Tips for Home Buyers
Home buyers don't pay commissions… True? False? The common myth that home buyers don't pay commissions has hurt many home buyers who felt that the seller had to pay the whole commission so it didn't matter to them. Nothing could be further from the truth. That thinking has led many of them to miss out on the opportunity to work with an agent who would negotiate with their interests in mind. MLS listed homes in Massachusetts acknowledge two sides to a commission -- the listing agent's fee and the fee to the agent who brings the buyer. To choose an agent who must work to get the highest price for the seller seems foolish when the MLS system provides a fee to have an agent work to the get the lowest price….. and who brings all the money to the closing table to cover the price of the house and the commissions? You guessed it… the buyer.
Agent or Broker? What is the difference? And which should you choose? And what about those initials after an agent's name? Obtaining a real estate license in Massachusetts is so easy that home buyers would be wise to look beyond a license. The state's Board of Registration monitors licensees and enable consumers to check up the licensee's status on the state web site. After 24 hours of education and an exam, new licensees work as an "agent" salesperson for 1 year or more under the supervision of a broker. 30 hours of education and another exam allows agents who have worked for their year of apprenticeship to become brokers.
Brokers are allowed to work on their own unsupervised and can set up their own offices and have agents work for them. An agent must always work under a broker's license. Some agents have many years of experience and have not felt the need to get their broker's license because they choose to work for a broker or national franchise realty firm. Agents should be asked about additional credentials they may have earned to further enhance their career or abilities. For example, some agents have earned a CRS (Certified Residential Specialist) or GRI (Graduate, Realtor Institute) upon completion of additional classes. Home buyers who want the advantage of working with an agent who must protect their interests can choose from a number of Buyer Agent credentials, including CEBA, ABR, CBR, CBA, and MCBA. How buyer agents handle any conflict of interest situations that may arise can affect the value for a home buyer. Some buyers prefer the exclusive buyer agent because they do not list properties for sale that might contribute to a conflict of interest problem.
If the owner or the listing agent is present while you preview a home, don't ooh and aah over the home's nice features. While is important to seem friendly and polite, you don't want to tip your hand about how much you really love the home because it will work against you when you begin price negotiations. This tip also applies if you are working with a sub-agent, who is working for the seller, not the buyer. Buyer's agents must not reveal the buyer's motivation or situation unless, in the case of a very hot seller's market, the buyers and the agent strategize to appeal to the sellers to win out over other competing buyers. Good buyer agents know how to present buyers in the best possible light without totally compromising the financial negotiations.
Find a lender who will be willing to supply you with more than one preapproval letter so that you can customize your preapproval to your offer price. A lender who tips off the home seller to your "top dollar" based on the total amount you can afford to borrow, if you need to, isn't doing you any favors!
Do not discuss your finances with a real estate agent unless you know, upfront, that the agent will be representing you in a real estate transaction. If the agent is working for the seller, he/she has a legal obligation to present your confidential financial data to the seller which could hurt your bargaining position.
Don't let your offer get 'shopped' by providing too long a period of time for the seller to respond, particularly in a hot seller's mnarket. Most buyers don;t realize that any agreement on price or terms is not valid until it is IN WRITING. Even if the seller verbally agrees to the buyer's written offer, the seller could get a higher offer and would be under no obligation to honor the first offer. In a hot seller's market, give the seller a short time to respond and get everything in writing as quickly as possible.
Don't just shop for rates when you compare mortgages. Some of the lenders who offer the really low rates charge exorbitant fees or points to get those low rates. Get information about the whole loan package so that you can compare apples to apples. Remember that rates are generally very competitive among mortgage lenders so you can take advantage of companies that also have a reputation of providing excellent service.
If a real estate agent recommends a particular mortgage company or lender, always ask the agent if the real estate office owns the mortgage company or if the agent is getting compensated in some manner for the referral. You would also want to be assured that the lender will not release confidential financial data to the listing agent or seller. One of the advantages of using a Buyer's Agent to buy your home is that the agent must keep your financial information strictly confidential and, in most of the offices that practice Buyer Agency exclusively, their duties include helping buyers arrange for best rates and good service from mortgage lenders.
Asking the right questions about title insurance may save buyers money when they buy a new home. Try to get a copy of the existing owner's title insurance policy if it was written within the previous ten years. Find out if any discounted rates ("reissue rates") are available if you supply a complete, legible copy of the prior title policy. Discounts of up to 40% may be available on both the owner's policy and lender's policy. A "substitution" rate may be available if the buyers uses the same lender as the previous owner and the same title insurance company; the discount may be as high as 70%.
Home buyers want inspectors to give honest, objective and thorough opinions of the home being inspected but many inspectors feel they must rely on real estate agents for referrals and will tiptoe around problem areas so as to be a "deal killer". This is good for home sellers and listing agents but bad for the home buyers. Look for an inspector who does not rely on real estate agents for their business. Consumer advocates generally recommend avoiding home inspectors referred by real estate agents unles the agent is working as a Buyer's Agent who has legal and fiduciary duties to the buyer which would include getting a thorough home inspection by a skilled inspector.
Skilled buyer agents have improved the standard language in offers to provide more protection for homebuyers. An example of one such modification is to state "if an inspection proves to be unsatisfactory to the buyer due to any defects, buyer may, at buyer's election, terminate this offer....." The term any defects replaces the standard of "material defects". This replacement provides language to get the deposit back without a hassle, in the case of this particular offer agreement as follows: "then the buyer will receive an immediate refund of all deposits held by the escrow agent..." It is important to note, though, that as soon as you determine you want to walk from the deal that you minimize the loss of time to the seller by acting immediately.
BuyerBrokerBoston.com is a web presence for Buyer's Choice Realty.