Aram Zoraian - COMPLETE GUIDE TO BUYING A HOME

COMPLETE GUIDE TO BUYING A HOME

Aram Zoraian

Table Of Contents

How Real Estate Agents Help Home Buyers

Owning Vs. Renting

Buyers' Needs And Desires

Real Estate Horror Stories To Learn From 31

Searching For The Right Home

Buying A House: Negotiation Dos And Don'ts 46

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 ARAM ZORAIAN

Born in Los Angeles and having been raised in Orange County for the majority of his life, Aram is deeply rooted in Southern California and has now taken all of his passion and Real Estate knowledge out to Kern County in the city of Bakersfield, CA. Aram has a high understanding of

what it means to transition from home to home and all that comes with the real estate buying and selling process. Whether it be moving out of state, out of the country, or relocating to a new city, or just down the street, you will always find Aram going above and beyond with the utmost professionalism and empathy when dealing with any of his client's real estate needs. Now teamed up with one of Bakersfield’s top growing Real Estate Brokerages with My Realty Company, Inc and The Zorian Group Real Estate, Aram is looking forward to providing the best possible service, value, and results that will lead to an everlasting impact within his local community by building lasting relationships with each and every one of his clients, local homeowners, and business owners in the area by simply helping them meet their real estate goals and needs; whether that be buying, selling, relocating, or acquiring properties to help build their overall investment portfolios. Aram acquired his Bachelors of Science Degree in Business Finance from California State University, Long Beach, and has

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helped in selling millions of dollars worth of product, while also helping manage a vast array of businesses throughout his career. This has all lead him to his passion and success within Real Estate. Never in a million years did he think he’d stumble into the Real Estate Industry as a REALTOR®, but you can’t always predict where or when you’ll discover what you’re meant to do in life, and he has indeed done just that and has found his true passion. Aram grew up playing organized Soccer, Baseball, & Basketball throughout his life, as well as his father, was a professional soccer player and entrepreneur who always taught him about hard work. This has helped foster his work ethic, leadership, social skills, and his understanding of the importance of teamwork. Through his experience, education, and uncanny knowledge of the market, Aram can leverage his skills to be able to take a unique and strategic approach towards every transaction in order to expertly guide all of his clients in a way that is specific to their unique and current life situations, and ultimately put them in the best possible position to win, make more money, and help make their real estate dreams and goals a reality! Aram has worked and sold everything in Real Estate from Residential, Commercial, Multi-Units, Mobile/Manufactured Homes, Agricultural/Vacant Land, and even Business Opportunities. As Aram's career has continued to advance and he is now capable of helping anyone with any type of Real Estate transaction, he has also found that the majority of his real estate dealings and clientele have come at the hands of helping a particular group of people who have had issues and difficulties with certain types of sales in the past. This has now led him to become an expert in these areas and types of sales and has become a primary focus for Aram in helping homeowners in his local market and community with these types of Niche Sales: • Expired Listings - Helping homeowners sell for top dollar iv

who have listed their homes for sale previously with another agent, and were unsuccessful in getting the home sold the first time around, leading to their properties consequently fall off the market. Aram makes it a priority to reach out to families and homeowners who have gone through these similar circumstances, and has had great success in helping owners their second, and sometimes third time around in selling their properties when listing with him by strategically assessing and going over in detail with the seller what was done wrong the first time around, and making sure to teach and guide them in not making those same mistakes again and to switch their marketing and selling strategies their next time around. Aram has never taken an Expired Listing in his career and has not been able to sell it for top dollar at market value or above. • For Sale By Owners - Helping homeowners sell for top dollar who attempted in trying to sell their home on their own at first, but were unfortunately unsuccessful in bringing forth many qualified or approved buyers with top dollar offers in a timely manner. This is usually due to a lack of exposure, expertise, marketing, strategy, negotiation, or simply just not knowing the full nuances on the back end of how the business fully works, all in an effort to try to save money by not paying any commissions, etc. (Statistics show that on average, only 2% of all For Sale By Owners are successful in selling their properties on their own, whereas approximately 98% of homeowners tend to list and sell their homes with a Real Estate Agent at some point or another. Out of the

2% of homeowners who are in fact successful in selling their homes on their own, statistics also showed that on average For Sale By Owners made about 10-15% less than the average local market value, and than all the homes that were sold and listed with a Real Estate Agent on the open market). That is tens of thousands of dollars lost in equity to a Seller that they could have potentially made or saved on their investment, even after paying a commission to an agent most times had they had the right pricing, marketing strategy, and negotiations on their side. Aram has worked with multiple For Sale By Owners in the past who decided to entrust in his skills and give him a shot, and has never once disappointed or not delivered for his previous clients. Once Escrow is closed, the funds have hit the Sellers bank account, or they receive their final paycheck along with their closing packet, all clients had walked away with more money than what they initially had expected. In this book, I am now giving you the blueprint and proven strategies to try to attempt to do this on your own. • Notice of Default or Foreclosure Proceeding Property Owners - Helping homeowners who have received a Notice of Default or are going through a Foreclosure. It is imperative to help homeowners understand all of their options to save their homes before it is too late as time is of the essence in these circumstances or transactions. If all options have been exhausted, Aram will expertly guide and help sell their properties for top dollar before risking losing it to the Bank or a Lender, only for it to go through a Trustee Sale/Auction and be sold to another investor or

buyer for pennies on the dollar at below market values. Aram prides himself on helping homeowners going through these difficult times and situations to not only save their name and credit by avoiding a Foreclosure altogether from showing on their record, but most importantly in helping them cash out and walk away with any equity and money that they still have within their property before it is too late and they have to short sale or lose the property entirely. For Sellers: Aram Will Help You Maximize Your Home Equity & Get You Top Dollar For Your Property: “I am your neighborhood expert! I will make it my top priority to know what's going on in your area that would affect the price of your property and will give you a proper suggested listing price option depending on if you wanted to do a major remodel, minor remodel, or sell your property in "As-Is" condition. I will also make sure to keep you informed and be in open communication with you from day one throughout the entire process. Need a quote from a home stager, contractor, carpenter, painter, plumber, electrician, clean-up service, inspector, lender, or escrow/title company? I will also connect you with my network of people that will give you a great discount, and will strive to be your one-stop shop, and make sure that you ultimately get top dollar for your property.” For Buyers: Aram Will Help You Build Wealth Through Home Ownership: “I understand that buying a home or a business is one of the most expensive purchases that you will ever make in your lifetime, and because of that, I will make sure to go above and beyond, and go the extra mile to help you find the perfect home or commercial property that will suit your business goals. I will make sure to vii

assist you through every step of the way from getting prequalified with a lender, to writing a strong offer that will set yours apart from the pack amongst other buyers in the market, to strategically negotiating the best price and terms, and finally getting you the home or commercial building of your dreams. I always pride myself on integrity and being honest with all of my clients even if it is not always what they are wanting to hear. Honesty and transparency are key, and guiding all of my clients through every step of the buying or selling process while working diligently to assist them and keeping them informed throughout every step of the way until escrow is successfully closed, keys are handed over to them, and their real estate goals have been met and become a reality.”

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Testimonials & Reviews Here’s a list of a few people whom I have helped buy or sell a home, and what they said about working with me: "I had the honor of working with Aram as my Realtor to buy my most recent house. I have purchased homes in the past, but this real estate transaction was different! Aram went above and beyond to help me get this highly sought after home. There were a lot of bumps and some unusual aspects to my deal that he found ways to overcome. He has a fantastic network of various real estate vendors that he utilized to help me pull of this miracle! One thing I felt with Aram over other realtors was that he has this personal care factor for each and every client he works with. I met him through the real estate buying process, but we've since become friends. He loves taking on challenging real estate deals and always seems to find ways to make magic happen! If you're looking to buy or sell your home and are looking for a realtor who knows all the ins and outs, someone to either save you money or help you get top dollar, who has a personal care factor that goes far beyond just the commission, and someone who goes above and beyond AND keeps you in the loop - then go with Aram."

-V.E.P.

"Aram Zoraian Is an absolute dedicated professional. He takes his job seriously and out performes the competition. He follows through day and night Regardless He has gone above and beyond expectations and has great connections with in the real- estate industry. He's tedious and focused. Has truly been a blessing working with Aram. I worked with a few other realtors and Aram is well above their standards. I highly recommend Aram to anyone looking for property' He'll find you the best fit for your budget regardless of what it is. Work on the deal that

has your best interest at at heart. I would give Aram 10 ☆☆☆☆☆☆☆☆☆☆ stars if I could." -L.M.

"I’ve used Aram twice so far, and I was impressed both times. I sold a property with Aram two years ago that I tried to sell initially with a different agent the first time around who simply just did not get the job done. Aram worked hard to sell this home and I got to see him first hand in negotiations and he is one of a kind. He just recently sold another property of mine. Everything went quickly and smoothly. Both of my real estate deals were done very quickly and professionally. Aram is honestly the BEST in his business. I would highly recommend him."

-G.P.S.

"My experience with Aram during the entire home buying process, from start to finish, has been nothing short of exceptional. I have a unique work structure, and because of this, it was very difficult to find mortgage lenders that would approve me for a home. I was very frustrated and on the verge of giving up, but Aram insisted that we continued searching. He always had a positive and caring sense to him and a unique way of making feel comfortable and optimistic about things to continue forward even when I was at times feeling discouraged. Not only did he partner me with a mortgage lender who was able to get me qualified and was great, but also with a mortgage and a rate that I felt great about as well which was lower than any of the rates I was quoted with all of the previous lenders I had spoken with prior to meeting with him. All thanks to Aram's perseverance and a random phone call is the reason I am now a homeowner. He is professional, punctual, very knowledgeable, detailed, and very strategic when it comes to writing up offers which I never would have thought was so important until I seen

how everything played out in the end as he explained to me it would have from the very beginning, which I was amazed and grateful for. He is very easy to work with. With the highest regard, I will recommend Aram to all my friends and family."

-C.S.

"Aram was the ‘best’ agent, He was always on call & response time very quick. Highly recommend Aram. We bought our first home and Aram made our first buying experience a pleasant one. He is friendly, hardworking and always available for the client. Great customer service and attention their client's need. Thank you Aram."

-A.S.

"Aram is definitely a problem solver!! He has a great proactive mindset. I appreciate his honesty and engaging personality. I feel he understands the housing market and gave us info that was insightful when I was purchasing a new home."

-N.G.

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 representing buyers are paid for out of the sellers pocket and the listing agent’s commission, and at no expense to the buyer. So, I’m not looking to part you from your money. Instead, I’m giving you the benefits of experience and advice I have gained throughout my real estate career in selling houses and being in real estate transactions — for both sellers and buyers. If you are in the state of California however and want me to help you find a house, we can definitely 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, Realtor.com, Homes, Redfin, or one of the hundreds of other real estate websites out there. 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, friends and fam! The reasons to use a real estate agent in today's market are as valid as yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their 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 even pay any of the commission to a Realtor or an agent on the purchase of a home in the first place. On most home sales, there is a "listing agent" (the agent representing the seller and engaged by the seller to sell the property) and a "selling agent" (the agent who represents the buyer and 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 or a forgotten disclosure, could haunt the buyer well down the line after a 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 and your interests, and avoid any legal disputes down the road.

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 a property 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:

• Its FREE to a Buyer (Seller pays the commissions) • Education and experience • Neighborhood knowledge • Price guidance

• Market conditions information • Negotiation skills and confidentiality • The ability to handle paperwork and legal disclosures • 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 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 and make sure to do your due diligence on the best qualified agent. A good buyer’s agent will want to know whether or not you are pre- approved and qualified for a loan with a lender, and what kind of loan and terms you are getting. They should spend adequate time to discover what you’re looking for in a house. They should listen as much as they talk and ask questions. Watch to see if the agent makes notes on all of the criteria, and everything you are sharing and saying to them. If the agent also doesn’t broach over the topic of agency relationships and obligations to you, ask for an explanation of his understanding of it. The law requires that all agents are to explain whether they will be working and representing you the buyer or the seller, or both as a dual agent 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 on 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 and you only. These are their 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 or on the DRE website.

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 in the home buying process; 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 home, termite, and roof inspectors, attorneys, lenders, escrow officers, title officers, and any 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 all of that for you, along with the negotiating on request for repairs, and with the 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 and an agent that controls the

listing as well. Once an agent represents both the seller and the buyer within the same transaction, the situation is known as a “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® 2017 Profile of Home Buyers and Sellers states approximately 8% of homeowners opted to put their homes up for sale in 2017 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; 87% of buyers chose to work with a real estate agent or Realtor®, on the buyer’s side. 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. 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. In 2015, Gallup reported that for the second straight year, more Americans named real estate than stocks, gold, savings accounts/CDs, or bonds as the best long-term investment. Real estate leads, with 31% of Americans choosing it, followed by stocks/mutual funds at 25%. A cautionary note though — although home prices have recovered their pre-2006 market slump and continue to rise, the value of your home can fall, as well as rise. 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 low. Interest rates vary through the years. Several years ago, interest rates were higher, and it was more expensive to obtain a mortgage. Since these costs have been reduced, it’s now easier and less expensive to own a house. 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 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

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