Nolo's Essential Guide to Buying Your First Home (20 page)

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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart

Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate

BOOK: Nolo's Essential Guide to Buying Your First Home
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What Your Agent Does for You
 
Your real estate agent is your team captain, answering to you but coordinating other players and handling multiple tasks. Expect your agent to:
•
Suggest neighborhoods.
Although this book helps you look for the right neighborhood, your agent should be able to pinpoint possible locations. Ideally, your agent will live in or around the area you’re interested in and give you an insider’s perspective.
•
Show you comparable sales data.
To help you gauge the market value of any house you’re interested in, your agent should compile a written report (called a competitive market analysis, or CMA) of comparable properties (“comps”) that sold in the last six months.
 
CHECK IT OUT
 
You can get some MLS data on your own.
Although real estate agents get access to the full details, anyone can view portions of the MLS at
www.realtor.com
, the NAR’s consumer website. You may be able to get more-detailed MLS listings on your local paper’s website, from a local agent’s site, or by working with an agency like ZipRealty (discussed below).
 
•
Find prospective homes that meet your needs.
You’ll tell your agent how much you want to spend, what physical characteristics are important to you, and what type of neighborhood you’re looking for. A good agent will search for properties that meet your criteria and show them to you as soon as they’re available. Any competent agent knows that this task may take one day or one year—in either case, the agent will patiently help you find what you’re looking for.
•
Walk through prospective properties with you.
Your agent will actually take you to look at properties, too. Your agent acts as another set of eyes, helping you think about practicalities (like whether the house provides enough storage space or has an impractical floor plan), and spotting potential problems (like a water stain on the ceiling indicating a possible leaky roof, or an old plumbing system in a sparkling new kitchen). The agent might also suggest easy-to-make improvements, such as converting an unused nook into a home office space. The agent will coordinate a second and even third showing, if needed.
 
TIP
 
Don’t hire an agent who’ll push you off onto an assistant.
Illinois Realtor
®
Mark Nash says, “Choosing a high-producing agent isn’t always your best bet, because such agents might not be available to work with you until you’re ready to write an offer. In the meantime, they’ll have a less-experienced, licensed assistant take you to look at properties. But an agent learns a lot about a client—and the client’s needs and preferences—from walking through properties together. Make sure your agent is going to take you around personally before you hire him or her.”
 
•
Draft a written offer and negotiate the sale.
In the majority of states, your agent will help you draft an offer or other written statement that includes your offer price and terms. The offer process will be discussed in detail in Chapter 10. The agent will also ensure you receive any legally required disclosures about the physical condition of the property.
•
Explain the process.
Your agent should (beginning at your first meeting) be able to summarize the process of and timeline for searching for homes, writing an offer, finding and applying for financing, opening escrow, checking title, obtaining insurance, removing contingencies, and closing the deal.
•
Open escrow.
Your agent should open escrow for you (help begin the process of finalizing your purchase) or give you recommendations for a reputable escrow or closing company or real estate attorney (depending on which state you’re buying in).
•
Manage day-to-day activities leading up to the closing.
Once your offer is accepted, you have a lot to accomplish before the deal is finalized, such as scheduling home inspections, lining up financing, and getting insurance. Your agent should guide you through each step, either handling the tasks directly or working with the appropriate professionals. Your agent should also be present for major events like inspections, the appraisal, the final walk-through, and the closing.
 
Make Sure Your Real Estate Agent Plays for You
 
Real estate agents make a living representing one of two parties: the buyer or the seller. Since most agents have several clients at a time, they often represent both types in different transactions, sometimes selling houses for sellers, other times helping buyers purchase houses.
Usually, this isn’t a problem. However, it can become one when the agent who is selling a house for one client has another client who wants to
buy
it. Then the agent could act as a “dual agent.” This frequently results when a prospective buyer visits an open house and the seller’s listing agent says, “Don’t worry that you don’t have an agent yet, I’ll write the deal up for you.”
You can imagine the potential problems when one agent represents two parties with opposite interests: While the buyer wants to buy the place for as little as possible, the seller wants to sell for as much as possible. It used to be that the agent just worked it out as he or she saw fit. But many buyers who’d told their agents that they were willing to pay more for a house than they’d offered were appalled when their agents turned around and told the sellers that exact information.
These days, if an agent wants to represent both sides, most states require that the agent get written consent from both parties. But it’s not a good idea to consent to this. You want someone who is on your team all the way. Your safest bet is to get your own, buyer’s, agent—one contractually bound to represent only you (though your agent must still be fair and honest with the seller).
Real-Estate Fiction
 
•
Death by Real Estate
, by Maggie MacLeod (Daybreak Publishing): Barb Parker is a mystery-solving real estate agent.
•
Closing Costs
, by Seth Margolis (St. Martin’s Press): Five couples try to survive the cutthroat Manhattan real estate market.
•
Good Faith
, by Jane Smiley (Anchor): A divorced real estate agent is lured into a development deal by a newcomer to his small town.
 
 
One good way to find out whether your agent will ever be a dual agent is to ask, before hiring, “Will you ever represent me in a dual agency?” Only work with agents who say “no.” If you become interested in a property listed by that agent, he or she can help you find another agent to complete the deal.
In a similar situation called a designated agency, you’re represented by one agent, and the seller is represented by another agent who works in the same brokerage. In states where designated agency is allowed, all parties must normally agree to it in writing. The risk of divided loyalties is much less than with a dual agency. Still, you’ll want to be confident that your agent is trustworthy and be careful about what you disclose.
Some agents focus solely on buyers’ needs. They’re called exclusive buyer agents or “EBAs.” An EBA will never represent a seller in any transaction. By default, this means you’ll avoid any possibility of a dual or designated agency. But an experienced agent who won’t act as a dual agent can serve your needs without being an EBA.
 
CHECK IT OUT
 
To find an EBA in your area:
Contact The National Association of Exclusive Buyer Agents, at 800-986-2322 or
www.naeba.org
.
 
Finally, on the other side of the table sits the seller’s agent, sometimes called the “listing agent.” The seller’s agent is hired by the seller. While the seller’s agent is ethically and even legally bound to be fair and honest toward you, this agent focuses on representing the seller’s best interests. You want the seller’s agent to remain where he or she belongs—on the other side of the table.
How Real Estate Agents Are Paid
 
After hearing about what a good agent can do for you, you may start mentally calculating whether you can fit one into your budget. The good news is, your agent is one person in this process you
won’t
have to hand money to. The seller pays the entire commission (averaging 5%), which is split between the seller’s agent and yours (usually, 2½% each). You do end up indirectly paying for your agent’s services, though, because the seller will probably factor the cost of paying both agents into the purchase price of the home.
Some people will tell you that agents are mainly out to make buckets of money, by maximizing their commission and minimizing the amount of time they spend with you. They caution you that agents will show you only properties above your price range, push you to offer too much, or rush you into a purchase.
It’s true that the more you spend, the higher the agent’s commission goes. However, to say that agents are solely motivated by money is an overgeneralization—in fact, it’s often not in the agent’s own interests to behave this way. If, for example, you’re pushed to offer an extra $10,000 on a home, and then don’t qualify for the mortgage, the agent will have wasted a lot of time. Or what if you pay the extra $10,000, then feel the agent trapped you into it? You’ll never use that agent again and will tell your friends not to, either. Neither prospect will appeal to the professional, experienced agent you’ll be choosing—not to mention the fact that an extra $10,000 on the sales price adds up to only about $150 in increased commission.
Money-Saving Agent Agreements
 
As a first-time, cash-conscious homebuyer, you might consider hiring a full-service agent who’ll give you a commission “rebate.” For example, an agent whose commission is ordinarily 3% might return 20% of that to you when the deal closes. That’s about $3,000 on a $500,000 purchase. There’s no disadvantage for the seller’s agent, who still gets paid the standard commission for the area.
In exchange for the rebate, you may need to share responsibility for finding prospective properties. For example, clients at ZipRealty (
www.ziprealty.com
are given access to MLS information usually only available to real estate professionals, then select properties to visit.
You’re best off choosing a full-service rebate agent rather than what’s called a “discount agent.” Discount agents don’t ordinarily give you access to the MLS or help coordinate showings. They may require you to view properties alone or to pay extra for these services. You thus lose the benefit of the agent’s experience.

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