The People Who Assist You with Your Home Purchase

Having the right professional people to assist you when you buy a home can be crucial. It can save you money and headaches. Remember, you hire the people assisting you with your purchase. In almost every purchase transaction, something does not go as expected. If an error occurs, you have every right to ask that it be set right. The other people involved in the purchase transaction are your paid advisors. It is your money, and you should be making the decisions.

The Real Estate Agent

A good agent will help you to find the home that meets your needs. They will negotiate for the best price on your behalf, and supervise all levels of the transaction, such as inspections and closing. Your agent should be representing you alone.

There are different types of agency relationships, depending on the type of agency contract that you have signed.

Sellerís Agent:

The agent works solely for the seller.

Buyerís Agent:

The agent works only for the buyer. Even if the agent gets a portion of the commission payable to the sellerís agent, he does not represent the seller.

Both these types of agency relationships are known as single agency, where the agent represents one party in the transaction. Even though a buyerís agent represents the buyer, there is one thing inherent in the buyerís agent relationship that makes the transaction questionable. The commission is still based on the sales price of the house. There is a conflict when you have an agent who is negotiating to reduce the purchase price on your behalf, and at the same time the higher the price, the higher their commission.

In a dual agency relationship, there may be two Realtors, one representing the buyer, and one representing the seller. The difference is that both agents work for the same broker. If a buyer decides to purchase a property, and the sellers agent works for the same broker, the agency relationship changes as soon as the offer is made on the property. The single agency relationship just changed, and each agent now also represents the other party. Either the buyer or the seller. It becomes that way because it is the broker that holds the agency. Since the broker is now the same, the agents now both represent the other client. If the real estate agent that you select works for a company with just a few other agents, the chances are small that an agent from the same company will be representing the buyer of the house you decide to purchase. If your agent works for a large company, with many offices and lots of agents, the chances are much more possible.

There are two potential problems with dual agency. You will need to feel confident that your agent is not sharing information about you to any other agents of the company. Also, if it seems as if you are being pushed into buying property that is being listed by the same broker, be cautious. The agent may be getting a larger commission if the same broker represents the property you buy.

Your real estate agent does not get paid unless you buy a home. This can create a conflict in some agents. It should not create any conflict in a good agent. A good agent should put your interests ahead of their own, at all times.

Commissions are calculated based on the sales price of the home. Since you are the buyer, your agent would get paid from the seller. Commissions should be negotiable. The listing agreement should state that commissions are not fixed and can be negotiated between the agent and the seller. Typically if the agent works for a broker, the broker also takes a percentage out of the agents commission.

A Good Real Estate Agent Should Have the Following Characteristics:

They will educate you as the purchase transaction progresses.

They explain your options, and allow you to make the decisions.

They will advise you when it could be necessary to ask for another expert opinion, such as an attorney or an extra inspector.

They voluntarily specialize in certain geographical locations or properties so they can become more knowledgeable in certain areas.

They should be full time professionals. Some agents only work after hours and on weekends when they are away from their "real" job. You require the services of a full time professional agent who has been in the business for a few years, at least.

Your agent should have developed contacts in the field whose expertise they respect.

Your agent should have time for you. Even good agents should not be so busy and over extended that they are never available for you. If your agent is constantly busy and unreachable, find another agent.

You should interview at least three agents before selecting one. If you need referrals, ask friends, business associates, members of your church, clubs and organizations. Your employer may have a relocation service that uses a particular Real Estate Broker.

Take each referral as a suggestion. It is likely that the person doing the referral has never actually used the person for which they are referring. In any case, no matter how highly recommended, you should still interview each candidate.

The Interview

Ask each agent you interview to bring a listing of every property they listed or sold in the previous 12 months. Here is the information you need and what you are looking for from that list:

Address: This will help you get an idea of the area in which this agent might specialize. Has this agent sold or listed properties in your target area? Do not use an agent whose main focus has been outside your target area or who does not seem to have an area.

Property Type: Does the agent work on the type of property you want to buy?

Price: Does the agent handle homes within your price range? If an agent seems to specialize in properties either much more expensive or much less expensive then the range you are looking in, they may not be right for you.

Sale Date: The Realtor should have activity evenly dispersed throughout the year. If that is not the case, you should ask why. If the agent has had little recent activity, there could be personal problems going on that might effect how the agent is able to do their job.

Seller or Buyer: did the agent more often represent one over the other? A good agent who has been around a while will have clients evenly distributed from both. If the agent you are interviewing has mostly buyers for clients, there is a good chance that they are relatively new. On the other side, you also donít want an agent who deals mostly with sellers because they may not possess the qualities needed for a buyer's agent.

Grand Totals: Comparing totals will give you an idea of the success achieved by each agent. You donít necessarily want to select whoever is the top producer, though. They may have reached the top by listing and selling large quantities of properties. These agents are usually extremely busy and do not have time to offer you any special attention.

Names of Previous Clients: Use this list to contact some of the Realtor's previous clients to obtain references. Good agents should not have a problem providing you this information.

After going over the agentís list, you should also ask questions of the agent. Consider the following as a good starting point:

Do you work as a real estate agent full time?

Who do you represent?

Describe your office to me.

How long have you been a real estate agent?

What kind of license do you carry? A salespersons or Brokers?

Do you have any professional designations through the National Assoc. of Realtors? What additional education have you had?

What do you feel my needs are as a buyer?

I am also interviewing (blank) and (blank), what do you think of them?

How many clients are you working with right now?

Have you partnered up with any other agents? Do you use an assistant?

Is there anything else that you think I should be aware of?

Now comes the time to make the all important referral calls. You should have a complete list of clients and be able to choose from that list anyone you would like to call. Do not let the Realtor just give you a fixed list of referrals. Any agent who will not give you the full list has something to hide. Do not use that agent.

You do not have to call every client the agent gives you. It is necessary only to get a good representation. To do this, go through the list and weed out all clients that were sellers. Since you are a buyer, their experience does not pertain to you.

Next, look for people who bought property similar to the price and type you are looking for.

Now look for two buyers who bought about 12 months ago. Then find two who bought about 6 months ago. Finally, search for buyers who just closed escrow on their homes. This should give you a representative sample of the Realtorís clients.

Now that you know who you will call, you need to write down what information you want to ask. You should consider the following questions:

Did they find the agent to be honest? Did the agent keep all promises? There can be no negative information here. If there is, do not hire this agent.

Did the agent have time for you? Did they seem overly rushed or hurried? Did they try to accommodate your schedule? An occasional conflict in scheduling should not be a red flag. If the occurrences were often, there is a problem, and you should not hire this agent.

Were you satisfied with the level of information you received? Did you feel that you were kept abreast of any changes? Were things explained to you that you were not familiar with?

Were the deadlines set for the contract reachable? Was there any problem in meeting them?

What words would you best use to describe this agent? "Committed?" "Motivated"? These words describe someone who is on top of things. "Low-key" or "Easygoing" might describe someone who is the opposite.

Did you find the home that you eventually bought or was it your agent?

Did your agent negotiate a good price?

Would you use this agent again?

Is there anything else I should know?

After the interviews you should have a lot of information about the agents you are considering. As the final criteria you need to ask yourself a few questions. How comfortable do you feel with this agent? Do they make a good impression? How do you feel about the personality of the agent? Since buying a home can be stressful, it is helpful to have someone who perhaps has the ability to ease your mind. If you like the person yourself, it can really be helpful.

Now that you have your agent, do what you can to make the relationship work.

Do not work with more than one agent. A smart agent will ask you who else you have been working with. If they find you are working with someone else you may not get their full attention and dedication. A buyerís agent already knows they must find a house for you in order to get paid. If they find out that in addition to that, they are in competition with someone else, they may opt out all together. If however, you are looking for a home in different geographical areas, then it would make sense to use more then one agent.

The Escrow Officer

Your escrow officer is the neutral party in your purchase transaction. The geographical area in which you close escrow determines who handles these responsibilities. It may be a lawyer, bank, real estate broker, or the firm that issued the title insurance.

Escrow fees are based on the property purchase price. Geographical area and local custom usually dictate who pays for these fees. This is often negotiable.

Should You Use a Mortgage Broker?

It is the Mortgage Broker's job to find you the best loan. They do not lend money themselves. A good broker will shop for a loan for you, explain all of your options, and assist you through all the paperwork involved.

Mortgage Brokers are in the business of selling mortgages. The interest rate you receive and the points you have to pay should be the same as if you went directly to the lender for the loan. This will not be the case if the broker receives a larger commission for their work and passes this cost on to you. The commission that the broker receives from the lender is negotiable. On a large loan it will be several thousand dollars. You should never hesitate to ask the broker what his commission will be.

When choosing a mortgage broker, you should check the following:

How many lenders does the broker do business with? A broker should do business with a wide array of lenders offering the most competitive pricing and programs. If your broker only works with the same lenders over and over, you are not getting the best representation.

Is your broker knowledgeable about all of the different loan programs he is suggesting to you? Your broker should be able to go into detail with you on every program and explain how they differ and how they work.

What Makes a Good Lender?

Friends and relatives who have had a good experience when obtaining a mortgage loan can sometimes make good recommendations on a lender. Your Realtor is also a good source. As you talk to lenders and ask them questions on loan programs and interest rates, also pay attention to the following traits:

1. Are they being straightforward? Donít stand for a loan agent who doesnít explain things using language that is easily understood. It is not necessary for an agent to use a lot of mortgage double talk.

2. Is your loan approved locally? It is not necessary to send your loan far away for approval to someone not familiar with the type of borrowers in an area or the type of properties.

3. Are they competitive? There is nothing wrong with asking a lender if they can match the interest rate of the lender with the lowest rate that you find. They may not be able to match it completely, but interest rates are negotiable and they might be able to improve on the rate.

4. Does this lender pay attention to detail? Lenders often promise the moon and then donít deliver. Your real estate agent should know which lenders are trustworthy to perform and meet contract deadlines.

When Do You Need a Lawyer?

The contract you sign for the purchase is a legally binding contract. If you have any questions concerning the legality of something in the contract or during any part of the purchase transaction, you should consult a lawyer. No one else involved in this transaction can give you legal advice.

What determines when you need one? Often it's the location of the property. In California, a lawyer will rarely get involved in a purchase. The Residential Purchase Agreement is already an approved document by the bar. In other areas, it is common practice for an attorney to draw up the contract for purchase and handle the close of escrow.

How complex a transaction do you have? If your purchase is not covered by a standard contract you should consult an attorney. Your real estate agent is not qualified to make legal judgments on complicated items such as partnership agreements between unrelated people and any complex situations on how to take title.

If the purchase transaction does not involve agents, you should have an attorney to consult. The attorney should at least prepare the purchase contract. Just because you are doing a purchase transaction without agents, you still have to disclose information, provide inspections, and remove contingencies.

If you do decide to retain the services of an attorney, make sure the one you choose specializes in residential real estate transactions. Your Realtor should be a good source of referrals.

Make sure the advisors you use stick to their own area of expertise. Do not allow a Realtor to give you legal advice. At the same time, do not allow a lawyer to give you any advice on property values.