DeLena Ciamacco - THE COMPLETE GUIDE TO BUYING A HOME

THE COMPLETE GUIDE TO BUYING A HOME

DeLena Ciamacco

Table Of Contents

How Real Estate Agents Help Home Buyers

Owning vs. Renting

Buyers' Needs and Desires

Real Estate Horror Stories To Learn From 32

Searching for the Right Home

Buying a House: Negotiation Dos and Don'ts 48

What to Know About Home Inspections

Shopping for a Home Loan

Programs For Home Buyers

10. The Closing Process

11. Organizing Your Move

Introduction Hi there! It’s nice to meet you. If you’ve received this book, it’s probably because you’re thinking about buying a home. And if you’re like most home buyers, you may be nervous about the entire process. But that’s why I’m here! My job is to make your job as a buyer as easy and seamless as possible. Throughout my years of experience in the real estate industry, I’ve amassed insider knowledge to help home buyers get great deals on their home purchases. And now, you’ve got all of that information at your fingertips.

In this book, you’ll find:

• An overview of the buying process • How to determine your wants vs. needs in your next home • Information on securing a home loan • Common mistakes to avoid • A negotiation guide to save money on your purchase • And much, much more Sure, you can try to employ these strategies yourself, but you should know that it costs you absolutely nothing to hire me to help you find your next home. Yes, buying a home can be stressful, but with this book (and my help!), we can make the process as seamless as possible.

About DeLena Ciamacco DeLena Ciamacco was born and raised in Columbus, Ohio. She attended Columbus Public Schools and then The Ohio State University for 6 years with studies in International Business, International Marketing, and Criminology/Sociology. In 1989, DeLena decided to take a temporary detour from her original path (of attending Law School at Capital University) and pursue her Real Estate Career. DeLena began to sell Real Estate with a local Conventional Brokerage and soon discovered that in order to grow she would need to affiliate herself with a much larger, International Company. She chose RE/MAX and that is when her career as a Realtor began to soar. After just her 2nd year with RE/MAX (1993) DeLena ranked #5 in all of Ohio among RE/MAX Realtors. In addition to her numerous local recognizable awards with the Columbus Board and Ohio Association of Realtors, she was inducted into the RE/MAX International "Hall of Fame" (RE/MAX’s highest achievement award at that time) as the youngest Realtor in RE/MAX History to attain this level of sales. She has been the recipient of RE/MAX’s highest awards since her first full year with RE/MAX. DeLena has been recognized in "Who's Who in Residential Real Estate in North America” for 1994, 1995 & 1996, and articles have been written about her in Ohio Realtor Magazine, In Contract Magazine, Columbus Executive Woman's magazine and Buon Giorno magazine to name just a few. She was also featured in numerous books which include “Billion Dollar Agent-Lessons Learned” and “Success Stories”. She has contributed her time as a Speaker on numerous "Top Producer" panels. In 2002 DeLena was nominated for the Ernst & Young Entrepreneur of The Year. DeLena's ranking in the Real Estate Industry among all other RE/MAX Team leaders is as follows:

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Local Recognition: #1 in Central Ohio – commission earned for over 20 years* #1 in Central Ohio – closed dollar volume for over 20 years* #1 in the State of Ohio for Over 20 Years Re/Max International Broker-Owner of The Year 2002 Re/Max Franchise Owner 1996-2006 Columbus Board of Realtors 25 Million Dollar Club Award Recipient Ohio Association of Realtors President’s Sales Club “Award of Excellence” 2021 Westerville’s Business Person of the Year Blendon Township Trustee (Elected 2023) d 2023) National Recognition: Ranked as a “Top 100” Realtors in the United States for Over 20 Years* Realtor.Com Award of Excellence Recipient 2008 Named one of the most powerful women in Real Estate & Relocation by National Relocation Real Estate 1999 Edition Repeatedly recognized in “Who’s Who in Residential Real Estate in North America” International Recognition: RE/MAX International’s “Platinum Club Member” 1994-2020 ytd* RE/MAX International’s “Chairman’s Club Member” 2002-2020 ytd Ranked as a “Top 100” Realtors in the World for over 20 years* RE/MAX International’s “Hall of Fame” award recipient* RE/MAX International’s “Lifetime Achievement” award recipient* RE/MAX International’s “Circle of Legends” award recipient* RE/MAX International’s “Diamond Club” Member 2012-2020 ytd Luminary of Distinction Recipient 2012 RE/MAX Paramount of Excellence 2022

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RE/MAX International’s “Luminary of Distinction” award recipient* RE/MAX Paramount of Excellence 2022

Re/Max International’s “Pinnacle Award” 2023* ” 2023*This award was only given to a handful of Re/Max Realtors internationally and is the highest award earned within all RE/MAX Clubs. To achieve this honor, teams must have shown an incredible level of achievement performing and dedicating themselves consistently at a superior level. Their leadership, integrity and legacy will leave a lasting impact on the RE/MAX organization, positioning them at the Pinnacle of their careers in the Real Estate Industry. *Among all Re/Max “Team Leaders”; Locally, Nationally & Internationally Member of: The Columbus Board of Realtors The Ohio Division of Real Estate The Builder’s Industry Association The National Association of Realtors The Christopher Columbus Educational Foundation (CCEF) DeLena is also the Owner of The Friesian Empire Event Center, which is scheduled to open for business in 2024.

Testimonials & Reviews for DeLena Ciamacco Here’s a list of people whom I have helped buy or sell a home, and what they said about working with me: DeLena is an expert in the field of real estate. She took care of every aspect of the sale of our home. She was really helpful advising us on the current state of the real estate market and walked us through the preparation of our house for showing and even did a couple of walkthroughs herself. One thing I really liked was her use of a specialized real estate photography company as well as the beautiful marketing brochure she created. I would definitely go with DeLena again if I needed to purchase or sell a home in the future. – Mark, Client DeLena was great. She made the process seamless - from advice on getting the home ready to show, to marketing, contracts and closing. She and her staff responded instantly to any questions. They couldn’t have been more professional and we got our full asking price in a tough market! I recommend her highly. – Christine, Client DeLena and her team are professional and the best!! She is an effective marketer and strategic negotiator, very communicative and dedicated. We had a challenging situation, but they were able to sell the house & close the deal. I am truly grateful for DeLena and her team, highly recommended!!! – Jessie, Client Can't say enough about what an awesome realtor DeLena is. Our family has worked with her many times over the years and continue to do so because of her outstanding service and results! On our first home sale with her, we tried two realtors prior to her who could not get our house sold for the price we wanted. DeLena got it sold no problem. We also had some land for sale. xi

Who else would meet with attorneys, Ohio DOD folks, Township zoning officials etc., with us to get our property sold?! She goes the extra mile and her and her staff are extremely professional, personable and return your calls/emails promptly. We are so grateful for DeLena. She treats us like family!! – Panpilas, Client My wife and I had great experiences with DeLena Ciamacco in the sale of our residence. Her real estate experience is exceptional as is her office staff. – Larry, Client Incredible experience working with DeLena! She’s extremely knowledgeable and talented and we knew she would deliver in selling our home! – Nicole, Client The listing for my place was incredible and definitely highlighted the best aspects of the property. I felt like I was getting all the support needed to sell my “little house”. Getting the “sold” sign up is terrific. – Phyllis, Client DeLena is a very knowledgeable, professional and an honest Realtor. I have had the privilege to work with her and her team on residential and commercial transactions!!! We consider her our Realtor and friend for life. I’ve had no question that has gone unanswered. DeLena has always gone above and beyond for me to get the best possible outcome for my real estate needs. Our transactions with her have always been pleasant and smooth. She is very easy to get hold of, she responds faster than any other realtor that I have ever known and is quick to answer any questions that I have. For me, this is a HUGE plus, especially when buying or selling residential/commercial homes/offices. Most importantly, is her continued contact with me even after a transaction has occurred. If you are looking in to buying/selling your home/commercial property, I HIGHLY recommend DeLena and her team. – Dan, Client

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Wow! I have never met anyone that works so hard for her clients! DeLena is definitely a stand out and professional in her field. She has that never stop work ethic. Her energy, enthusiasm, and depth of knowledge about her industry is amazing! DeLena does not miss a detail! Her marketing strategy was above and beyond our expectation. She sold our home quickly at the price we wanted. I highly recommend DeLena if you are looking to sell your property! We give her a 5 star plus rating! – Robin, Client I just sold my second property with DeLena. A true professional in every way. Everything always goes smoothly. She defends and protects her client's interests all the way. Thanks again for another successful transaction! – Jerry, Client DeLena is the ultimate business professional who not only excels in real estate transactions, but who builds enduring relationships with her clients. DeLena and her extremely efficient and competent Team handled our purchase of our "forever home" flawlessly and we now will be using DeLena and her Team to Sell our existing home. DeLena's knowledge extends far beyond the world of real estate and DeLena is a resource for services associated with a purchase, sale and move of a residence. Without any hesitation, I highly recommend DeLena and her Team as THE best real estate team in our area. – Ed, Client DeLena was absolutely fantastic to work with. We had a few obstacles to overcome to sell the house and she handled them with no trouble at all. I would sincerely recommend her to anybody I know. – Dominic, Client Working with DeLena and her staff was a pure joy. They made what typically is a stressful endeavor extremely easy and efficient while maximizing value. I highly recommend her for all your real estate transaction needs. – Matt, Client

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DeLena is the best realtor. There is no one else in her league. My parents have used her in the past, now I have for the sale of my first home. We listed when the market changed in favor of the buyer and she was still able to get us nearly 20% over list price!! I would recommend her to anybody and everybody. She’s always available, always provides plenty of information to you when and before you need it. I truly don’t think there is a better realtor around. She has a passion for real estate; it is so obvious. Don’t mess around with your biggest asset. Place your trust with DeLena. I promise that you will be more than satisfied. She is AMAZING. I will use her for every home purchase or sale in the future. It’s not even a second thought. The process was so easy and stress free. We were out of our home for showings for only two days. Within those two days we had 98 showings and there was no need for any others after. Honestly, we probably could have stopped showing after the first day. You will not go wrong with DeLena. – Ben, Client Thank you DeLena for the great experience from you and your team when purchasing my home. Her and her team were great at communicating with me throughout the whole process. I highly recommend DeLena! – Rojo, Client Delena is wonderful. She is very positive and extremely efficient in what she does. I am glad she was my realtor. – Mina, Client I can't speak highly enough about DeLena as my agent in the sale of my home during an extremely difficult time for my family. Her knowledge, compassion, integrity, hard work and ethics are much appreciated. DeLena & her team went above and beyond. I would recommend her for anyone looking to buy/ sell. You will NOT be disappointed! – Sherry, Client A real go-getter, DeLena is everything real estate. We have used her services on multiple occasions, for both buying and selling, and have been very pleased with the results. Not only is she

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professional and knowledgeable, she is very helpful, understanding and respectful of our needs and concerns. Put your trust in her and you won't be disappointed. – Steve, Client You will simply not find a better real estate agent than DeLena. She and her team bring a level of expertise, professionalism, and assistance to each part of the process that is unsurpassed. We have now sold two homes through her, and purchased two homes through her under varying market conditions, and each with their unique challenges. DeLena is simply the best! – Doug, Client I have worked with DeLena twice and my family for as long as i can remember and she has always taken great care of us. She is very professional, easy to talk to and always responds to calls quickly. She even sold our last house over asking price. I would recommend Delena to anyone looking for a realtor. – Scott, Client Selling a house can be stressful, even in a strong market. Working with DeLena and her team took any stress out of the equation. The communication and transparency throughout the process was outstanding. DeLena was as motivated to sell our house as we were. She does not wait for someone to buy your house - she actively sells it. A great experience all-around. Highly recommend! – Elizabeth, Client DeLena is great! Helped us sell our house just days on the market. After selling our home we started building our own with a local building company, she was there with us from day 1 to closing. Any time with had questions or concerns during the building process she was the one to go to. She made a stressful experience into an easy one. It’s great to know you have someone on your side at all times. – John, Client

DeLena and her team helped sell some challenging properties for my company. Very responsive and professional. A pleasure to work with. – Jay, Client BEST realtor for the job of selling or buying a home. In my case I was buying, found me the right house at the right price. I could not have accomplished my dream house without the expertise and experience DeLena brings to the table. All the qualities I was looking for. Simply stated: she is the BEST! – Avery, Client

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CHAPTER 1 How Real Estat eal Estate Agents e Agents Help Home Buyers

I’ll come right out at the start and tell you I’m a real estate agent — proudly so! Nice to meet you! I’m not trying to sell you anything, but I’m pleased to be of service. In fact, generally, real estate agents for buyers are paid for out of the listing agent’s commission. So, I’m not looking to part you from your money. Instead, I’m giving you the benefits of experience and advice I have gleaned throughout my career selling houses and being in real estate transactions — for both sellers and buyers. If you want me to help you find a house, we can talk. Call me if you need me. Technology has changed the way homes are sought and bought today. In this “Information Era,” most buyers are first introduced to the home they eventually purchase via the internet, through Zillow, Trulia, Yahoo! Homes, Realtor.com, Redfin or one of hundreds of other real estate websites. So that means there’s no real need for a buyer’s real estate agent, right? The reason to use a real estate agent is to find a home and show homes available for sale, right? If a buyer can find and visit a home on the web all on their own, why involve another party?

WHY HOME BUYERS NEED A REAL ES UYERS NEED A REAL ESTATE AGENT

Ah, not so fast, friend. The reasons to use a real estate agent today are as valid as yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their 2

own real estate transactions came about recently, throughout the last decade. This has caused buyers to wonder if using a real estate agent is no longer necessary or if it's an expense that can be avoided. While doing the work yourself can save you money if you buy a “For Sale By Owner” (FSBO) house and the seller agrees to reduce the price by 3% (half of what a listing agent would receive), for many, a do-it-yourself home purchase might be pricier than a real estate agent’s commission in the long run. Besides, a buyer generally doesn’t directly pay any commission to an agent on a house purchase. On most home sales, there is a listing agent (the agent engaged by the seller to sell the property) and a selling agent (the agent who introduces the eventual buyer into the transaction). The selling agent is sometimes called the “buyer’s agent” because he or she is often working on a certain buyer’s behalf, and it’s easier than explaining that the selling agent is not the listing agent but really the buyer’s agent. There are some real estate agents that market themselves as “buyer’s agents,” “exclusive buyer’s agents,” or “buyer’s representatives.” These real estate agents have chosen to make a business of finding homes for prospective buyers and handling the negotiations and transactions attendant to the purchase. These agents want to accentuate the reasons a buyer shouldn’t go directly to the listing agent when they purchase real estate. A buyer who goes directly to the listing agent and allows that agent to “manage” both sides of the transaction is dealing with an agent who has conflicting responsibilities. Their job is to get a good price for the seller, and they might not zealously represent the interests of the buyer. Those who market themselves as buyer’s agents indicate they’re only working for the buyer in a real estate transaction. The buyer’s agent's commission is paid by the seller, with rare exceptions. They either get paid directly by the seller or set up the

transaction so that the seller provides a “credit” to the buyer for how much the real estate commission is — then the buyer pays the commission. A maxim in real estate is, “No matter how it’s set up, the buyer still walks away with the house and the seller still walks away with 94% of the purchase price.”

MORE ACCESS TO THE REAL ES O THE REAL ESTATE MARKE TE MARKET

A real estate agent will have better access to the market and a special knowledge of local conditions. The agent is a full-time liaison between sellers and buyers. An agent will have ready access to other properties listed by other agents. Buyers’ and sellers’ agents know how to put a real estate deal together. A real estate agent will track down homes that meet your criteria, contact sellers’ agents, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things. This is even more so the case when a buyer is moving due to relocation or employment opportunity and does not engage a buyer’s agent to handle matters.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate agent will keep the transaction “at arm’s length,” such that personalities and emotions do not become involved. Price negotiations take a special skill and understanding of the psychology of offering and counter-offering. Agents keep the transaction dispassionate and rational. For example, a buyer (you) might like a home but despise its wood- paneled walls, shag carpet, and lurid orange kitchen. When you work with an agent, you can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home without insulting the owner. Your agent will translate that to the seller — that you very much like

the property but can see having to spend a certain amount in decorating costs, and thus can offer that much less.

CONTRACTUALLY SPEAKING…

There are many contracts and documents involved in purchasing a house. The stack is more than an inch thick. Unless you’re a real estate lawyer or title agent, these documents will be foreign to you. Yet, they require detailed and accurate completions. Buying a property is not necessarily a “fill-in-the- blanks” transaction. One mistake, let’s say in title work, could haunt the buyer well down the line after purchase. This very situation happened. A property that sat on a double lot was put on the market. The neighbor bought it to carve off a bit of the second lot to expand his own yard. The seller then put the home back on the market, and it sold. Months later, through a property tax notification, it came out that, in preparing new deeds for the properties, the expanded yard area was correctly in the name of the neighbor; however, the house had been transferred to the home buyer. The new homeowner now owned both houses, and the neighbor owned his expanded driveway and yard. Fortunately, they were good neighbors and settled the matter with a few signatures. A real estate agent deals regularly with these contracts, conditions, and unexpected situations and is familiar with which conditions should be used, when they can safely be removed, and how to use the contract to protect you.

YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY

The point of not using a real estate agent would be to save money,

right? Otherwise, why would someone turn down professional assistance in finding a home? However, it’s unlikely that both the buyer and the seller will reap the benefits of not paying real estate agent commissions. It works like this: An owner selling on his own (FSBO) will price the house based on the sale prices of other comparable properties in the area. Many of these properties will be sold with the help of an agent; therefore, the seller profits in getting to keep the percentage of the home’s sale price that might otherwise be paid to the real estate agent (usually 6%). Buyers looking to purchase a home sold by owner without an agent may believe they can save money on the home by not having an agent involved, and so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unless the buyer and seller agree to split the savings, they can’t both save the commission — and that’s if the listing price was not already lowered by near the commission amount to make it more market-attractive. Here’s a short list of the advantages that using a real estate agent can bring to your buying experience:

• Education and experience • Neighborhood knowledge • Price guidance • Market conditions information • Negotiation skills and confidentiality • The ability to handle paperwork • The ability to handle closing questions • Relationships for Future Business

It’s extremely important to know the “ins and outs” of real estate agents before you bring one along with you to help in your search 6

for a home, just so that you might know what to expect, and what will be expected of you.

WHO A REAL ESTATE AGENT IS GENT IS

Simply put, a real estate agent is someone licensed to list and sell real estate, including homes, multi-family properties, commercial, and industrial buildings. A Realtor®, however, is somewhat different. A Realtor® is a member of the National Association of Realtors®. While an agent is always a real estate agent, a real estate agent isn’t always a Realtor®. As mentioned, real estate agents who work on behalf of the best interests of the buyer are commonly called buyer’s agents. All listing agents represent the seller, but other agents who don’t have buyer-agency agreements with prospective buyers — even though they may show homes to those buyers — are working on behalf of the seller and must obtain the best price they can for the seller. In contrast, buyer’s agents work on commission, which is contracted in the listing agreement. When a buyer’s agent brings the buyer, the listing agent must split the contracted commission with the buyer’s agent.

HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS UR NEEDS

You might feel the urge to pick the first real estate agent who appeals to or approaches you, but that’s something to avoid. As with any professional, there are degrees of professionalism, dedication, and experience. The “wow factor” will simply wear off. Meet with prospective buyer's agents in their offices. A good buyer’s agent will want to know whether you’re preapproved for

a loan by a financer, what kind, and the terms of the loan you’re getting. They should spend adequate time to discover what you’re looking for in a house. They should listen as much as talk and ask questions. Watch to see if the agent makes notes. If the agent doesn’t broach the topic, ask for an explanation of his understanding of agency relationships and obligations to you. The law requires agents to explain whether they’ll be working for the buyer or the seller whenever they have substantive contact with a customer or prospective client. If the agent doesn’t offer you a buyer’s agency agreement, that agent is representing the seller, not you. If the agent can’t explain agency concepts to you, then move to the next agent. Be sure that the agent will be showing you all listings or properties on the market that meet your requirements, and not only listings that are handled in-house. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even when an agent will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and take you to see viable prospects. A good buyer’s agent will provide a home-buying education. The listing agent will point out all the features of a home; a good buyer’s agent will point to the faults — or advise when they can be overlooked. Competent buyer’s agents help their buyers to think clearly as the home-buying process unfolds. For example, if a house is a good buy, a buyer’s agent might suggest looking past the dated bathroom and kitchen and look at the space above the garage that will make the perfect art studio you desire. Likewise, a cute house with all the amenities but with knob-and-tube wiring or a 40-year-old roof might not be worth the asking price. According to the San Francisco Chronicle’s Home Guide, if you decide to buy with the intention of building an addition, the agent should

advise you to check the zoning before making an offer.

Agree to sign a buyer’s agency agreement after you have met with an agent. Some people sign an agency agreement after attending a showing given by the agent. Working with a seller’s agent is a mistake, according to an article by Amy Fontinelle of Forbes’ Investopedia. Any information you reveal will become leverage that the seller can use in a purchase negotiation. A buyer’s agent is legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties.

LOOK FOR PROPER CREDENTIALS

You wouldn’t trust a doctor who didn't have the proper credentials and licensing. Don’t trust a real estate agent who doesn’t present theirs or doesn’t have them at all. It’s easy to find real estate agents who can take the job, but finding agents with special credentials — those who have gone that extra step to take additional classes in certain specialties of real estate sales — is worth looking into. Here are just a few credentials within real estate that you should be on the lookout for: • Accredited Buyer’s Representative (ABR): Completed additional education during representation of buyers in their transactions. • Certified Residential Specialist (CRS): t (CRS):Completed additional training during the handling of residential real estate, such as houses and apartments. • Seniors Real Estate Specialist (SRES): RES):Completed training for the purpose of helping sellers and buyers 50+ years old.

Similarly, if you choose to use a real estate agent who’s also a member of the National Association of Realtors®, it will be a bonus. However, ensure they have credentials that are relevant to your need(s).

RESEARCH LICENSING

Your state will have a license board for all active Realtors® and agents, which you can easily access. You will also be able to see their contact information, disciplinary actions, complaints, or any other information that you’ll need to help influence your decision — especially since most of the information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good agent will know about all the other properties for sale in the area. Also, a good agent always does their research regarding the events in the current market, and those homes that are out there for the taking. In short, you want an agent who’s an expert of the current market, and someone who always stays on top of things.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence that a real estate agent has is the best way to figure them out. Ideally, you’re going to want an agent who specializes in one or two real estate markets, and who understands which types of homes and amenities are available within your price range. You can unearth this information by asking them or by asking the state licensing authority if you’re not comfortable with asking the agent directly. You’re better off with an agent who’s engaged actively in one area and price range — e.g., residential homes around the $200,000 to $250,000 range or the $400,000 and up range.

GOING THE BUYER'S AGENT ROUTE

So, you’re ready to take the plunge and look for a place to call “home.” To get the most out of it, use a buyer’s agent to avoid a flurry of paperwork, stampedes of buyers competing for the same property, and other challenges. Home buying can be exciting and exhilarating, but it can also be complex and stressful — which is why having a pro by your side can make an enormous difference. As discussed, you’ve probably heard of buyer’s agents, seller’s agents, listing agents, and so on. You’re a buyer, so what’s a buyer’s agent? True to the name, buyer’s agents assist home buyers every step of the way; they can also save you both time and money on the road to homeownership. When you find the right one for you, these real estate agents will work day and night to ensure all your needs and requirements are met when it comes to finding the right home.

WHAT BUYER'S AGENTS DO FOR YOU

Your buyer’s agent will have a vast knowledge of the current real estate market for the area, which will include neighborhood amenities and conditions, the law, zoning issues, price trends, negotiations, taxes, financing, and insurance. Once you meet with the buyer’s agent, they’ll generally help you determine your needs and wants when it comes to finding a home and a neighborhood. The agent will teach you what you can afford, help you set a budget, provide some insight on the current conditions of the market, and explain what you should expect while shopping for a home. During the shopping period, you’ll meet with your agent for tours of homes in which you might be interested.

They will give your insight into the floor plans, the home’s pertinent selling points, and the overall crime rate of that neighborhood. They will also give you the rundown for local activities, restaurants, shopping centers, and schools nearby. Your agent is responsible for ensuring inspections of the homes are complete, as well as the disclosures therein. They’re also in charge of ensuring coordination and completion is done through the roof inspector, attorneys, lenders, and all other professionals involved with the purchase of the home. If bargains need to be made over the price, you won’t have to negotiate yourself. Your buyer’s agent will do that for you, along with signing the final closing documents. They will be present whenever there are documents to go through and sign.

DUAL AGENCY: THE BASICS

A “dual agency” relationship occurs when a buyer is being represented by a brokerage firm that controls the listing. Once an agent represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple states, this is illegal because of the conflicts of interest that can arise regarding the broker. All agents hold the same responsibility, which is to inform their clients of all potential risks that could arise due to conflicts of interest. Legally, agents are not allowed to work on both sides of any transaction without consent from the clients. If you’re selling your home and you don’t want your agent to also work with the buyer of your home, it’s your right to say so in the listing agreement. This is also true for buyers. A buyer can get out of an agreement with an agent if they are interested in purchasing a home their agent is listing.

When it comes to dual agency, there are definite advantages for the seller. • Trust has already been gained with your listing agent, so representation for the buyer has been established. • Your agent brought you the buyer knowing that you’re selling, even if your property has not yet hit the market. • Your listing agent will have already covered and researched your neighborhood’s market to gain buyer inquiries, which means your agent will be working from all sides of the deal to sell your house faster, and with more incentive. • Your agent works together with corporate relocation buyers who need to find a house quickly, and they will ensure it’s your house that’s bought. There are also cons for the seller when it comes to dual agency, and they are: • You can’t be advised by your agent as thoroughly when they must act as a dual agent because impartial facilitation is required. • Your listing agent is not allowed to negotiate the best or highest price for you if also negotiating both the best and lowest terms for the buyer. • Earning a full commission, if the opportunity arises, may tempt the agent to coerce a deal that you might not accept otherwise. • Your agent may inhibit all access to your listing through buyers with agents.

To avoid surprises or missteps in a dual agency sale, always ensure you have clarified important details with your agent ahead of time. You can do this by using an exclusive buyer agency agreement, or a listing agreement.

HOW REAL ESTATE AGENTS ARE PAID

The National Association of Realtors® 2021 Profile of Home Buyers and Sellers states approximately 8% of homeowners opted to put their homes up for sale in 2021 without using a real estate agent or Realtor®. A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related; Real estate agents and Realtors® — unlike professionals in different categories who bill by hourly rates or earn a salary — get paid through a transaction (commission) at the end of each sale. For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction goes through to settlement (closes) based on the selling price of the home. At that point, the commission is earned. The commission itself is negotiated — in most cases, between the seller and the agent. Typically, an agent will earn a commission of 6% from the sale price, but some brokerages have commission discounts for the sellers with whom they work.

Essentially, the listing agent and the buyer’s agent will split the

commission. That can bring forth some issues. For example, sometimes the split might not be negotiated evenly. A seller could have agreed to pay a commission of 5.5% that, if further divided, the buyer’s agent would receive 2.5% while the listing agent receives 3% of the commission. Even though some agents are associate brokers, or brokers in general, all commission payments are instructed to go through to the broker who’s managing the brokerage where the agent is working. From there, the commission is then split to the agent and the broker, according to the agreement that’s been made. The split will vary; sometimes, newer agents will earn a small portion of the commission compared to the experienced or successful agents who generally sell more expensive properties or homes.

PAYING THE COMMISSION ITSELF

The overall commission is paid for at the settlement period by the seller. The fee is taken from the proceeds of the sale of the home or the property. However, the buyers pay the commission because they’re literally paying to purchase the house, while the sellers take the commission for the agent into account during the process of determining the price for the listing. From there, the commission is then divided during the settlement process between the buyer’s agent brokerage and the listing agent’s brokerage. Afterward, the agents who made the real estate sale are further paid by their brokers.

CHAPTER 2 Owning vs. Renting

Owning your own home might be one of the defining qualities of the “American Dream:” the set of ideals that includes opportunity for prosperity and success and an upward social mobility for the family and children, achieved through hard work. Home ownership is surely ingrained as one of the strongest representations of that vision — 66% of Americans own their own home, and more hope they will or wish they did. Something about home ownership plucks a strong chord with Americans. Financial security, permanency, status, and pride are values many of us seek. Lifestyle plays a big role in the decision to own versus rent. Home buying is most often driven by household formation, such as marriage and growing a family. Less than 40% of people under 35 years old own homes, 60% of people over 35 years old own homes, and more than 80% of people 65 years old or over own homes. Interestingly, for the millennial generation, the primary reason for buying a home? Owning a dog. The U.S. homeownership rate has fluctuated between 62% and 70% since the 1950s. Most young people begin their independent lives renting an apartment, maximizing lifestyle flexibility and minimizing the hefty upfront costs associated with purchasing a home. As they build careers, save money, and start families, many choose to buy a home, recognizing that home ownership, as opposed to rental living, is more appropriate to their growing family needs. At the other end of the age spectrum are homeowners nearing 16

retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations, and go back to renting.

WHICH IS BEST?

Is it better to rent or buy a home? Most adults ask themselves this at some point as they form their goals and plan for the years ahead. Before you answer the question, here are some things to ask yourself. Owning and renting each have their advantages, but what’s best for you depends on your circumstances. What will be the duration of your stay in the home? Each market is different, but whether the time you plan to spend in the house warrants its purchase is possible to predict. In general terms, it takes four to seven years to break even on a home (i.e., where there has been enough appreciation to pay back the cost of the transaction and cost of ownership). If you’re thinking about buying a home and selling it in two years, buying is very unlikely to be cheaper than renting. Do you think of or need your house as an investment in your retirement plan? Americans are used to their homes being a store for wealth to liquidate in retirement when downsizing their lifestyle. According to Jacob Passy, a recent study from the Federal Reserve Bank of New York examined consumer preferences toward being a homeowner and how their perceptions have changed over the course of the COVID-19 pandemic. Survey participants were asked to rate which was the better investment—a home or stocks. The results showed that over 90% of the respondents preferred owning their residence rather than investing in the stock market. Majority of the survey participants also favored the idea of being a landlord to buying stocks, with more than 50% of the participating households preferring to own a rental property.

Are you financially ready? Owning a home is a financial

commitment that requires planning how home ownership fits into where your life is headed. Ask yourself what your budget is and if either buying or renting would require you to stretch your finances. Crunch all the numbers. A frequent mistake of first-time home buyers is comparing a month’s rent to a month’s mortgage payment. Many people don’t have all the numbers. There are many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, homeowners’ association (HOA) fees, and ongoing maintenance. Are you prepared for the down payment? This is the lump sum payment that funds your equity in the property (how much of the property you actually own). Down payments vary; 20% is preferred and gets the best rates. There are some loans that allow down payments as low as 3%. Sometimes relatives help with the down payment. If you have a choice, take a gift rather than a loan because lenders will add the loan debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 43% to qualify for a home loan. Can you afford the monthly mortgage and its components? Generally, a mortgage includes loan principal and interest (both amortized over the life of the loan) plus homeowner’s insurance and property taxes (prorated). These items can affect the monthly loan-only payment by several hundred dollars. Are you emotionally ready? Can you handle the stress? A big factor to consider when buying a home is stress. The Holmes and Rahe Stress Scale, a landmark stress study, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28), and change in residence (No. 32). If someone has recently made other life changes, such

as marriage (No. 7), switching careers (No. 18), or having a child (No. 14), it might be wise to postpone buying a home. Stress overload can lead to missed payments, which can result in destroyed credit or even losing the home. It’s better to rent if your life is in flux and then buy when your stress levels are lower. Are you ready for commitment? Are you ready to make lots of decisions, from picking a real estate agent to picking paint colors? Are you confident enough to choose a neighborhood where you believe home values will continue to appreciate and that will serve your needs (i.e., proximity to schools, shopping, recreation, etc.)? Are you ready for devoting the time and attention to maintaining a home (i.e., leaf-raking, grass-cutting, appliance maintenance and repair, etc.)? Taking care of your biggest investment can be gratifying, but only if you’re ready.

ADVANTAGES OF BUYING YOUR HOME

Control over housing expense. By selecting a fixed-rate 15-, 20-, 25-, or 30-year mortgage, the homeowner has assurance that housing costs won’t increase over the period, and, in fact, will be eliminated at the end of the term (subject to refinancing). You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go to homeowner’s insurance and county taxes. The remainder pays down the loan principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual ownership of the property. Further, the property should appreciate in value each year, further adding to equity (what the house could be sold for versus what is owed on it). Discounting certain blip periods, such as the 2006 housing bubble burst, home prices in the U.S. appreciate nationally at an average annual rate between 3% and 5%. Remember, though, home value appreciation in different metro areas can appreciate at markedly different rates than the national average.

Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, while potentially boosting its value. Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: • Homestead exemption. Many states exempt owner- occupied homes (homesteads) from a portion of the property tax amount that would normally accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, so a $200,000 home in New Orleans is taxed as if it were worth $125,000. • Federal tax deductions. When you’re looking to purchase a home, it’s important to understand what can be deducted on your tax return and what can’t. Property taxes and interest paid on your mortgage can be deducted if you itemize your federal income taxes, which can reduce your income tax burden. Many home buyers, unfortunately, overlook the effect of mortgage interest on their federal income tax payments. Mortgage interest can be a powerful financial planning tool. Calculate the amount of mortgage interest deductions you are eligible for, and include that in your annual financial planning. Then, make a point of checking Internal Revenue Service (IRS) Form 1098, which you’ll receive from your lender at the end of the year. This form shows the amount of

mortgage interest that you’ve paid. The Tax Cuts and Jobs Act (TCJA) applies from 2018 to 2025 and limits the aggregate deduction for state and local real estate property taxes; state and local personal property taxes; state, and local, and foreign income, war profits, and excess profits taxes; and general sales taxes (if elected) for any tax year, up to $10,000 ($5,000 for marrieds filing separately). This limit does not apply if those taxes are paid or accrued in carrying on a trade or business, or in an activity engaged in for the production of income. In other words, if you are just living in your home, you can only claim up to $10,000 in tax deductions on your property, but if you are earning income directly from your home in some way, the limit might be waived. Current mortgage rates are relatively moderate. Interest rates vary through the years. In the last few years, interest rates dipped quite low, and for a little while it was less expensive to obtain a mortgage. While these costs have increased, good rates are available to borrowers who are ready to become homeowners. Ownership rights and creative freedom. Your decorating and home-improvement choices are just that — yours, provided they don’t break building codes or violate homeowners’ association rules. You can paint walls any which way, add fixtures, update or finish your basement, or build a patio or deck. Changing your environment to suit whims is a freeing aspect of homeownership. A sense of belonging to the community. Homeowners tend to stay in homes for longer than renters and are more likely to grow roots. They might join a neighborhood association, volunteer at a nearby community center, join a school group, or align with a business improvement district. Renters might not do any of those things, particularly if they know their lease is up in a year and 21

they might move. There’s an intangible pleasant feeling attached to owning your own house — a sense of freedom and independence. The home you live in belongs to you, and you can do what you want with it. You aren’t daunted about increases in rent or losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area on a more permanent basis; you never need to worry about a notice from the landlord to vacate your rented house or apartment for a variety of reasons over which you have no control.

ADVANTAGES OF RENTING

It seems a shorter list, but one man’s pro is another man’s con, and there certainly are advantages to renting to factor into your buy- or-rent decision. No responsibility for maintenance. Admittedly, this is a big one. As a renter, you’re not responsible for home maintenance or repair costs. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person — you just call your landlord or superintendent. Renters in condos, townhouses, or apartments don’t have lawn and grounds care obligations. Relocating is easier. When renting, relocating for work is easier. Though a sudden move may require you to break your lease, you can partially offset the cost by subletting your apartment or talking with your landlord. On the other hand, selling a home takes time and effort. If you have a short timeline to sell your home, you may be forced to accept a lower price and lose some of your investment. No real estate market exposure. Home values fluctuate and can decline over time. If you’re a renter, that’s not your problem. If you’re an owner trying to sell — it is.

DISADVANTAGES OF OWNING

Maintenance. The renter’s largest advantage might just be the homeowner’s major disadvantage. While insurance might be available to protect against expense from major catastrophe, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the baseboards and can also be as extensive and expensive as replacing a HVAC system or sewer pipe. The expense will vary from year-to-year; however, you can expect to pay about 1% of the value of your home annually toward these expenses. If you live in a $200,000 home for 10 years, that’s $20,000 over the period, and perhaps more if you must replace a costly, long- lived mechanical item, such as a furnace. Keep in mind the usual homeowner’s chores of lawn care, snow removal, gutter cleaning, and other regular home maintenance needs. Upfront and closing costs. Buying a home entails numerous upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, while others are paid at closing. These include earnest money, down payment (typically ranging from 3.5% for FHA [Federal Housing Administration] loans to more than 20% of the purchase price), home appraisal, home inspection, property taxes, and first year’s homeowner’s insurance. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange for the sale of a residence. Selling the home from out of town involves special logistics and financial matters, such dealing with the mortgage while the home is on the market. Financial loss potential. Homeownership builds equity over time; however, equity doesn’t equate to profit. If home values in your area go down or remain stagnant during your time as a

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