This article has been written by Margaret Maynard, pursuing Paralegal Associate Diploma and has been edited by Oishika Banerji (Team Lawsikho).
It has been published by Rachit Garg.
Table of Contents
Introduction
Specialists are found in all occupations, and real estate has many areas where real estate agents can specialise. A specialty helps focus the professional’s attention and marketing efforts on a specific type of client, and he/she is not usually required to exclude other types of clients. With technology driving processes, real estate has become more of a service business versus a sales business than ever before. This article touches on various aspects of the real estate professional’s role in the real estate business in the United States, from types, fees, and specialisation categories to finally considering how specialisation can affect outcomes.
Brokers and agents
Brokers are most commonly found in the real estate, finance, and insurance industries, as well as the food, chemical, and manufacturing industries. They may represent either a buyer or a seller and are paid by the party who hires them. They perform only a few of the marketing flows, seldom carry inventory or assume risk, and their main function is to ease buying and selling,that is, to bring buyers and sellers together and negotiate between them. Real estate transactions in the United States usually involve a listing broker working for the seller and a cooperating broker working for the buyer. They typically do not have fiduciary or legal duties entrusted to them, as a lawyer or stockbroker may have.
The transition of businesses from the traditional way of advertising to that of digitally enhanced one with ubiquitous internet access at home, school, work, and the library has brought about irrevocable changes in the way we as consumers earn, learn, travel, shop, buy, and sell.
While technology has to a large extent displaced the small and middle level travel agent shop and various other small businesses, real estate agents are still very much around and are, from all accounts, anecdotal as well as statistical, thriving. Employment of real estate brokers and sales agents is projected to grow 5 percent from 2021 to 2031, about as fast as the average for all occupations, according to the Occupational Outlook Handbook: published by the U.S. Bureau of Labour Statistics (bls.gov).
Clarity on terms real estate broker, agent and realtor in the United States
If you are planning on buying or selling a home in the United States, you will most likely engage the services of a real estate agent, broker, or realtor. Though all of these real estate professionals are licensed to help you buy, sell, or rent a home, they are distinct from one another in their qualifications and their footing in the industry.
★ A real estate agent is licensed by the state to help people buy and sell real estate, and is paid a commission when a deal is completed.
★ A real estate broker does the same job as an agent but is licensed to work independently and may employ agents. Brokers are paid on commission but also get a percentage of the commissions of agents who work for them.
★ The term realtor is not often used by people and correctly it should read as and refer to REALTOR®. A realtor is a member of the National Association of Realtors (NAR) and may be an agent or a broker, among other professions in the industry.
Role of a real estate agent
Reduced transaction costs in property sales are largely due to real estate agents. The legal framework controlling the contractual connection between the principal (the house owner) and agent has been demonstrated to affect the incentives they confront and the impact they have on selling price and time on market.
Along with the use of technology in their initial home search, prospective property buyers and sellers routinely use the services of a real estate agent, and only in later stages of the transaction do they meet with a real estate attorney to check on liens, encroachments, and restrictions. Real estate agents can help with this and check municipal records for information.
Despite no immediately apparent problems in a home, most buyers and sellers appreciate the help an agent can give them. For instance, agents attend home inspections, negotiate repairs, and go through documents such as titles, title insurance, and surveys with buyers. For sellers, agents will list a property on the MLS, which is a multiple listing service, conduct open houses, network, and market the property. Thus, real estate agents can simplify the process of property buying and selling, and an expert in a particular area can ease the transaction even more.
Real estate brokerage fee
Traditionally, the cost of most real estate transactions was tied to the value of the home rather than the value of the services provided by the real estate agent, which could be well worth the fee. The real estate broker receives their fee either as a commission or as a flat fee, the latter being a newer concept that has gained considerable ground. Within the traditional commission model, there are the options of full-service brokerage or a discounted commission with a reduced service package.
2.5–3% is the listing fee that traditional brokerages usually charge to sell your home (plus a buyer’s agent commission of a similar amount), bringing your outgoing commission expenses up to 5-6%. Let’s take an average house worth $500,000.00. When you list with a traditional real estate agent that has a commission based on the value of your home, you can expect to pay your listing agent at least $15,000.00 in commission and the buyer‘s agent at the other end of the transaction, bringing your total to $30,000.00. Each agent pays about half of the 3 percent fee to his or her firm. The selling agent keeps just 1.5 percent of the final sale price.
Specialisation in the real estate agent’s role
It is necessary to note that in situations where a real estate agent is utilised in a real estate transaction, the role it has to play is that of an agent, thereby facilitating the conduct between the buyer and seller. This particular service is what attracts homebuyers when they are purchasing a new home.
It is common knowledge that property owners wishing to sell their home will hire an agent to help them complete the sale quickly. A prospective house buyer will want the assistance of an agent who gives them hope that a suitable property can be found while keeping the cost of the transaction to a minimum. Real estate experts are engaged for their experience and specialised knowledge, but it is apparent that the level of productivity and experience of such people will differ greatly.
What specialisation does is allow a prospective buyer or seller to hire particular types of real estate agents who are well versed with specific types of property, housing laws, and how to govern buyers who are in niche categories and have an interest in luxuries.
Designations
★ NAR’s Green Designation
This designation teaches agents how to gain a competitive edge when marketing green homes. Real estate agents learn how green properties are marketed differently than traditional homes. Green issues, research, and resources taught include how energy-efficient and sustainable features impact real estate.
★ Seniors Real Estate Specialist (SRES)
This designation caters to real estate agents who want to sell homes in age-restricted communities. Professionals study buying, selling, relocating, and refinancing residential and investment properties. They learn how to help seniors prepare for life-changing decisions and issues related to real estate, such as pensions, retirement, and loan fraud.
Certifications
★ At Home With Diversity® (AHWD): The AHWD certification concentrates on issues concerning multicultural populations, including diversity sensitivity, U.S. fair housing laws, and developing professional guidelines in a growing multicultural real estate market.
★ Luxury Homes Certification (LHC): The Luxury Homes Certification teaches agents how to sharpen their skills and prepare for the evolving luxury home market. The certification covers the luxury niche, pricing strategies, negotiation tactics, and how to distinguish oneself from other professionals.
★ Military Relocation Professional (MRP): The MRP certification prepares agents to work with military professionals. The course focuses on VA financing, procedures, and decision-making processes associated with military relocation and housing options.
★ Resort & Second-Home Property Specialist (RSPS): The RSPS certification was designed for real estate agents representing clients interested in purchasing and selling second homes and resort properties. Clients might include retirees, vacationers, managers, and investors.
Commercial real estate agents require the initial state issued certification and then a training programme with mentorship from a real estate firm that handles commercial real estate. They also usually need to have membership in a professional organisation such as NAR, ULI (Urban Land Institute), or REBNY (Real Estate Board of New York). They can then choose to specialise in and sub-specialize in areas such as shopping complexes, office buildings, hospitals, laboratories, agricultural land, unimproved land (land with no electricity, water set up and requires special legal knowledge), short sale, foreclosures, etc.
Other areas are development, which is purchasing land and building on it, arranging financing, negotiating tenant leases, and supervising the process; and property management, which includes handling day-to-day operations such as repairs, staffing, and so on.
Implications and applications of specialisation
We have seen that after the initial learning foundations are laid, there are other areas of specialisation for the agent, such as focusing on only one side of the transaction, either buying or selling, or type of property, such as golf communities, resorts, condos, or commercial real estate. Being able to offer specialised services means the agency can adapt their service offerings and costs of doing business to meet consumer needs and price concerns. Specialisation would enhance:
★ Individual professional development
Having a sphere of specialisation helps the individual agent stand out and helps focus marketing efforts, generating better leads.
★ Broker agency credibility and productivity
Having subject matter experts or specialists in the real estate office can boost a team’s efficiency or even a solo professional’s productivity. A buyer, be they an investor, first-time buyer, veteran, or one with environmental concerns, would be readily convinced of a broker’s credibility if the broker’s office boasts of a team of specialists, one of whom can handle his/her concerns rather than generalists.
Within the team, each member knows their role and area of expertise, allowing the agent to refer the client to the best suited agent. Customers need to be educated that a significant amount of time and attention goes into selling your property and ensuring that all the necessary government documents are properly executed, along with the legal forms. Seeing specialists on the team can assure the customer that such services are well worth the commission being charged.
★ Better service, leads and relations within the industry
Being a specialist also means that each team member has cultivated dedicated relationships with vendors and key players, like loan officers, throughout the industry. They bring better negotiation skills to the table, know the questions to ask, the disclosures that owners have to make about property issues (septic tank, asbestos, lead paint in the house etc.) A property disclosure statement and lead paint disclosure for most properties built before 1978 (with some exemptions) are required by law.
They are conversant with the county and local regulations and codes, can check for them, ask pertinent questions, and ensure that a competent professional, such as a house inspector or electrician, checks for house foundation, paint, and electric wire issues and gets him/her to check areas of concern. A home inspector cannot tell a client, for legal reasons, “Buy this house” or “Do not buy this house.” The home inspector can only report if something works or doesn’t and point out cracks, leakages, and some potential issues. He/she will not go through the house history and title search, cloud on title etc. An agent or in house specialist can advise verbally, with some reservations in wording, about buying the house. All of this further research done by the specialist agent results in high quality service for the client. Networking and building business relationships with other specialists helps all in the real estate industry benefit by creating better leads, contacts, sales, immense client satisfaction, excellent reputations for the agency, and word of mouth advertising.
Finally, and most importantly, rather than having the house on the market for 3-6 months, the average listing time can be cut considerably by having one or more specialists on the real estate agency team. Although factors like technological access and competition from full-service discount brokerages are making service rates more affordable and customers can shop around for service with a lesser fee, there are soft skills as well as knowledge skills that are irreplaceable.
Building a warm relationship with the client, taking and making numerous phone calls, hand-holding, though not literally, driving clients around or accompanying them to viewings, along with specialised knowledge, are hard to replace skills. Some of these existed among the best real estate agents before formal specialisation and are ingrained among the top players in the industry.
Issues that are not affected by specialisation and will stay
★ Just like repair ‘handymen’, automobile mechanics, and attorneys, real estate agents know more about their area of expertise than the people paying them for their services. Car mechanics on occasion recommend more expensive repairs than are necessary, attorneys can charge high fees for services that savvy consumers could perform themselves, and realtors can give sales advice that boosts their profit rather than that of the homeowner.
★ Most real estate transactions require two agents from different agencies to cooperate, not one as in a travel agency, stock brokerage or insurance sales. The fact that a competitor’s cooperation is necessary to conduct business opens an opportunity for activities that support collusion. NAR and the Department of Justice (DOJ) have worked out agreements that uphold NAR’s pro consumer stance of transparency and knowledge regarding commissions. However, if a buyer’s agent offers clients low-cost online access to home listings, other agents can refuse to make their own listings available through such channels. Or, if a seller’s agent cuts her commission rate, other agents may “punish” her by steering their potential buyers away from her listed homes.
Conclusion
As has been shown, specialisation is a value add of high ethical standards and skills, both soft and practical, that help enhance the perception a customer has of the service he/she will receive and the customer’s overall experience.
References
http://www.yelowitz.com/BSY2022.pdf
- The Impact of Real Estate Agent Specialization and Activity Level on Market Outcomes | Semantic Scholar
- The Impact of Real Estate Agent Specialization and Activity Level on Market Outcomes | Request PDF (researchgate.net)
- Professionalization of the real estate agent occupation – A comparative study of Australia and Sweden | Emerald Insight
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