to close, sometimes longer due to unforeseen complications, so it’s important that your values, personalities and goals mesh. This may be the largest purchase of your life so it’s very important that you like your agent and trust them to represent YOUR best interests in the transaction.
Qualifications and Requirements
Of course, you want your real estate agent to be professional, honest, and ethical with strong integrity and character, but the agent you choose to work with must also be responsive and reliable; answer or return phone calls and emails in a timely manner, walk you through each step of the process and clearly outline every document you are signing.
I would also add another essential requirement – how much experience and knowledge do they have when it come to the local real estate market? Are they able handle any unforeseen complications in the transaction? Do they understand the nuances and differences of real estate in Hawaii? You want to deal with a professional, not someone who is selling real estate on a part-time basis. Ask if the agent owns their own home? What about investment properties for themselves, do they have any? This type of information indicates the experience they have when buying and selling real estate on a personal basis.
Different Types of Agency
What is an Agent? Technically a REALTOR® is a licensed agent you hire to represent and protect your interest. So if you are a buyer, you hire a REALTOR® to represent you, find a property that matches your requirements and get you that property for best price with the most favorable terms. If you are a seller, then you hire a REALTOR® to sell your property and work to get the highest price with the most favorable terms.
Clearly, the buying agent and the selling agent have different objectives as they represent opposing parties. But it’s the agents’ duty and responsibility to reach a compromise and attain the best price and terms for their clients.
On occasion, an agent might represent both the buyer and the seller. This is called dual agency and it’s often fraught with problems because it’s almost impossible for an agent to represent both the buyer and seller impartially. Some buyers mistakenly believe that working with the selling agent ensures they get a better deal, like getting a discount or access to information that gets them the best price or terms.
However, in reality, dual agency is the cause of most consumers’ complaints against REALTORS®. I would strongly recommend buyers hire a different agent to represent their interest. Remember, the seller normally pays the commission, so why not get an impartial and professional perspective to ensure you get the best deal and terms.