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BUYING A HOME - SELECTING A REAL ESTATE PROFESSIONAL
Buying a home can be confusing. Few people have the knowledge and experience needed to find, evaluate, and then buy a house without the help of a real estate professional. Homebuyers, especially first-time buyers, often hesitate to ask questions. But remember the only dumb question is the one that has not been asked.
An efficient method of shopping for a house is to consult a real estate professional. They have completed specific real estate courses, passed a state exam and will be knowledgeable about the community they service. The majority also has access to a computerized Multiple Listing Service (MLS) that will allow them to review all homes available through all real estate offices that meet your requirements.
A real estate professional brings together sellers and buyers. Always remember whom the real estate professional is representing. Real estate professionals, who represent the seller, have a financial, legal and moral responsibility to the seller—not the buyer. In return for representing the seller, they receive a commission from the seller when the house is sold.
Buyer's Broker or Agent
The concept of using a buyer's broker or agent is relatively new. There are pros and cons to this approach. The most obvious advantage is that the buyer's broker or agent is legally obligated to negotiate the best possible price and terms for you-the buyer-not the seller. A buyer's broker can help you locate potential houses to consider and determine the condition of the houses, such as water damage. They are particularly helpful in negotiating the sales contract and writing a purchase offer that favors your position. Finally, they may be able to give advice that the traditional real estate professional could not because his or her loyalty is to the seller.
The main disadvantage to using a buyer's broker or agent is that you may have to pay a fee or commission. This may be a flat fee, a percentage of the purchase price, an hourly fee, or a combination of the three. While the buyer is primarily responsible for paying the buyer's broker or agent, often, with consent of the seller, the seller's agent pays the fee. You will be asked to sign an agreement that spells out exactly what you want the buyer's broker or agent to do for you. In turn, you will be obligated to work with the buyer's broker/agent for a specific time. This service is not available in all markets, so consult with your real estate professional for more information.
Dual Agency
At times a real estate professional may become the representative of both a seller and a buyer-creating a dual agency situation. Dual agency situations often come about when one real estate firm has a relationship with two clients, one wanting to sell and the other wanting to buy. When this happens, the real estate professional is obligated to notify each client, and to modify his or her actions to ensure that duties and obligations owed to each client do not come into conflict. Primarily this involves the real estate professional's obligation to keep confidential the motives for buying or selling, and other information obtained through the agency relationship with each client. This may limit the range of duties the real estate professional may perform for either party. Buyers or sellers should carefully consider the possible consequences of the "dual agency" relationship before agreeing to such representation.
What a Real Estate Professional Can Do for You
A real estate professional can provide you with a broad range of services including the following:
When working with a real estate professional:
1. Never let another real estate professional show you a house that you have previously been shown.
2. If you are seriously interested in buying a house, don't worry about wasting a real estate professional's time by looking at too many houses. It's in your best interest to look at as many houses as possible. A real estate professional should not push you to make up your mind or make an offer on a house before you are ready.
3. Assume that anything you say to the listing agent or broker will be told to the sellers. The seller's agent represents the sellers and is legally obligated to represent their interest. You can put yourself at a disadvantage in negotiating a price if you have been too enthusiastic about a house on which you decide to make an offer.
A real estate professional brings together sellers and buyers. You'll need to understand the concept of "agency" before you select your real estate professional.
The Law of Agency and Buyer Representation
Law of Agency
Buying a home may be the biggest financial transaction of your lifetime. You will need to understand the Law of Agency to assure that your home buying experience will go smoothly. Whom does the real estate professional work for? Whose interests come first? What services can you expect?
Agency Disclosure
In past years, brokers who listed homes for sale were legally committed to being the seller's agents, owed special duties to sellers and dealt with buyers on that basis. Brokers were legally obligated, for example, to put the seller's interests first, and, among other things, obtain the highest price possible for homes they listed. That was true even if they were bringing buyers to houses listed by other brokers.
Often, though, brokers who were working with buyers tended to identify with the house hunters and thus violated their fiduciary obligations to the sellers. Many buyers also assumed that the agent with whom they were working was "their" broker, putting their interests first.
With the growth of the consumer movement, one state after another took action to raise buyers' awareness of just where they stood. The laws and requirements vary from state to state. Consult with your broker or manager to determine the applicable laws in your state. There are four types of agency relationships:
Seller Agency
Subagency
Buyer Agency
Dual Agency
Your real estate professional should explain to you at the first meeting whom he or she represents, and you may be asked to sign an acknowledgment of this disclosure. Each state will be different, so be sure to read over the acknowledgment and feel comfortable with the relationship. Your real estate professional can also show you unlisted homes (for sale by owner) in many cases, and can represent you in negotiating with the owners.
Tips for First-Time Buyers
For many veterans, owning their own home is the American dream. If home ownership is your dream, it can become a reality, but not without realistic goals, sound advice, careful planning and a clear understanding of the costs involved. As in any endeavor, the more you know about home ownership, the better able you will be to reach your goal.
- Financial incentives: For many people, the motivation for home ownership is primarily financial. Owning your own home is a first-rate investment for a number of reasons.
- Scheduled savings: When you buy a house, your monthly mortgage payments serve as a type of scheduled savings plan. Over time, you gradually accumulate equity. In the future, you could borrow against the equity or convert it to cash upon selling the home. In contrast, renters must continue paying rent to a landlord for as long as they rent, without the opportunity to build equity.
- Stable housing cost: Rents typically increase every year, but the principal and interest payment on your mortgage will remain constant if you secure a fixed rate mortgage.
- Increased value: Typically, if they are taken care of, homes increase in value over time. This appreciation over time adds to the equity in the home.
- Tax benefits: Homeowners are eligible for significant tax breaks that are not available to renters. Interest on a home mortgage and property taxes are usually deductible on Schedule A of your federal tax return.