By Tony Marriott - Arizona Home Buyers Playbook

Arizona Home Buyers Playbook

By Tony Marriott y Marriott

Table Of Contents

How REALTORS® Help Home Buyers

Buyers' Needs and Desires

Owning vs. Renting

Home Warranty

Searching for the Right Home

Buying a House: Negotiation Dos and Don'ts 51

What to Know About Home Inspections

Shopping for a Home Loan

Programs for Buyers

10. Contract to Close of Escrow

11. Organizing Your Move

Foreword Welcome to the exciting journey of homeownership in Arizona! In the pages that follow, you will embark on a comprehensive guide designed to empower and guide you through the intricate and rewarding process of buying a home in Arizona. Whether you're a first-time homebuyer or someone looking to make a change in their living situation, this book is crafted with you in mind. Buying a home is more than a transaction; it's a significant milestone that marks a new chapter in your life. It's an investment in your future, a place where memories will be made, and a sanctuary that reflects your unique identity. However, navigating the real estate landscape can be daunting, filled with complexities, terminology, and choices that may seem overwhelming at times. This guide aims to demystify the home-buying process, breaking it down into manageable steps and providing you with the knowledge and tools needed to make informed decisions. From understanding your financial readiness to exploring neighborhoods, negotiating deals, and navigating the paperwork, each chapter is a step towards achieving your homeownership goals. We understand that this is not just a financial investment but a personal and emotional one, and our goal is to equip you with the information and confidence needed to make the best choices for your unique situation.

As you turn the pages, consider this book as your trusted

companion, guiding you through the intricacies of the real estate market. Remember that every homebuyer's journey is unique, and there is no one-size-fits-all solution. Instead, think of the knowledge gained here as a toolkit that you can tailor to fit your individual needs and aspirations. Congratulations on taking the first step towards homeownership! May this guide be a valuable resource as you embark on this exciting adventure, turning the dream of owning a home into a reality.

Happy home hunting!

Tony Marriott

First Edition - May 2024

Our thanks to our editor:

Marte Cliff marte@copybymarte.com www.copybymarte.com Priest River, Idaho 208-448-1479

and to:

Casey Doty for the custom book cover

Also to our publisher Authorify and their team that transforms my written words into these polished digital and print books. The links in this book are current and active as of this writing. If you find a "broken" link please let us know so we can update it.

Video Testimonial estimonial Buyer Testimonial from Vish & Preethy (relocated from New York) Chief Technology Officer at Mayo Clinic and Head of Product at Matterport Click the link below to view the recording, or if you prefer, just read the transcript.

https://youtu.be/rCrOy9jVP20

Transcript

Vish: Preethy and I were moving from New York to Arizona for a change of job and we were introduced to Tony and Jim. We really had no idea about what to expect in Arizona. We had a very short time frame; the schools were starting in July and we started our house search really the end of May I think. Preethy: Yeah, after Memorial Day. So it just felt throughout the whole experience like Tony and Jim really like guided us through it. All in all we are super excited and happy about where we ended. But it really only happened because we had this overall Concierge service, not just about buying a house but really about like what does it take to move to a completely different place and like find a home and do it all kind of on your own in like a 2 months’ time period. I don’t think we could have quite managed all of this without them. Vish: It was overall a very, very smooth experience – it was really up to us to make some decisions but beyond that the process itself was very seamless and convenient for us.

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Buyer Testimonial from Nikhil (relocated from California) Vice President of Operations at Custom Control Sensors. Click the link below to view the recording, or if you prefer, just read the transcript.

https://youtu.be/wWsWVFCyaH8

Transcript

Yeah so this whole experience has been really fantastic, I'll try to be as brief as I can but to give you the details. The company we were moving our headquarters from California to Arizona, to Phoenix, and the challenge was the timing of events. It's not like we were setting up a new plant, we were actually moving our existing headquarters to Phoenix, and I knew nothing about the Phoenix area, other than a few friends who gave us some tips. I really did not, we really did not venture out to find any other brokers, the company was nice enough to introduce us to Tony. And the Tony/Deb, the Tony and Deb show if you will, they were fantastic. In a short span of time the number of houses we saw, and not just the number of houses but the range of houses we saw, from something like a 2 bedroom to something like a mansion if you will - they were very patient trying to calibrate their search if you will, to our changing needs. It was fantastic, the whole experience was very enthralling, they accommodated us over the weekends. There was actually a time when Tony was videoing a certain area, sharing that, as a matter of fact this home that we finally lined up with we had not seen

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before we put the offer in - so Tony gave us a walkthrough, virtual walkthrough if you will, and by that time as you can tell we had established a level of trust. This is not our first "rodeo" in terms of buying a house, but this experience has been different in many ways. We had to close this in record time like 20 days or what have you and it was like everything that could happen - at one point we seriously thought the stars were aligned against us - two people in a row had the same reason for not being able to close on time but I think the Tony "magic" worked really well to be honest with you. It was very clear he was a true professional, he was very persevering, he had some really good insights in how we could manage the whole situation. As a matter of fact my wife and me and the family were out on vacation which was around the time we were trying to close this - so all in all he accommodated us on a busy schedule - he was here to help us out. It was good - he helped us close within the time and within the budget - I think all in all if it hadn't been for Tony and Deb we would have probably been struggling...

Interested in reviewing additional video testimonials from our delighted customers? Reach out to us for an exclusive look!

CHAPTER 1 How REALTORS® Help Home Buyers

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 an MLS Portal, ColdwellBanker.com, Zillow, Trulia, Yahoo!Homes, Realtor.com, Redfin or one of hundreds of other real estate websites. If a buyer can find and visit a home on the internet all on their own, why involve another party? You would think that having all this information available means there’s no need for a REALTOR®, right? No, that's not right. You still need a REALTOR® to represent you and ensure that your interests are addressed. You need someone working on your behalf who has the knowledge and experience to ensure your transaction goes smoothly. There are many other professional parties involved in a real estate purchase – a lender (unless an all cash purchase), home inspector, title and escrow company, home warranty provider, and mover to name a few. Finding a home you like is just the first step towards a successful purchase transaction. Getting into contract and successfully following the process and timelines from contract to closing requires the services of an experienced REALTOR® to keep things on time and on track.

Currently and typically, buyers do not pay commission, the seller usually covers the commission, so you as a home buyer don't have to worry about whether you can afford us. This may be "technically" changing some time in the future where instead of sellers covering the total commission, the seller may pay the listing agent and the buyer may pay the buyer agent, however, it is widely expected that the sellers will offer a contribution to buyers closing costs, and the buyer broker commission is part of the buyer closing costs - which would have the same effect. Why Home Buyers Need a REAL d a REALTOR® to Represent them Exclusively For most home sales, there is a listing agent. This is the agent hired by the seller to sell the property. It is this agent’s job to represent the seller’s best interests from marketing through closing. There is also a buyer’s agent – the person who represents the buyer’s best interests as they search for a home, as they prepare and negotiate an offer, and as the transaction proceeds to closing. In some cases, the same agent handles both sides of a transaction, in a situation known as dual agency. Although this is a common situation, we do not recommend it. We’ll explain why a little later.

Working with a REAL h a REALTOR® gives you access to market knowledge…

Choosing to work with a REALTOR® gains you access to the full market inventory, including properties that are about to come on the market, and a special knowledge of local conditions.

Despite your REALTOR®’s knowledge of local conditions, you

still have a responsibility to do due diligence regarding schools, crime rate, and other considerations important to you. The fact is, your agent may not answer some of your questions.

The Fair Housing Act

It is a violation of the Fair Housing Act for a REALTOR® or real estate licensee to answer questions such as: • Is this a good place to raise a family? • What’s the neighborhood like? • Is this area safe? • How are the schools here? The Fair Housing Act prohibits real estate professionals, including REALTORS® and licensees, from answering questions that may lead to discriminatory practices or biases. These questions are considered potentially discriminatory because they could be interpreted as related to factors such as race, color, religion, sex, national origin, familial status, or disability, which are protected classes under the Fair Housing Act. To adhere to fair housing guidelines, real estate professionals should provide information about the property itself, such as its features, amenities, and condition, rather than commenting on subjective matters like the suitability of the neighborhood for raising a family, the safety of the area, or the quality of schools. This ensures that all individuals have equal access to housing opportunities without facing discrimination. We can suggest resources you can use to make your own determination regarding those questions:

United States Census Bureau

https://bit.ly/CensusB

LexisNexis Community Crime Map

https://bit.ly/LNCCrimemap

My Local Crime

https://bit.ly/LocalCrime

Great Schools

https://bit.ly/AZGreatSchools

School Digger

https://bit.ly/Schooldigger

Another excellent resource is the Arizona Association of REALTORS® Buyer Advisory:

https://bit.ly/AZBuyerAdv

Is It Already Sold?

Your agent will be able to identify which of the properties on your “short list” are already under contract. This can be important to you because the Internet sites lag behind real time information. More importantly once a property is under contract – yet is still being marketed by the Listing Agent for backup offers, it will often show “Active” on the other internet sites. You may not want to view such houses.

He or she can also locate homes that meet your criteria, contact sellers’ agents, and secure appointments for viewing the homes. Buyers working on their own have a more difficult time with obtaining this information and access. This is even more challenging for a buyer who is moving due to relocation or employment opportunities, and who may be unfamiliar with how a real estate purchase works in Arizona.

Negotiating is Harder on Your Own

An experienced REALTOR® will keep the transaction “professional,” so that personalities and emotions do not become involved. Price negotiations take skill and understanding of the psychology of offering and counteroffering. For example, you might like a home but despise its wood- paneled walls, shag carpet, and lurid orange kitchen. You can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home to your agent without insulting the owner. Your agent will translate that to the seller's agent and present an offer on your behalf to take into consideration those upgrades.

CONTRACTUALLY SPEAKING…

There are numerous contracts and documents involved in purchasing a house. When printed, the stack is more than an inch thick! Unless you’re a real estate lawyer or title and escrow agent, these documents will be foreign to you. Yet they require detailed and accurate completion. Buying a property is not necessarily a “fill- in-the-blanks” transaction. A REALTOR® deals regularly with contracts and works closely with the other parties (title company, mortgage company, etc.)

involved in the transaction to safeguard you from errors.

Buying Without an Agent Won't Necessarily Save You Money

The point of not using a REALTOR® would be to save money, right? Otherwise, why would someone turn down professional assistance (that typically costs them nothing) in finding a home? Buyers looking to purchase a home "For Sale by Owner" (FSBO) without the assistance of a REALTOR® may believe they can save money on the home by not having a REALTOR® involved, and so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unfortunately, the seller has the same idea – they’re trying to sell without an agent in order to save the commission. Unless the buyer and seller agree to split the savings, they can’t both save the commission. Even more troubling is the fact that you could miss important, and expensive, details as you come to agreement on the price and terms. Here’s a short list of the benefits of hiring a REAL g a REALTOR® to assist you in buying a home:

• Education and experience • Neighborhood knowledge • Price guidance • Market conditions information • Negotiation skills and confidentiality • Handle paperwork

• Handle closing questions • Represent your interests

Purchasing a home is a major investment and working with a professional who informs you on what to expect from them and what your responsibilities are is important to a hassle-free transaction. That’s why it’s extremely important to hire the right REALTOR®. One who has knowledge, experience, and the willingness to keep you fully informed at every step in the process. Personality is important too, so choose a REALTOR® whose company you’ll enjoy.

What About Dual Agency?

In our opinion It is not in a buyer’s best interest to use the listing agent and allow that listing agent to “manage” both sides of the transaction. A “Dual Agency” relationship occurs when a buyer is being represented by a brokerage firm that controls the listing. In many states, this is illegal because of the conflicts of interest that can arise. Dual agency is legal in Arizona. However, I never intentionally represent both parties to a transaction.

Our group consists of:

• Tony Marriott, Associate Broker, REALTOR® • Suzanne Marriott, Associate Broker, REALTOR® • Deborah Hickey, REALTOR®

All agents have 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 prior written consent from the clients.

A REALTOR®'s responsibility is to provide fiduciary duties for their client and an agent representing both parties will encounter conflicting responsibilities because their job is to get the best offer for the seller, and at the same time get the best price for the buyer. These objectives are usually opposite. To avoid false expectations, both the Buyer and the Seller must sign a “Consent to Limited Representation” if they choose to use the same agent to handle both sides of the transaction. When you have exclusive representation from a REALTOR® they are legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties. Any information you reveal to a listing agent may, and generally will, become leverage that the seller can use in a purchase negotiation. To avoid unknowingly becoming involved in a Dual Agency transaction, always clarify your agency relationship with your REALTOR® ahead of time. To be sure that the agent is representing you and you alone, you can enter into a “Buyer-Broker Exclusive Employment Agreement”. This is a contract between you, the Buyer, and the REALTOR®’s brokerage. It stipulates amongst other things the amount of commission the Buyer is committing that the REALTOR® will receive. It does not mean that you will pay the commission – most often the REALTOR® accepts whatever the Seller or Seller’s Broker is offering in the MLS. Recently some Listing Agents have started to offer low or essentially no co-broke to the Buyer Agent. Many Buyers have therefore given written instructions to their Buyer Agent to only show them homes that are offering a co-broke commission equal to or higher than the Buyer Agent commission stipulated in the

Buyer Broker Agreement.

Some people sign an agency agreement after attending an open house or a showing given by the listing agent. I believe this is a mistake, and I am not alone in this belief. Amy Fontinelle of Forbes’ Investopedia explains her reasons why in this article:

https://bit.ly/REDualAgency

You Won't Save Money by Agreeing to Dual Agency

Some buyers believe that by working with the seller’s agent, they’ll save money because that agent will reduce the commission. This is usually not true. The commission is contractually agreed upon between the seller and the agent at the time of listing. The only difference is that the commission will be paid to one brokerage and one agent rather than split between two brokerages and agents. What is the Difference Between a REAL n a REALTOR® and a Real Estate Agent? Simply put, all REALTORS® are real estate agents, but not all real estate agents are REALTORS®. All real estate agents are licensed to list and sell real estate, including homes, multi-family properties, commercial/ industrial buildings, farms, ranches, development property, and unimproved land. All are subject to agency laws and the regulations imposed by the State in which they are licensed. A REALTOR® is a member of the National Association of REALTORS® and subject to additional regulations, such as the REALTOR® Code of Ethics.

In addition, REALTORS® have access to education that goes beyond licensing and periodic continuing education classes. REALTORS® can become certified in a growing number of specialties, each of which requires hours of class time, plus testing.

What is the Difference Between a REAL n a REALTOR® and a REALTOR®/BROKER?

First, every real estate agency/brokerage must have a Designated Broker. This person is ultimately responsible for overseeing the activities of agents and brokers whose licenses are hung with that brokerage. This terminology can be confusing for people coming to Arizona from other states. In some states, all agents are called brokers, while in Arizona and many others, becoming a broker takes more effort and education. Only about 11% of REALTORS® and real estate agents in Arizona are brokers. To become a Broker in Arizona, a licensee (REALTOR® or real estate agent) must: • Submit proof of Arizona residency • Be at least 18 years of age • Have been licensed for at least 3 of the past 5 years and working full time as a REALTOR®

• Complete 90 hours of Broker education • Complete a broker management course • Pass the Arizona real estate broker’s exam

Thus, while we believe becoming a REALTOR® is a step up from being a real estate agent because of the additional commitment, becoming a broker is yet another step up.

How to Choose the Best Agent for Your Needs

You might feel the urge to pick the first REALTOR® who approaches you, but that’s something to avoid. As with any profession, there are degrees of professionalism, dedication, and experience. Meet with prospective buyer's agents in their offices or "face to face" via Zoom or the equivalent. A good buyer’s agent will want to know whether you’re pre-qualified for a loan by a lender, what kind of loan, and the terms of the loan. They should spend adequate time to discover what you’re looking for in a house. They should ask questions and listen more than they talk. If the agent doesn’t raise the topic, ask for an explanation of his or her 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 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 just listings that are handled in-house. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even if 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 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. If you decide to buy with the intention of building an addition to the structure, the agent should advise you to check the zoning before making an offer.

Look for Proper Credentials

You wouldn’t trust a doctor who didn't have the proper credentials and licensing. Don’t trust a REALTOR® who doesn’t present theirs or doesn’t have them at all. It’s easy to find REALTORS® who can take the job, but agents who have taken additional classes in certain specialties of real estate sales are worth hiring. Here are just a few of the real estate credentials that REALTORS® can earn: Accredited Buyer’s Representative (ABR): The ABR designation signifies that the real estate agent has gained additional knowledge and skills to effectively represent buyers in the home-buying process. Certified Residential Specialist (CRS): t (CRS): Certified Residential Specialist (CRS) is the highest credential awarded to residential sales agents, managers and brokers. It is earned through hours of additional education, plus experience both in years and the number of transactions completed. Certified Luxury Home Marketing Specialist™(CLHMS): t™(CLHMS): Recognized as the mark of accomplishment in luxury markets around the world, the Certified Luxury Home Marketing

Specialist™ (CLHMS) designation assures affluent buyers and sellers that the agents who have earned it have the knowledge, experience, competence, and confidence they require. The CLHMS™ designation is earned by Institute Members with documented sales performance in the top 10% of their market. Tony is also a member of the Million Dollar Guild, a distinction earned by have closed multiple "million dollar+" properties. Certified Probate Real Estate Specialist (CPRES): RES): A real estate professional who has completed an educational certification program centered around the probate process. This individual specializes in helping families navigate the estate process after a relative or other benefactor passes away. Certified Real Estate Brokerage (CRB) Designation: One of the oldest and most respected designations in the industry. Elite group – only 3% of REALTORS® have met the requirements. Coldwell Banker Realty Global Luxury: Only 10% of Coldwell Banker agents have achieved this distinction. One of the criteria for this is the Certified Luxury Home Marketing Specialist™(CLHMS). t™(CLHMS). e-PRO® Certification (e-PRO): The e-PRO® certification program enables REALTORS® to master the advanced digital marketing techniques of today. Real Estate Negotiation Expert (RENE): t (RENE): The Real Estate Negotiation Expert (RENE) certification is for real estate professionals who have sharpened their negotiation skills. The RENE certification program gives tips and tools REALTORS® need to be skillful advocates for their clients. The National Association of REALTORS® also offers specialized classes and designations for those pursuing specialized real

estate niches, such as divorce, senior relocation, short sales, military relocation, and many others.

Give the “What Else” Test

A good REALTOR® will know about all the other properties for sale in the area. He or she will know if prices are rising, holding steady, or dropping. Also, a good REALTOR® always does their research regarding developments in the current market that could affect home prices in the future. In short, you want a REALTOR® who’s an expert on the current market, and someone who always stays on top of things.

Research their Business Activity

Learning the type of market presence that a REALTOR® 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. When purchasing your new home, you’re better off with a REALTOR® who’s engaged actively in residential real estate.

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 simplify the process and help you navigate the steps between searching and actually closing on a home. Home buying can be exciting and exhilarating, but it can also be complex and stressful. Having a pro by your side can make an enormous difference.

What Buyer's Agents do for You

When you meet with a REALTOR®, he or she will ask you

questions to create a customized search. The questions will center around where you want to live in addition to the features and benefits you need or want in your new home. He or she will also advise you to become qualified by a lender, so you’ll know what you can afford. Finally, the agent will provide some insight on the current conditions of the market and explain what you should expect while shopping for a home. After a bit of research, your agent will set up appointments for you to tour the homes that meet your needs. You’ll also get insight regarding local amenities such as restaurants, shopping centers, medical facilities, and recreational facilities, plus resources where you can research school districts, crime rates, and other information that agents are not allowed to provide. Once you’ve chosen a home, your REALTOR® will assist you in writing an offer and negotiating the purchase price and terms using the “Residential Resale Real Estate Purchase Contract”. As your liaison with title and escrow company, home inspectors and other professionals involved in the transaction, your REALTOR® will be involved in every step of the process between agreement and closing, and will keep you informed. And finally, he or she will review the final contract documents prior to closing to make sure everything is correct and ready for the closing day. What if you Prefer to Buy a Newly Constructed Home – or to Contract with a Builder for a New Home? Perhaps you dream of owning a brand-new home. You’d like to be the first to stock the kitchen cupboards, hang your clothes in the closets, and walk barefoot on the floors. If that’s your dream, remember to begin with location, just as you would with a previously occupied home. No matter how

much you love the house, if the location is wrong, you won’t be happy for long. Next, avoid the temptation to drop in to builders’ open houses without your agent. This is because some builders will not allow you to use a buyer’s agent if you have already viewed the home without your agent. Some, but not all, will let you use your agent if you hand their agent your agent’s card at the first meeting. And… Home buyers really do need a buyer’s agent when contemplating the purchase of a newly constructed home or when contemplating signing an agreement to have a new home built. The builder’s representative you’ll meet at a builder’s open house is there to represent the builder – and to sell you on three things:

• Purchasing the home for the builder’s asking price • Adding upgrades, including lot premiums • Paying full price for those upgrades

By the way, in all probability, the model home will have those upgrades, so if you contract to purchase a “basic” house, what you see in the model home is not what you should expect to get. The builder’s representative may also discourage you from including home inspections in your contract, and that is a mistake. Sometimes even newly constructed homes have issues that can and should be corrected before you finalize the purchase. In fact, it is wise to hire an inspector who will visit the home several times while it is under construction. Only then can you see what is inside the walls.

Your buyer’s agent will help you choose which upgrades are smart to include during construction, and will help you negotiate both the price of the home and the price of the upgrades. In other words, he or she will save you money. Builders in Arizona typically use their own contracts, meaning their contract favors the builder more than the Resale Contract. Our track record of working with new construction has resulted in savings of thousands of dollars for our clients. Tip: Home builders are highly incentivized to negotiate in the last few days of each month. One of our buyers saved $11,000 on a lot premium, received an additional credit towards options and upgrades of $9,000 - a savings of $20,000 on a home with a $600K purchase price.

How REALTORS® are Paid

In the realm of real estate, the compensation structure for REALTORS® is distinct from many other professional fields. Unlike professionals who charge hourly rates or receive a fixed salary, REALTORS® predominantly earn their income through transactions, specifically in the form of commissions upon the successful conclusion of a sale. This method of compensation is inherently tied to the outcomes of their efforts, creating a performance-driven environment. The commission structure for real estate transactions is currently linked to the selling price of a property. Generally, REALTORS® and their seller clients agree upon a percentage of the property's selling price as the total commission. This agreement is formalized in a contract, and the commission is typically deducted from the proceeds generated by the sale. The total commission is divided between the listing agent and the buyer agent, and it is not necessarily a 50/50 split.

It is crucial to note that the commission is not a flat fee but a percentage, which means that as the property's value increases, so does the compensation for the REALTOR®. This alignment of interests encourages real estate agents to strive for higher property values, benefiting both themselves and their clients. Upon the successful completion of a real estate transaction, the commission is then distributed between the buyer's agent's brokerage and the listing agent's brokerage. This division reflects the collaborative nature of real estate transactions, as both sides of the deal typically have separate representation. The buyer's agent and the listing agent each receive a portion of the agreed- upon total commission, with the remaining funds going to their respective brokerages. As mentioned earlier in this Chapter, in recent years, a noticeable shift has occurred in the real estate industry with the increasing adoption of Buyer Broker Agreements. This marks a departure from the traditional model where sellers were the exclusive source of compensation for both listing and buyer's agents. In this evolving trend, buyers are now playing a more active role in compensating their chosen real estate agents directly. The Buyer Broker Agreement formalizes this arrangement, specifying the terms of compensation, often integrated into the closing costs. Importantly, these agreements serve as a means to confirm compensation to the Buyer Broker, especially in cases where there might be a difference between what the seller is offering. This not only enhances transparency in the financial aspects of the transaction but also empowers buyers to have a more direct relationship with their agents, offering a personalized and flexible approach within the real estate landscape. This shift reflects the industry's responsiveness to changing market dynamics and a growing emphasis on providing clients with tailored and transparent compensation structures.

This commission based model emphasizes the importance of successful deal closures for REALTORS®. It aligns their interests with those of their clients, incentivizing them to secure the best possible outcomes in terms of property value and transaction terms. In essence, REALTORS® only receive compensation when they effectively bring buyers and sellers together, making the commission system a cornerstone of the real estate industry's performance-driven ethos.

CHAPTER 2 Buyers' Needs and Desires Before you begin your home search, take time to think about what you need and what you want. Your needs list might include the number of bedrooms and bathrooms, an office space, room for your grand piano, or a 4-car garage with a work area. Only you know what is absolutely necessary. Now it’s time to think about wants. These are features it would be nice to have, but they aren’t necessary. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room or an Olympic- sized swimming pool with a hot tub and sauna. Sometimes, you won’t find everything you desire in a home and if you do, you may not be able to afford it. It’s important to prioritize the things you want in a home by how important they are in your search. Budget usually constrains us most in selecting a home. While some things are necessary for any home others will just stay on the list of desires for now.

Make a List and Check it Twice

After you’ve thought it through, make a list of your “must-haves” and the “nice-to-haves.” Give this list to your REALTOR® to assist him or her in searching for your perfect home.

Do realize that it’s nearly impossible to find a home that meets all needs and wants. Compromises will be necessary. It’s a good idea to work from outside-the-house factors to inside-the-house. For example, location is perhaps the primary concern, and both “needs” factors and “desires” factors might be involved. A “need” would be “must be within 25 miles of work.” A desire might be, “would like Westwood” (a favored neighborhood), while a need might be “on the west side of the city” (because work, family, friends, and recreation activities are all located there). Location needs may include proximity to schools, frequently used recreation facilities, or mode of transportation (bus or suburban rail access). Whether an item is a need or a desire depends on circumstance. Closeness to family might be a need for a couple with young children or elderly parents to care for — or a desire if those factors aren’t involved. It’s items like these that make a checklist most helpful. After location needs and desires are compiled, housing factors can be considered. Needs include having all essential house structures and systems in good working order. Accepting a house with need for a new roof because the owner is willing to knock $7,000 off the listing price — but it will cost $10,000 to replace the roof in two years — is not a sensible deal. Needs might include a minimum number of bedrooms and bathrooms, no steps, fenced yard, perhaps a first-floor laundry room, and any feature the prospective buyers have decided they cannot accept a home without. Desires are features that make the home more attractive or enjoyable — an upgraded kitchen, walk-in closets, a master bedroom suite. Of course, one buyer’s need is another buyer’s desire. The point is to know your own

needs and desires so you can easily assess potential properties and make the process smoother. Regardless, buying a house is not a simple process. Much of the planning should be done well before looking at homes. Step 1 is contacting a real estate agent so they can recommend resources such as lenders that provide the type of loan you are looking for. Work the costs as well as your budget. Choose a general location. Contact lenders well ahead of home shopping, so that your offers aren’t tied up in getting financial approval.

A Note about Pets

Consider your pets in your home shopping. Home buyers who are pet owners have specific requirements — they must provide for their pets. According to a survey conducted online by Harris Poll on behalf of SunTrust Mortgage. One third of millennial homebuyers said the desire to have a better space or yard for a dog influenced their decision to purchase the home. Dogs ranked among the top three motivators for first-time home purchasers and were cited by more millennials than marriage/upcoming marriage, 25%, or the birth/expected birth of a child, 19%. Of course it’s not just millennials who are concerned with dogs. 44% of all U.S. households include a dog. Even more households include a cat or two, and some homeowners want other animals, such as goats or chickens. If you are a dog lover, check to be sure that the neighborhoods that interest you have no restrictions on pets. Do you raise American Staffordshire Terriers, also known as pit bulls? There are neighborhoods that ban this breed. What about goats or pigs? Have you always wanted fresh eggs from your own chickens? Include your animals in location planning.

After location, consider the features of the home. Some pet owners choose wood or other hard flooring, not wanting to risk pet damage or odors. An appropriate-sized fenced backyard is on the “needs” list for many pet-owning house buyers. Consider the arrangement of rooms and the structure of the house to ensure it’s suitable for your pets, too. Is there a suitable spot for a pet door. Does the flow in the house allow for food and water dishes? Traffic in the area could be another checklist item. Pet services, such as veterinary, grooming, and exercising, should be conveniently nearby.

Location, Location, Location!

You must make sure to limit your search to a neighborhood that offers the closest possible match to the kind of lifestyle that you like and want to live. Trulia recently conducted a survey with Harris Interactive, and found 84% of Americans said the neighborhood would be equally important to — or more important than — the house itself, if they were searching for a new home. Location is so important that people are willing to give up 'must- have' features to buy into their desired neighborhood — 72% would forget about a pool, 55% would lose a finished basement (which are scarce in Arizona), and 33% would accept less square footage. What matters is living in a safe place with good schools. According to Trulia, 69% would drive through the neighborhood during different times of day to determine if the neighborhood was the right fit. It’s critical that prospective home buyers do their own research on schools in the area and check crime statistics.

While a REALTOR® can provide you with tools to check and review this information, they are PROHIBITED by law (Fair Housing) from doing that research for you and rendering an opinion to you. You can’t go shopping for a home without choosing a location where you’d like to live. Probably the most significant decision when buying a home is where it is. Location influences your everyday life. Your property does not exist in a bubble; it’s part of a bigger community. It’s important to find a neighborhood or area that suits your needs. Do you want the peace of a secluded woods, or the energy of a bustling city center? Do some research before starting your search. Drive through the area and see if all the stores, activities, and features you want are there. Eat at local restaurants and walk-through a nearby park. Price is mainly based on the location and condition of the property. When someone starts looking for their house, it’s important to consider the location and its proximity to schools, shopping areas, and other facilities. Home means comfort, and comfort can’t come if the location isn’t suitable.

CHAPTER 3 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 as 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. 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 retirement who may desire to sell their homes, downsize, avoid 27

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. How long will you want to stay in the home? Each market is different, but whether the time you plan to spend in the house warrants its purchase can be predicted. 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. However, there are exceptions to rules. In Arizona we saw a 25% year-over-year appreciation for three years in a row. You could break even or make a profit by re-selling in less than 2 years. That frenzy of price increases has now tapered off, primarily due to the increase in mortgage interest rates. 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 from 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. New homeowners must remember that there will no longer be a landlord to pay for a service call if the water heater quits running or the pluming becomes clogged. 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. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment. 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 to devote the time and attention necessary 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 (aside from taxes and insurance) 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 increase a home's value through home improvements, thus making the home more comfortable and enjoyable while improving 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 Federal and State tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home. 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. Do discuss this with your CPA, as in the past few years there have been significant changes to the tax code.

Current mortgage rates (2024) a s (2024) are significantly higher than a

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