WHY YOU SHOULD USE A BUYER'S AGENT

When a seller sells a home, s/he is represented by a listing agent and, often times, an attorney.  The lender uses an appraiser and an attorney.  Why then, as a buyer, would you go unrepresented?

Let's look at a few myths/realities:

MYTH:  I don't want to spend a lot of money for a buyer's agent.
REALITY:  There is no charge for this.

MYTH:  I don't want to commit myself.
REALITY:  Why??  Don't you want someone who will commit to you throughout the whole process?  Don't you want someone advocating for you at every step?  Don't you want someone negotiating for you?  Don't you want someone with experience to help you avoid pitfalls?

MYTH:  I can find houses online.
REALITY:  True.  However, finding a home to look at is vastly different from buying a home.  A buyer's agent will guide you through the process and will look out for your best interests.

MYTH:  I can save money if I don't use an agent.
REALITY:  Not likely.  A listing agent and a seller agree on a fee. The listing agent agrees to split that fee with the agent who brings the buyer.  If for some reason, a buyer shows up without representation, the listing agent is happy because s/he will get both sides of the fee - the full fee.  There is no incentive to share any of that with the buyer or to try to convince the seller to reduce the price.  Why would the listing agent negotiate anything on your behalf?  The listing agent has a duty to the seller to get the best price for the property.  If anything, the listing agent might discount the fee for the seller, but there is no incentive to assist the buyer.

MYTH:  I'll just use the seller's agent.
REALITY:  Another reason to ask: Why?  The listing agent treats the seller as a "client."  S/he will treat you as a "customer."  How can the listing agent be loyal to both seller and buyer?  It's an inherent conflict of interest and not something that most people would want.  Does the prosecuting attorney represent both the suspect and the victim?  Does the divorce attorney represent both spouses?  Then why would you want a listing agent to work for you when the full commitment is not there?

For every property, there is only one listing agent (or team).  That makes every other agent a buyer's agent - by default - for that particular property.

You do yourself a big favor when you work with someone who will watch out for you.

If I told you that you were going to get the services of an attorney or plumber or carpenter, and that you would not have to pay a cent for those services, would you take that deal?  Of course you would!  Well, that's the deal you get with a buyer's agent:  All the service and loyalty, with no cost.

Don't go it alone!

WHAT IS A BUYER'S AGENT and WHAT DO THEY DO?
David Ortiz of the Boston Red Sox is arguably the best designated hitter of all time.  He specializes in one thing:  hitting.  Most players do two things: they hit and they play a position in the field.  He does not play a position in the field (except in rare circumstances).  His main job is to hit.

Contrast Ortiz with someone like teammate Dustin Pedroia.  Pedroia is a great hitter but he is also a great fielder.  He fields and hits - just as most baseball players do.  He is not a "specialist" like Ortiz - he is more of an "all-around" player.

Like Ortiz, some agents work only with sellers or only with buyers.  These agents specialize with one or the other for various reasons.  However, most agents work with both types of clients.  For example, if someone calls me to sell their home, I am as happy to do that as I am to help someone who is buying their first home.  I will also help someone rent their home or help someone find a rental.  These functions - and more - are all components of what would fall under the general job description for most real estate agents.

So what makes me a buyer's agent or a listing agent?  It is a label that applies simply based upon what the situation is.  For example, there is only one agent who is the listing agent for any given home.  That makes every other agent - by default - a buyer's agent for that particular home.

Most people know generally what a listing agent does:  they offer help to the seller in setting a price, they take photos of the home, they market the home through advertising and Open Houses and they help negotiate any offers so that the seller gets the best offer overall.

 

What does a buyer's agent do?  The buyer's agent gives full attention and support to his/her buyers.  The agent advocates for the buyers at every step of the process.  The agent owes the buyers confidentiality, loyalty and all the requisite fiduciary responsibilities.  Here are the major services that the agent provides:

• Assists buyers with obtaining their loan pre-approval
• Provides automated e-mail alerts for properties that match the buyers' criteria
• Schedules private showings for homes of interest
• Assists buyers with making reasonable offers
• Negotiates best offer terms for clients
• Assists clients with selecting home inspector and scheduling inspection
• Re-negotiates terms of offer, if necessary, based upon inspection results
• Assists with selection of attorney (if necessary) to review final sales agreement
• Deals with any unexpected issues that come up along the way
• Schedules final walk-through prior to closing
• Attends closing with clients

If you are a buyer, it makes a lot of sense to enlist the help of a buyer's agent - you get all the services and there is no fee!

FORECLOSED VERSUS REGULAR SALES – WHAT ARE THE DIFFERENCES?

Buying a foreclosed or bank-owned home (also referred to REO) often works pretty much the same way as a private sale when it comes to the process.  However, there are differences and here are a few points to keep in mind:

Some banks respond to offers very quickly – sometimes within 24 to 48 hours.  Other banks take much longer.  So if you are willing to pursue a bank-owned property with the potential reward of getting a good deal, patience is truly a virtue.  That said, we can often get a fairly quick answer for many homes - I have had responses as quickly as the same day of the offer!



The banks have their own contract that is used and that contract usually cannot be altered in any way.  In a private sale, you would typically have your attorney review the contract and he or she would sometimes insert additional language or an addendum to further protect you beyond the protection that the standard contract offers.  The seller would do likewise and the two attorneys would normally hash out any changes at their levels.  For a bank-owned home, the bank’s standard contract is used.  It's legal and used all the time - they just don't allow your attorney to make any changes.  In that respect, the contract can favor the bank. 

The time-frames are usually a little different. For example, they might want a purchase and sale agreement signed within 48 hours of acceptance of an offer.  This is different from how we normally do it, which is to sign the purchase and sale agreement after the inspection.  Again, as long as the inspection contingency is still in there, it's not usually an issue.  However, unless you are a contractor or someone who is going to tear down or totally rehab the building, we absolutely want you to have the option to have the inspection and to pull out of the deal if the inspection results reveal things that you are unhappy with and that can't be negotiated with the seller.  The bank’s contract often includes language that says that you will give them notice of any unsatisfactory findings in the inspection report and also give them a chance to remedy the problems.  This can work to your benefit.

Bank-owned homes typically have no seller disclosure.  This could be the same for a private sale as well, but usually a seller will fill out a disclosure form so that you can get an idea of the condition of the house before you do an inspection or make an offer.  Of course, you would go through the house anyway to observe the condition of the home for yourself before making an offer, and you would have an inspection done by a professional after making an offer, but it's always nice to have the seller disclosure form at the beginning.  Bank-owned properties typically never have this.  It's a relatively minor point given that you will be going through the house several times and that you will have the house inspected by a professional.  Moreover, there is no requirement in Massachusetts (as this is written in January 2014) for sellers to provide a disclosure anyway, so many "regular" sales go forward without this either.

Bank-owned properties are usually sold "as is." What this generally means is that if you do the home inspection and there are significant issues that you would typically ask the seller to either correct or give you credit for, the seller of a bank-owned property will not usually entertain any request to repair items or to give a credit for you to fix them.  This would seem contradictory to those contracts that state that the buyer is to give the seller a chance to fix anything found to be deficient in the inspection.  And it is!  A better interpretation of “as is” might be:  Buyer Beware and Conduct Your Own Due Diligence!”

One last point is that if you do not close on the agreed-upon date, the bank can charge you a per diem fee for every day that extends beyond the originally agreed-upon closing date. $100 per day is not unusual.  I have been lucky enough to never seen a bank actually assess this fee in my experience - but they could and they do!  To read about reasons why closing dates get extended, please see my blog article on that topic. 

There might be other differences, so check with your agent and attorney whenever contemplating an offer for a bank-owned property.

HOW TO GET YOUR (REALLY) FREE CREDIT REPORT THREE TIMES EACH YEAR

GET YOUR CREDIT REPORT FREE

Here is some information on free credit reports that might be useful to you:

When considering buying a home - and even as part of an ongoing general financial plan - it is important for us to check our credit reports regularly.  It is generally agreed that at least 25% of consumers have errors on their reports that could adversely affect their credit-worthiness.

Here is a method to do it for free and to do it on a regular basis:

Go to: www.annualcreditreport.com

NOTE: There are MANY similarly-named sites, including ones with the word "free" in it. They are not really free and usually try to get you to sign up for a credit monitoring service or to pay to see your credit score. You should avoid those sites.

When you go to the site, pick one of the three companies listed: Equifax, Experian or TransUnion.

Fill out the form.  Yes, you will have to enter your SSN, but the site is legitimate.

After you submit the form, you will be able to see your credit report instantly and you can even download it as a PDF file or print it out.

Although you can only get one free report each year from any one company, here's how to get three of them each year for free:

Pick one of the companies. Then, four months from today, pick the second company. Four months from that date, pick the third company. Then you can start over again, beginning next year. By rotating through the three companies every four months, you can keep a pretty vigilant watch over your credit without paying anything for a monitoring service.

These reports will not contain your credit rating score (FICO score). You usually have to pay for this, although when you apply for a loan, the lending institution usually gives you a copy of your scores along with your latest credit report. To get a copy of your score on your own generally costs about $16. You can sometimes get a free score by agreeing to a trial subscription to a monitoring service. This is okay, but remember to cancel within the specified time so that you will not be charged for the subscription - unless you really want it!

Finally, requesting the free credit report through www.annualcreditreport.com will NOT affect your credit score.

Some credit card companies are starting to offer your credit score as part of your cardholder agreement - you can check to see if one of your cards is in this group.

There are also other sites like Quizzle.com, CreditSesame.com and CreditKarma.com that offer free credit reports, free credit scores and free suggestions on how to improve your score.  You can also get them at any time.  These sites require NO credit card information to be given, so check them out and see if you like them!

THE BEST FIRST STEP IN FINDING A NEW HOME: GET PRE-APPROVED FOR A LOAN!

A PRE-APPROVAL - WHAT IS IT AND WHY GET IT FIRST??

My best first suggestion to clients who are getting ready to start their home search is to get pre-approved.  So what does the informal term "pre-approved" mean?

Realtors use this term all the time, usually asking a potential client:  "Are you pre-approved yet?"

What we really are asking is:  "Have you spoken - at length - with a lender and has that lender, after pulling your credit report and verifying some information, issued you a written document that says you are qualified for a home loan of a certain type and for a certain amount?"

If you have filled out an online form at a lender's site, and then the site spits back a "pre-qualification" notice suggesting that you would qualify for a loan, this is NOT a pre-approval.  These are fine to satisfy your own personal curiosity as to what you might be qualified to borrow, but they are essentially meaningless in terms of demonstrating your ability to qualify for a mortgage.

You want a specific pre-approval from a loan officer who has reviewed your criteria.

It is important to get this FIRST for several reasons:

• It specifically defines your comfort zone in terms of price.
• It gives you confidence that you will qualify for a loan.
• It is better to have this BEFORE you find a home that you really like rather than having to scramble afterwards to get it.
• It is submitted with any offer to demonstrate to the seller that you can afford whatever it is that you are offering.
• It also reassures your agent, who is investing time and travel expense to show you homes, that you are not "just looking" and that you have a sincere intention to purchase a home.

A pre-approval should not cost you anything in terms of dollars.  It will typically be considered a "hard" inquiry (made by a lender) as opposed to a "soft" inquiry (such as when you check your own credit score.)  In  that sense, your credit score will be affected slightly - suggestions are that it might drop your score by five points.  For most people, this will not become an issue.  However, discuss this with the potential lender BEFORE they do the credit check to be fully informed.

Once you have the pre-approval, it is usually good for 45-90 days.  If it expires, and not much has changed in terms of your job, income, debt and so forth, renewing the pre-approval is usually an easy process.

Making a request for a pre-approval is easy:  You call a lender and spend a few minutes providing information so that the loan officer can identify you and start the verification process.  Many loan officers are able to issue pre-approvals the same day if you call in the morning - some do it in as little as an hour.

You can contact any bank, lender or credit union that offers home loans to see what programs might be available and what rates are being offered.  I usually offer several recommendations to my clients if they need some names.  These are lenders who I trust and who have demonstrated the ability to close a loan in a predictable and dependable way.

To summarize, applying for a pre-approval is usually an easy and quick process, and almost always the best first step that you can take.

Welcome to Real Estate 311!  Why 311?? 3-1-1 is the special number that people in many communities can dial to get non-emergency service or information.

This blog provides a similar opportunity:  You can get all kinds of information about real estate here.

Information is power - use it!!

Fran Hart - Real Estate 3-1-1