FAQ

FAQ

Frequently Asked Questions

Why should I use a REALTOR?

A real estate salesperson is more than just a “sales person.” They act on your behalf as your agent, providing you with advice and guidance and doing a job – helping you buy or sell a home. While it is true they get paid for what they do, so do other professions that provide advice, guidance, and have a service to sell – such as Certified Public Accountants and Attorneys.

The Internet has opened up a world of information that wasn’t previously available to homebuyers and seller. The data on listings available for sale is almost current – but not quite. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.

If you’re selling a home, you gain access to the most buyers by being listed in the Multiple Listing Service. Only a licensed real estate agent who is a member of your local MLS can get you listed there – which then gets you automatically listed on some of the major real estate web sites. If you’re buying or selling a home, the MLS is your agent’s best tool.

However, the role of an agent has changed in the last couple of years. In the past, agents were the only way home buyers and sellers could access information. Now agents are evolving. Because today’s home buyers and sellers are so much better informed than in the past, expertise and ability are becoming more important.

The real estate agent is becoming more of a “guide” than a “salesperson” – your personal representative in buying or selling a home.

You might want to consult a couple more Realtors on the market value of your home. Most of the estimates should be in the same ballpark.

It could be that your friend is being more honest with you about the value of your home and the other Realtor gave you a higher number because he already knew you expected it. This is called “Buying a Listing”. Or it could simply be that your friend is a good friend, but not that great of a real estate agent.

Mixing business and friendships is always risky to the friendship. On the other hand, if your friend is truly competent and was providing wise advice, she may be offended if you ignore the advice and choose another agent.

If you have to ask this question, you probably don’t have the necessary knowledge to properly represent yourself.

The seller pays the real estate commission, not the buyer, and real estate commissions are already set in the listing contract. It doesn’t cost you anything extra to have your own agent represent you because the seller is already paying for it.

If you don’t have your own agent, the seller’s agent will often represent both you and the seller as a “dual agent” or just represent the seller. This means the agent either has divided loyalties or is working for the seller, not you.

In this situation, since there is only one agent to be paid, sometimes you can get a reduction in price by getting the agent to accept a lower commission from the seller. However, you have to realize that you are interfering in what is essentially an agreement between the agent and the seller — and something that has already been negotiated and agreed upon.

The seller can net the same gain on a lower price if they have to pay less commission. At the same time, the agent is not going to be willing to cut the commission totally in half because – since you don’t have an agent – they are going to be doing some of the work that your agent would normally be doing (whether you realize it or not).

And you’d better know what you’re doing – because the listing agent isn’t going to be on your side. If your offer causes them to reduce their commission from what the seller has already agreed to — that agent isn’t going to be real happy with you.

On most transactions, there is usually a listing agent and a selling agent. The selling agent is sometimes referred to in media as the buyer’s agent, because he works on the buyer’s behalf and it easier than explaining each time that the “selling agent” is not the listing agent and is actually the buyer’s agent.
However…There are some agents that market themselves as “buyer’s agents,” “exclusive buyer’s agents,” buyer’s representatives,” and so on. Mostly it is just marketing. At the same time, part of it is because they want to accentuate the reasons a buyer should not go directly to the listing agent when they purchase real estate. This has to do with agency.See, if a buyer goes directly to the listing agent, they are dealing with an agent that has conflicting responsibilities. Their job is to get a good price for the seller and they may not zealously represent the interests of the buyer. Those who market themselves as “Buyer’s Agents” indicate they are only working for the buyer in a real estate transaction.The commission is still paid by the seller, no matter what they say in their marketing (with extremely rare exceptions). They either get paid directly by the seller or set up the transaction so that the seller provides a “credit” to the buyer for how much the real estate commission is — then the buyer pays the commission.Like a Realtor I once knew said, “No matter how it is set up, the buyer still walks away with the house and the seller still walks away with 94% of the purchase price.”

If you want to purchase that property, the only ethical thing is to purchase it through that Realtor. Otherwise, you could set up potential conflicts between your previous agent and whatever new agent you may choose.

You see, if your previous agent finds out you purchased the home with a new agent, he may want to claim all or a portion of you new agent’s commission. This could develop into a “battle royale” involving real estate agents, offices, managers, brokers, and attorneys. You may be able to resolve the issue by letting your current agent know you have misgivings about their expertise and ask if a more experienced Realtor from his office can be aboard as your adviser, too.

That is the only ethical way I can think of to handle your situation. It isn’t “your” ethics I mean, but the ethics of the two agents. One agent isn’t supposed to make an offer on a property you have already previewed with another agent. It happens, but it isn’t ethical without some sort of disclosure and agreement between the parties.

It should be pretty simple. Just tell the agent you have changed your mind and decided not to sell after all.

Since your cooperation is required to sell the house, most agents won’t give a hard time about canceling. Their hope is that when you later do decide to sell, you will get back in touch with them. However, if you attempt to put it back on the market during the contracted listing period using another agent, your original agent will attempt to enforce their contract.

There isn’t a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one. Just be sure to communicate often with your real estate agent about everything you’re looking for. It will help avoid wasting your time.

Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller’s or real estate agent’s answers are clear and complete. Ask questions until you understand all of the information they’ve given. Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive.

In addition to comparing the home to your minimum requirement and wish lists, you may want to consider the following:

  • Is there enough room for both the present and the future?
  • Are there enough bedrooms and bathrooms?
  • Is the home structurally sound?
  • Do the mechanical systems and appliances work?
  • Is the yard big enough?
  • Do you like the floor plan?
  • Will your furniture fit in the space? Is there enough storage space?
  • Imagine the home in good weather and bad – will you be happy with it year round?

Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint.

The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

You can find out by asking yourself some questions:

  • Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
  • Do I have a good record of paying my bills?
  • Do I have money saved for a down payment?
  • Do I have few outstanding debts, like car payments?
  • Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

A lot depends on why you are buying the house. Are you buying it mostly as a home or mostly as an investment? There is a difference.

For the most part, upgrades are high-profit items for builders. They aren’t designed to enhance the value of the house, but make you happier with the house you do buy.

If you are looking at your home as an investment, then you buy from the smaller to medium size in the tract and spend only a minimal amount on upgrades. If you are looking at your purchase as a home, then you select upgrades that will enhance your quality of living.
One rule of thumb is to always upgrade the carpet and padding.

I want to buy a home and approached two different real estate agents. One was very informative, handed us brochures, especially on the real estate law and the responsibility of the agent. The other was very informal, made a lot of gestures, and presented nothing in writing.

Agents are all different in their style and how they deal with people. Some are formal and some are informal. That doesn’t necessarily have anything to do with their knowledge and ability. Go with who you like and who you trust.

All listing contracts have expiration dates. When is yours?

If it is not coming up soon, tell the agent and/or his manager that you want to cancel your listing. Often they will let you cancel easily, since they do not want to build ill will in the community.

If they won’t, you can always pull your home off the market until the listing contract expires.

Before you sign a listing agreement you should first ask the agent to research the average selling time in your neighborhood. If a listing contract is for more than ninety days, it should not exceed double the average selling time.

As for canceling the contract, a lot depends on whether the agent works for a larger office with management, etc. Usually, the office or company wants to retain your good will, and will usually let you out of a listing agreement. It would be best to broach the matter in a calm pleasant way instead of getting hot and excited. Simply explain that you can no longer work with that agent or company any longer and you wish to cancel your listing.

Initially, they will (of course) try to talk you out of it. Just keep repeating that you want to cancel and your reason for doing so. If you do it calmly, they won’t get defensive.
Most of the time, this works. Make sure to get the cancellation in writing.

If it doesn’t work, then you have two options. First, take your home off the market during those six months. Second, consult an attorney. I always hesitate to bring attorneys into things because you can never tell when that will get messy. Once things get messy, fees go up. Plus, real estate companies usually have attorneys already on retainer. You don’t.

It should be pretty simple. Just tell the agent you have changed your mind and decided not to sell after all.

Since your cooperation is required to sell the house, most agents won’t give a hard time about canceling. Their hope is that when you later do decide to sell, you will get back in touch with them. However, if you attempt to put it back on the market during the contracted listing period using another agent, your original agent will attempt to enforce their contract.

Since you have a contract for 90 days, you would have to get your agent’s permission to be released from the contract so you can go with the other agent.

Most of the time they will attempt to dissuade you from making the change, but will release you because they don’t want to engender any bad will. The agent will be reluctant of course, especially since you just “changed your mind,” and cannot point to any lack of performance problems with your present agent.

The agent can refuse to release you from the listing agreement and there are various reasons they may do so. In that case, you’re either stuck or you have to simply take your home off the market for the rest of the listing period.

Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

Listen to your real estate agent’s advice, but follow your own instincts on deciding a fair price. Calculating your offer should involve several factors: what homes sell for in the area, the home’s condition, how long it’s been on the market, financing terms, and the seller’s situation. By the time you’re ready to make an offer, you should have a good idea of what the home is worth and what you can afford. And, be prepared for give-and-take negotiation, which is very common when buying a home. The buyer and seller may often go back and forth until they can agree on a price.

Your real estate agent will assist you in making an offer, which will include the following information:

  • Complete legal description of the property
  • Amount of earnest money
  • Down payment and financing details
  • Proposed move-in date
  • Price you are offering
  • Proposed closing date
  • Length of time the offer is valid
  • Details of the deal

Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just making an offer.

It’s not required, but it’s a good idea. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you’d like to purchase and it is a good time to ask general, maintenance questions.

An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of only repairs that are needed.
The Inspector does not evaluate whether or not you’re getting good value for your money. Generally, an inspector checks (and gives prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.

It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed, you’ve bought the house “as is.” Or, you may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an “out” on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.

If your goal is to buy a home for it’s resale value and the one you are thinking of buying in the older neighborhood is at the upper end of values for that neighborhood, then it may not be the wisest choice. If it is similar or lower in price to the others, then there should be no problem, because pricing should be considered in relation to the local neighborhood and not compared to homes in other neighborhoods (for the most part). Plus, is it a neighborhood on the decline, or are others going to be fixing things up, too, so that it is a neighborhood that is improving? It could turn out to be a very good deal as long as you don’t “overpay” because of the recent improvements.

Remember that you also buy a home for it’s value to you as a “home,” and that is something else you should consider. Which neighborhood would you AND your family feel most comfortable in?

It’s like buying stocks. How do you really know which ones will increase most in value over the next five years? As with any investment, there are risks.

The most often quoted rule is that location is the most important factor. You want to make sure that the house does not back to busy streets and is as close to the interior of the tract as possible. Avoid corners and intersections. Choose the middle of the block or a cul de sac. You’ll want to be sure it has at least two bathrooms (if you are buying in an older area).
Sometimes it is just timing that works out best for you. For example, if you buy a home before a major surge in local prices.

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