COMPLETE GUIDE TO BUYING A HOME
Published by Authorify Publishing Copyright © 2019 Authorify Publishing
All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. DISCLAIMER AND/OR LEGAL NOTICES: While all attempts have been made to verify information provided in this publication, neither the Author nor the Publisher assumes any responsibility for errors, inaccuracies, or omissions. Any slights of people or organizations are unintentional. This publication is not intended for use as a source of legal or accounting advice. The Publisher wants to stress that the information contained herein may be subject to varying state and/ or local laws or regulations. The reader of this publication assumes responsibility for the use of these materials and information. Adherence to all applicable laws and regulations, including advertising and all other aspects of doing business in the United States or any other jurisdiction is the sole responsibility of the reader. The Author and publisher assume no responsibility or liability whatsoever on behalf of any reader of these materials. If your property is currently listed with a Realtor, please disregard this notice. It is not our intention to solicit the offerings of other brokers. Printed in the United States of America
Table Of Contents
1. Owning VS. Renting
2. Buyers' Needs And Desires
3. How Real Estate Agents Help Home Buyers
4. Shopping For A Home Loan
5. Shopping For A Home Loan
6. Searching For The Right Home
7. Buying A House: Negotiation Dos And Don'ts
8. What To Know About Home Inspections
9. Real Estate Horror Stories
10. The Closing Process
11. Organizing Your Move
When I first ventured into the real estate industry years ago, I did so with the hopes of helping sellers like you avoid the headaches often associated with the home-selling process. In my years of experience, not only have I helped alleviate the stress of selling for my clients, but I’ve also accumulated years of knowledge to help them get more money for their homes in the least amount of time. I decided to share all of my expertise in one place with potential clients. And that’s why you’re receiving this book. I want to help you have the best possible home-selling experience. And by that, I mean I want you to 1. Get the most money possible for your home, 2. Sell in the least amount of time, and 3. Avoid the headaches most commonly associated with the home-selling process. Think of this book as my gift to you. It contains insider advice on the home-selling process to help you achieve your ultimate real estate goals, including:
• Strategies to sell your home for more money • Marketing techniques to optimize exposure • Advice on how to appeal to today’s buyers • And much, much more
If, after reading through it, you want to hire me to help you to achieve your goal of selling your home, I’d be more than happy to meet with you to discuss a specific plan.
T here are so many people that have helped me throughout my Real Estate career. Most of all, none of this would have been possible without all my clients. I am so grateful to each and every one of them. I know that buying or selling a home can be stressful and emotional, and one of the largest financial decisions in your life. Thank you for trusting me to help you. Finally, I would like to thank Kathy, my wife and business partner. I have learned so much from her, specifically about personal communications, vision, leadership and personal development. Your optimism and love are an example for all of us.
About Me Coeur d'Alene, Idaho is a great place to live which is why I choose to call it home. Originally from the Northeast, I've lived in Idaho for 27 years and have no plans to ever leave. Real Estate has been my career for nearly 30 years, building homes as a Master Builder, developing land for new neighborhoods and self-storage facilities, and now as a Real Estate agent, I consider myself to be a seasoned professional. Something my readers may not NEED to know but it is a part of who I am is that I was a professional motocross racer. After a professional racing career, I joined the Kawasaki Team and was a professional "tuner" for the racing circuit. Although my love of racing was a strong pull, the travel demands finally wore me down and now I enjoy motocross from the sidelines. In my spare time I still enjoy dirtbikes, trial bikes, and really any motorcycle that I can ride. My years in motocross taught me valuable lessons in process, attention to detail, and getting it right the first time. In winter, I thoroughly enjoy skiing in our local ski areas and once a year I take a 3 day trip to a ski resort I have never been to. Whistler and Banff have been two of my favorites! My idea of a great day: Meet with clients in the morning, then ski (winter) or ride (summer) in the hills. Come home
and eat a cheeseburger with my wife (any season) Favorite Book: To Build a Fire by Jack London
Favorite Eatery: Best Philly Cheesesteaks Food Truck
Favorite drink: Loft Honey Beer by North Idaho Mt. Brew
Best Treat: A Hershey bar
Best Buddy: Toby, my old furry friend, RIP
Most Valuable: Relationships I have built with my clients
Best Friend: My Wife
Best Times: Raking outrageous amounts of leaves on a sunny fall day
A Few Testimonials
Dale Frazell = Best Realtor Ever!
In the past few years Dale has helped us sell two homes and buy two homes. Dale is not one of those realtors who lists your house, waits for it to sell, collects his commission and moves on. You can count on Dale to be with you every step of the way. He will help you make your home look its very best from top to bottom. You can’t go wrong with Dale Frazell in your court! He has advice worth listening to and the support you are looking for throughout the stressful process of buying or selling your home.
Happy in every way with the best realtor in town, Karen and Gary
It is with immense pleasure that I write this letter of reference for Dale Frazell, a man of whom my family and I hold in the highest regard. Dale Frazell assisted our family this past year during a critical time in my life. Due to Dale’s strong communication skills, dedication and attention to details, plus his sterling integrity he directed and secured two (2), homes for our family side by side. We are eternally grateful to Dale for his commitment to excellence. He is a genuine, ethical and unimpeachable human being. It is a
pleasure and honor to commend and recommend Dale Frazell for all your Real Estate needs without reservation. Janet M. and Family Hands down Dale has been the best agent I have ever dealt with. From the start his one priority was listening to our desires, needs, financial goals and budget and then led us gently but confidently in that direction. He became our voice with other agents and builders and wasn’t afraid to “slay the giants” on our behalf. Dale’s vast experience in the real estate market has given him a wealth of knowledge and understanding that makes him so great at what he does. Kathy O. Dale is very knowledgeable and experienced and we highly recommend him to anyone selling or purchasing a home. He went above and beyond to make our old house look spectacular! With his help and advice, the selling (and new purchase) was an easy process. Lee and Kathryn I. Dale is an absolute professional. He cares for, listens to and advocates for his clients. I highly recommend Dale for your Real Estate needs. If I require a Realtor in the future, Dale will be the first person I call. Shannon P. I wanted to let you know about my never-ending gratitude to Dale Frazell. He recently helped me sell a home and buy a new home. He is an extremely knowledgeable, experienced, and professional realtor, but what I appreciated the most
was he made me feel like I was his only client. Not only was he always there to help me through an extremely difficult sale, he even helped me measure my windows for blinds for my new home. Dale’s professionalism and experience helped me get through an agonizing sale. My buyer’s loan was delayed due to the government shutdown. This was difficult for everyone involved, as no one knew exactly what to do. My buyer’s realtor lacked communication, but Dale did everything he could to keep the momentum going and get the sale closed. My children and I are now in the perfect home and we wouldn’t be here if it wasn’t for Dale. Linda P.
CHAPTER 1 Owning VS. Renting
Owning your own home might be one of the most 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 — whatever the reason for wanting to own your own home — there is no place like home! 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 childbirth. 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 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 needs. Their needs might be better filled in a single-family house, a condominium, a townhouse, or a duplex of their own. At the other end of the age spectrum are homeowners nearing retirement who may desire to sell their homes, downsize, avoid the maintenance and other obligations of home ownership, and go back to renting. 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. WHICH IS BEST?
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 and downsizing their lifestyle. In 2015, Gallop 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 additional fees necessary to include to make a fair comparison: principal, interest, property taxes, property insurance, (PITI=Mortgage) homeowners’ association (HOA) fees, and ongoing maintenance. Are you prepared for the down payment? This is the payment that funds your equity in the property (how much of the property you actually own). Down payments vary; There are some loans that allow down payments as low as 3%. However, a higher down payment percentage will get you better rates(%). Sometimes relatives help with the
down payment. If you have a choice, take a gift rather than a loan, because lenders will add that 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. You should have your lender explain the breakdown and help you find the best option. 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 (pro-rated). (PITI) Are you emotionally ready? A big factor to consider when buying a home is the responsibility of home ownership. 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), mortgage (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, which is 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 in value 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 home repairs, etc.)? Taking care of your biggest investment can be gratifying, but only if you’re ready. Control over housing expense. By selecting a fixed-rate 15-, 20-, 25-, or 30-year mortgage, the homeowner has assurance that the mortgage, (principal and interest only) costs won’t increase over the period, and, in fact, will be eliminated at the end of the term. You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go to homeowner’s insurance and property taxes. The remainder pays down the loan principal. Every dollar put towards 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). With 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% (home value appreciation in different metro areas can appreciate at markedly different rates than the national average). ADVANTAGES OF BUYING YOUR HOME
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: • Homeowners exemption. Many states exempt owner- occupied homes from a portion of the property tax amount that would normally accrue. For instance, Coeur d'Alene, Idaho and surrounding areas, exempts the first $100,000 (approximately) of a home’s value from property tax assessments, so a $350,000 home in Coeur d'Alene is taxed as if it were worth $250,000 providing it is your primary residence. • 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 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. Now you have something to talk to your accountant about, which is highly recommended. 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. Lower interest rates equate to more home. (size, ammenities, etc.)
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. Keep in mind that some improvements add more value to your home than others, it is wise to research those values before deciding what changes to make. For example, a swimming pool is not always a value added to the home. It can be a detriment in some cases. 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, sponsor block parties or National Nights Out, 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 only (or your spouse or partner), and you can do what you want with it. You aren’t daunted about increases in rent or risk losing the lease. You’re free to make improvements and changes. Also, owning your home gives your children the guarantee of attending the schools in the area on a more permanent basis; you never need to worry about a notice from the landlord to vacate your rented house or apartment for a variety of reasons over which you have no control.
ADVANTAGES OF RENTING
It seems a shorter list, but one man’s pro is another man’s con, and there certainly are advantages to renting to factor into your buy-or-rent decision. No responsibility for maintenance. Admittedly, this is a big one. As a renter, you’re not responsible for home maintenance or repair costs. If a toilet backs up, a pipe bursts, or an appliance stops working, you don’t have to call an expensive repair person — you just call your landlord or superintendent. Renters in condos, townhouses, or apartments don’t have lawn and grounds care obligations. Relocating is easier. When renting, relocating for work is easier. Though a sudden move may require you to break your lease, you can partially offset the cost by subletting your apartment or talking with your landlord. On the other hand, selling a home takes time and effort. If you have a short timeline to sell your home, you may be forced to accept a lower price and lose some of your investment. No real estate market exposure. Home values fluctuate and can decline over time. If you’re a renter, that’s not your problem. If you’re an owner trying to sell — it is.
DISADVANTAGES OF OWNING
Maintenance. The renter’s largest advantage might just be the homeowner’s major disadvantage. While insurance and home warranties might be available to protect against
expense from repairs, usual maintenance items are on the homeowners’ dime. Maintenance and repair can be as simple as repainting the trim and can also be as extensive and expensive as replacing a HVAC system or sewer pipe. The expense will vary from year-to-year; however, you should expect to have some expenses, depending on the age of the home. Always plan for some maintenance expense as things wear out. I always recommend having a Home Warranty Policy in place to help with these costs. Keep in mind there are the usual homeowner’s chores of lawn care, snow removal, gutter cleaning, and other regular home maintenance needs. Upfront and closing costs. Buying a home entails certain upfront costs. Some are paid out-of-pocket after the seller accepts your purchase offer, for example the earnest money deposit, then the home inspection and lender's appraisal, paid for by the buyer. Others are paid at closing, including the down payment, (the amount depends on your loan program), property taxes, and first year’s homeowner’s insurance. Loss of relocation flexibility. It’s much easier to break a lease and move out of town than to arrange for the sale of a residence. Selling the home from out-of-town involves its special logistics and financial problems, such as dealing with the mortgage while the home is on the market. Financial loss potential. Homeownership builds equity over time; however, equity doesn’t equate to profit. If home values in your area go down or remain stagnant during your
time as a homeowner, the appraised value of your home could decrease, putting you at risk of a financial loss when you sell.
DISADVANTAGES OF RENTING
No equity building. The monthly rent you pay goes to the landlord. It represents the fee you pay for using the property. You gain no ownership in the property, no matter how long you live there. No tax benefits. While homeowners can deduct property taxes and mortgage interest on their tax returns, renters aren’t eligible for housing-related federal tax credits or deductions. Home improvements go to the landlord. Any structural and decorative home improvements that renters make belong to the building owner and will have to stay behind when you move to a different place. Additionally, approval for desired major redecoration will be necessary. After all is said, the decision to buy or rent depends on the prospective home buyer’s circumstances. There’s no denying, though, that a home of your own is a good financial and a great emotional investment. An investment in a home can also mean an investment in the future of your children. Little is better than leaving a home behind as a legacy for your children to enjoy.
There is much to consider when you want to buy a home.
Switching from renting to homeownership is highly challenging, but an exciting and amazing decision to make. Owning your first house is a big step in the direction toward obtaining the home you've always been dreaming of. Because, at the end of the day, as we all know, there is no place like home.
CHAPTER 2 Buyers' Needs and Desires
After you’ve decided to buy a home, what sort of home it will be is your next decision. It’s a better approach to have a rather concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). Your needs fulfilled, you turn to your desires. A home on the beach or in the woods, a gourmet kitchen, wood- paneled den, crystal chandeliers over a banquet table in the manor-sized dining room, and an Olympic-sized swimming pool with a hot tub and sauna. In your first home, you must ensure all needs are met; however, there are probably going to be some desires that you’ll have to let go (for now) due to affordability issues.
Decide your needs vs your desires.
• Would you like a swimming pool? Enough that a home without one will not be looked at? • In what areas or neighborhoods might the home be
located? Where do you want to live? Where might you have to live for commuting to work or for affordable home prices? • What features would make it special? • What can you afford and what is out of your budget? Budget usually constrains us most in selecting a home. While some things are necessary for any home (as mentioned, the good roof, a working furnace), others will just stay on the list of desires for now (the sauna or that home in Beverly Hills). You may have an impression of what you want in your new home. Putting that to paper and having a complete checklist can prove useful. Before starting your hunt for a new home, it’s advisable to make a list of all your basic needs and desires, then prioritize the desires, figuring that all needs must be met in any house under consideration. This will make the search easier and help weed out the ones that don’t meet the basics. Realize, however, that it’s nearly impossible to find a home that meets all requirements. 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 MAKE A LIST; CHECK IT TWICE
Westwood” (a favored neighborhood), while a need might be “on west side of 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) or close freeway 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 (for pet owners), perhaps a first-floor laundry facility, 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 contacting a real estate agent or looking at homes. Work the costs as well as your budget. Choose a general location. Be sure you have spoken with a lender and done the necessary paperwork well ahead of home shopping so that your offers aren’t tied up in getting financial approval. Having the image of your dream home is reality married with imagination. In fact, you may find that some aspects of the house you intend to buy are different. It’s not the same as what your dreams are. Different people have different requirements. It depends on your thought processes as well as personality. We understand important things and potential compromises differently. Needs are basic requirements that just can’t be ignored or compromised. Desires, on the other hand, can be left behind if the situation demands it. You need to make a clear distinction between what your needs are and which items you would classify as desires. No matter how many desires you have unfulfilled now, they can be worked on later. A pool can be added after a promotion or two. Maybe you don’t like the color of the walls or the window trim. Paint color is rarely a need, but not having a garage if you are a shade-tree mechanic is.
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. A third of millennial-aged Americans (ages 18 to 36) who purchased their first home (33%) say the desire to have a better space or yard for a dog influenced their decision to purchase the home, according to a survey conducted online by Harris Poll on behalf of SunTrust Mortgage. 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%. It’s essential that the neighborhood in which you’re going to buy a house in has no restrictions on pets. Do you raise American Staffordshire Terriers? There are cities that ban this breed (aka pit bull). Goats? Vietnamese pigs? Have you always had fresh eggs from your own chickens? Include your animals in location planning. 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. 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 the real estate site found 84% of Americans said the neighborhood would be equally important 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, 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. 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 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. As price is mainly based on location and condition of the property, when someone starts looking for their house, it’s important to consider the location and how far it is from work, schools, shopping areas, and other facilities. Home means comfort, and comfort can’t come if the location isn’t suitable.
CHAPTER 3 How Real Estate Agents Help Home Buyers
I’ll come right out here and tell you I’m a real estate agent — proudly so! Nice to meet you! I’m not trying to sell you anything, but I’m pleased to be of service. In fact, generally, real estate agents for buyers are paid from the seller's (listing) side of the transaction. So, I’m not looking to part you from your money. I’m giving you the benefit of experience and advice I have picked up in my career selling houses and being in hundreds of real estate transactions — for both buyers and sellers. Then, if you want me to help you find a house, we can talk. 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 and Realtor.com. These are the top three “Most Popular Real Estate Sites,” as derived from eBizMBA’s Rank, which is a continually updated average of each website’s Alexa Global Traffic Rank, and U.S. Traffic Rank, from both Compete and Quantcast. So that means there’s no real need for a buyer’s real estate agent, right? Good question. If a buyer can find a home on the internet, set up a showing and visit the home, then why would they need an agent to go along with them?
WHY HOME BUYERS NEED A REAL ESTATE AGENT
The reasons to use a real estate agent today are as valid as yesterday. The ease of online transactions and proliferation of services to assist buyers in handling their own real estate transactions came recently, arising throughout the last decade. This has caused buyers to wonder if using a real estate agent is no longer necessary, or an expense that can be avoided. While doing the work yourself can save you if you buy a “For Sale By Owner” (FSBO) house and the seller agrees to reduce the price by 3% (half of what a listing agent would receive), for many, a do-it-yourself home purchase might be pricier than a real estate agent’s commission in the long run. Besides, a buyer generally doesn’t directly pay any commission to an agent on a house purchase. On most home sales, there is a “listing agent” (the agent engaged by the seller to sell the property) and a selling agent (the agent who introduces the eventual buyer into the transaction). The selling agent is sometimes called the “buyer’s agent” because he or she is often working on a certain buyer’s behalf and it’s easier than explaining that the selling agent is not the listing agent but really the buyer’s agent. It can be confusing. 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. No matter how it’s set up, the buyer still walks away with the house and the seller still walks away with approximately 94% of the purchase price. 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 locate specific homes that meet your criteria, contact sellers’ agents, and arrange appointments for viewing the homes. When buyers try to do this on their own, it is extremely difficult and not to their benefit as they will need to deal directly with the seller's agent who MORE ACCESS TO THE REAL ESTATE MARKET
represents the seller. This is not to your best interest. Trust me on this one!
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 update 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 $xx in renovation costs, and thus offer that much less. There are many contracts and documents involved in purchasing a house. 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 and a mistake, let’s say in title work, could haunt the buyer well down the line after purchase. This very situation CONTRACTUALLY SPEAKING…
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 contracts, and unexpected situations, and is familiar with which forms should be used, when they can be removed or adjusted, and how to use the contract to protect you.
YOU WON'T NECESSARILY SAVE MONEY
The point of not using a real estate agent would be to save money, right? Otherwise, why turn down professional assistance in buying a home? However, it’s unlikely that both the buyer and the seller will reap the benefits of not paying real estate agent commissions. It works like this: An owner selling on his own 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 keeping the additional percentage of the home’s sale price that might otherwise be paid to the real estate agent (usually 3%). Buyers looking to purchase a home sold by owners without an agent may believe they can save money on the home by not having an agent involved. With this in mind, they may only look at FSBO houses. But has the seller already lowered the price of the house to reflect that savings from the commission, or is it still priced at market value, with the seller reaping the benefit of the savings?
Here’s a short list of the advantages that using a real estate agent can bring to your buying experience:
• Education and experience • Agents are buffers • Neighborhood knowledge • Price guidance • Market conditions information • Professional networking • Negotiation skills and confidentiality • Handling Volumes of Paperwork • Answer Questions Before and After Closing
It’s extremely important to know the “ins and outs” of real estate agents before you decide who to work with, so that you might know what to expect, and what will be expected of you.
WHO A REAL ESTATE AGENT IS
In short, a real estate agent is someone licensed to list and sell real estate, including homes, multi-family properties, and 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®. 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. Buyers' agents and listing 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. You might feel the urge to pick the first real estate agent who appeals to you or approaches you. Like with any professional, there are degrees of professionalism, dedication, and experience. The “wow factor” will simply wear off. Keep in mind that although tempting, using a friend or relative who is a real estate agent is a good way to take down a friendship or make holiday gatherings uncomfortable. Tip; have your friend or family member refer you to another agent and then they would receive a HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS
referral fee. It will save a lot of heart ache in the long run.
Meet with a prospective buyer's agent in their office. A good buyer’s agent will want to know if you’re pre-approved by a lender and what kind of loan program you are using. They should spend adequate time to discover what you’re looking for in a house. They should listen as much as talk and ask questions. Watch to see if the agent makes notes. Real Estate law requires agents to explain the Buyers Representation Agreement whenever they have substantive contact with a customer or prospective client. The agent can represent you as a "client" or "customer" and will explain the difference. If you want an agent and brokerage to promote your best interest in a transaction, you become a "client". Be sure to ask your agent can explain it further. A “dual agency” relationship occurs when a buyer is being represented by a brokerage firm that controls the listing. If an agent represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple states, this is illegal because of the conflicts of interest that can arise regarding the broker. All agents hold the same responsibility, which is to inform their clients of all potential risks that could arise due to conflicts of interest. Legally, agents are not allowed to work on both sides of any transaction without consent from the clients. DUAL AGENCY: THE BASICS
For example, if you’re selling your home, and you don’t want an agent to be working with the buyer, it’s your right to say so in the listing agreement. This is also true for the buyers. To avoid surprises or anything going wrong in general when going with dual agency, always ensure you properly undertand your full relationship with your agent. You can do this by using an Exclusive Buyer Agency Agreement. Please have your real estate agent answer any further questions you may have about this very important issue. Be sure that the agent will be showing you all listings or properties on the market that meet your requirements, not only listings that are handled by their brokerage. Buyer’s agents have the legal duty to put buyer’s needs ahead of their own. Even if an agent might be paid more for selling their brokerage listing, they must inform you about other available, suitable listings and take you to see those you believe are 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 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. A buyer working with a listing 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. However this varies, depending upon the real estate agent's professionalism and ethical standards. A buyer’s agent is legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties. You wouldn’t trust a doctor who doesn’t have experience in their field. Likewise, you shouldn't trust a real estate agent without experience. You don't want to be the one who is giving them on the job training. I know new agents have to start somewhere but there are other ways they gain experience without costing you money. 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 LOOK FOR AN AGENT WITH EXPERIENCE
relevant to your need(s). Such as a RENE (Real Estate Negotiating Expert) designation which will benefit you, the buyer.
Your state will have a license board for all active real estate Realtors® and agents, which you can easily access. You will also be able to see their information, disciplinary actions, complaints, or any other information that you’ll need to help influence your decision — especially since most of the information is now posted online.
GIVE THE “WHAT ELSE” TEST
A good agent will know about all the other properties for sale in the area. Also, a good agent always does their research regarding the events in the current market, and those 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. So, you’re ready to take the plunge and look for a place to call “home.” 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. If you listen to the advice above and find the best one for you, these real estate agents will work diligently to ensure all GOING THE BUYER'S AGENT ROUTE
your needs and requirements are met when it comes to finding the right home for you.
WHAT BUYER'S AGENTS DO FOR YOU
When you meet with the buyer’s agent you have chosen, they’ll generally help you to determine your needs and wants when it comes to finding you a home and a neighborhood. The agent will help you to connect with a quality lender who will assist you in setting a budget. The agent will provide insight on the current conditions of the market, and explain what you should expect while shopping for a home. During the shopping-for-a-home period, you’ll probably meet with your agent to plan tours of homes in which you are interested. Prior to viewing any home, it is a good idea to drive through the neighborhoods yourself to see if you even like the area. If you do, then it would be time to view the home in that neighborhood. The agent will give you insight into the floor plans, the home’s pertinent selling points, and any CCR's (covenants, conditions and restrictions) and HOA (homeowners association) for the neighborhood. Not all neighborhoods have these, but you should be aware that they might. They will also give you the rundown for parks, shopping centers, and schools nearby, etc. After you find a house that you love, and after reviewing the Property Condition Report (PCR), a form filled out by the
seller addressing any known issues regarding the home, you might decide to make an offer. If an offer is made and accepted, your agent will then open escrow (discussed later) and assist you in ensuring that inspections of the home are ordered and completed. This is one of the first stages of the transaction process. Your agent is also in charge of ensuring that coordination and completion is done with inspectors, lenders, appraisers, title company, and any other professionals involved with the purchase of the home. If adjustments need to be made over the price, you won’t have to negotiate yourself. Your buyer’s agent will do that for you. Right down to scheduling your signing of the closing documents. 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 during 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. HOW REAL ESTATE AGENTS ARE PAID
Real estate agents and Realtors®, unlike professionals in
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