This guide is submitted by an active Realtor, involved in my work and association.

In the course of my work I see great agent performance, adequate agent performance, and weak agent performance.  Myself, as a home buyer or seller, I'd rather work with category 1 people.

I hope you get something from these notes.

Selecting an agent is similar to selecting an employee, with four big exceptions:
1. The agent only gets paid once the job is done; employees are paid for their time.
2. The agent has a fiduciary responsibility to the client; employees generally do not.
3. The agent's job is ad hoc; the employee's job is generally on-going.
4. The agent usually knows more about the real estate business than the employer.
5. The agent goes away once the job is done.

Beyond these major exceptions, the hiring decision process brings many of the blessings, benefits and pitfalls as does hiring an employee. All hiring is hit or miss, to some degree, on the goodness of the person you engage as an emplyee or agent. Just like hiring emplyees, it may pay you to interview more than one agent.

I have been an agent for over ten years and, still, I do not have a tried and true formula for selecting an agent. (nor did I have a tried and true formula when I was hiring people into a corporation setting). However, from time to time I have thought about the prospect of listing our property or looking for property after I have left the real estate field. Because I work in this arena, today I would think immediately of a couple of good people out of the hundreds of licenensed agents in town, as likely resources. But, how does one select an agent if you're not in the business? Here are some thoughts:

Why it matters at all, and things to be thinking about.
Thousands of dollars and tons of grief or happiness rests on your decision.  Bad agency practice can lead to very poor pricing and sales strategies, wasting money, time, and possibly opening you up to lawsuits.  Real estate is a relatively "Easy entry" field.  No matter how many times some agents like to say it, they are not "professionals."  However, some agents bring themselves up to something at least approaching professional status by being smart, caring, and focused.  Many of the wrong kind of people enter, discover they don't have what it takes, and depart, often leaving a swarth of errors and failures.  In fact, about 40% of agents entering the field are gone 12 months later, and other 30% of those remaining are gone 24 months later, and 48 months later there may be 10% of those entering left as true agents.  Let me also state that longevity does not a good agent make.... I see serious faults fairly regularly from agents with years of experience.  They just never "got it" and also they never "got it" when it was time for them to go.  So, they linger for decades, performing poorly, and leaving a trail of weak work (largely without knowledge) to the detriment of their clients. 

The CMA (Comparative Market Analysis)
The good agent will do a meaningful Comparative Market Analysis (CMA), using meaningful comparable properties, and using good market statistics and data to present a clear picture of property value and market conditions. Since no one is "bad", let's just say a less-than-good agent will either do no market analysis at all or will punch a few buttons and let a computer spit out a very, very, nice looking, but often incorrect, CMA. As an agent, I often see properties that are priced far too high, or, even worse for the seller (but wonderful for the buyer), far too low.

A licensee or a Realtor?
In all states, agents facilitating real estate sales must be licensed by the state. To get a license, the candidate usually takes 3 to 6 courses (30 hours each) and then must pass a test. Most states require on-going training every year to three years. Once licensed, the licensee can opt to become a member of a trade association, commonly known as the National Association of Realtors. A Realtor is a licensee who also belongs to the National Association of Realtors (NAR). Being a Realtor brings with it an additional set of standards-of-practice above and beyond the state licensing requirement. This does not mean that a non-Realtor works to lower standards; the non-Realtor simply is not a member of that association. Good agent or bad, one benefit a Realtor brings to the client that a non-Realtor does not, is the Multiple Listing Service (MLS). The MLS is a rich data base of available, pending, and sold properties in a given locale.

When a Realtor lists a client's property for sale, the agent enters the property description into the MLS, and all other agents in that locale are offered the chance to sell the property. In my town there are over 1,500 Realtors, and it is much, much, more likely that one of those Realtors will have a "better buyer" than any buyers I may be working with. A better buyer brings a better offer and a quicker, less painful, and more sucessful sale.

Competancy of the agent.
There are many measures of competancy in agent performance beyond spooling out glossy CMA's and looking pretty. Things in real estate are just like they are at your job; there are a few great performers, many good performers, and a few poor performers. And just like your own workplace, performance comes in many dimensions. Few people excel in every dimension of work; the models I think of here are the superb engineer who is poor at communications, or the great speaker who has little to say. What we can say is that the best performing agents (I did not say "the most successful agents"), will strike you as a very capable communicator, marketeer, negotiator, statistition, politician, who is also driven to help you, has a can-do attitude, understands that your business is a "gift", and is also a plain old good person.

Can a Successful Agent Possibly be a Bad Agent?
Yes. It happens, but happily not all the time. Some highly successful agents are doing well simply because they are "connected" to a flow of new listings and buyers. Such agents offer little correct advice to their clients, inadequately represent the client, and are rife with costly mistakes. This costs the client thousands of dollars and tons of headache, but many remain self satisfied because they engaged a "successful agent", not recognizing that they just sold their house for thousands less than they should have.

Why use an agent at all?
Until recently I was not aware of any good existing studies that prove the benefit of having an agent, compared to self-sale of property. A just released a study shows that home sellers who were represented by an experienced, full-service agent, netted an average of 9.5% more than home sellers who used a partial-service agency, a help-u-sell type business or who sold on thier own. So, based on this single study, there is at least some evidence that good agency practice produces measurably better results. After 10 years in the field, I can state that good agency practice will nearly always bring better results for both buyer and seller.

Buyers benefit from working with an agent who has a fiduciary responsibility to the buyer. This means the agent must put the buyer's benefit above all others. A good buyer's agent knows the market, understands market statistics, and uses this knowlege to help bring the best results to the buyer. This usually means the most perfect property available at the best price and terms.The buyer's agent helps guide the agreement to a close, offering advice and assitance on such things as offer strategy, inspections, financing, and the language used in the agreement. All of these factors, done right, can significantly benefit the buyer in meaningful ways.

Sellers benefit from working with an agent that has fiduciary responsibility to the seller. Here the agent must put the seller's interests above all others. A good listing agent brings a wealth of knowlege into play in the sale of a property. Yes, there is a seemingly steep commission to be paid, but in my experience and when all is said and done, most represented sellers net higher than those that choose to sell on their own. The reason for the higher net is simply the power of broader marketing that the listing agent brings to the table. Your listing agent should be seen as one person but with a few hundred or a few thousand other agents clinging to their back ready to help make the sale. In real estate, as in all other industries, expanding the market to more buyers effectively expands demand (and therefore value) for the product.

Both buyers and sellers benefit from having someone to turn to if things go wrong. Most agencies and some agents carry Errors & Ommissions (E&O) insurance which protects the client in the case of a mistake. Costly mistakes are rare in real estate transactions....
- many eyes are on the agreement ranging from other agents, to agency contract checkers, to title company experts, to lenders, to home inspectors, surveyors, and appraisors - but errors do happen and here, the cost to resolve the problem is covered by an insurance policy. Further, in many states, there is a fund established from licensing fees, that allows financial recovery even if the agent and the agency are broke and uninsured. To me, selling on one's own, even if the market is very hot, is very prone to
a) problems arising due to lack of experience of the parties, and
b) no recourse at all other than going to the courts which is very expensive, time consuming, and producing outcomes that are unknown and difficult to enforce. So, in my opinion, buying from a For Sale by Owner (FSBO) is too risky to consider, as is selling as a FSBO too risky to consider.

If you decide to FSBO anyway:
Can you cover yourself by hiring experts by the hour? Yes, hire an agent to write the agreement and guide both parties through the contract time line, and hire an attorney to represent each party; this way the parties at least have their lawyers to sue. The agent cannot be held accountable (you could try, but probably wouldn't prevail) since the agent would not "represent" either party. Another approach is to find a buyer, then contract with an agent to assist at some greatly reduced commission. Be sure to define who the agent represents, seller or buyer, if anyone. Note that the person who pays an agent is not assumed to be the represented party.... get agency representation in writing.

Last, some studies do show that most FSBO attempts end up being listed by an agent. So, most FSBO's fail, often after painful expenses and lots of wasted time.

Selection
1. Most agent selection comes from simply knowing the agent. The agent might attend your church, or is a member of your organization, or is related to you, or simply friends. The good thing here is that you do have some knowlege of the person, and you may have a sense if the agent has something on the ball. The bad thing is, your aquaintence may be with an agent that you would rather not have on your team.... it is hard to say "no" to someone you know.
2. Ask around. Good referals on an agent from a trustworthy friend can be a big help
in quickly finding a good agent.
3. Interview, interview, intertview, and then pray for divine guidance.

The key idea is to interview 3 or more agents.  One will surely float to the top.