Why Should You Use A Realtor?
A lot of people ask why they should use a realtor instead of selling a home or purchasing a home themselves. The answer is simple. A realtor is a trained real estate professional with experience and knowledge of the local real estate market. This experience and knowledge is of critical value when one is attempting to get the most for their home sale, or finding the best possible deal when purchasing a home. However, the realtors importance goes much deeper than that, there are several more areas that the realtors abilities come into play that are often unconsidered or overlooked.
One of the most important things that a realtor can do for you, especially when the sale of your home is concerned, is provide marketing and market coverage. This is a difficult undertaking on your own for many reasons. First of all a realtor usually has a previously established web presence. The realtors website is a great place to find out info about homes that are available, information about the community and mortgage options. Your home will be prominently featured on this website, showcasing your home to a huge market. Other aspects of marketing that a realtor provides include such things as newspaper ads, open houses, flyers and info packages. Realtors have a higher budget to spend on marketing a home, and the experience of doing so. They also have an established network of contacts, usually buyer's agents. This means that their network will bring more prospective buyers to your home.
When buying a home a realtor will essentially do the legwork for you. By informing them of what you are looking for in a home you can save yourself valuable time. A realtor will be able to sort through the homes that are available and select only the homes that suit your needs, lifestyle, and budget. They will also have important information regarding the area, neighborhood, and the homes in question. Realtors will also be able to arrange inspections and conduct them with the inspector so that you remain as informed on the process as possible.
Another important aspect of both sales and purchase where a realtor's knowledge is invaluable is during the closing of a home. This is easily the most complicated part of a transaction as many FSBO sellers and buyers have found out. Real estate contracts are intricately involved documents that require an understanding of not only the contracts process, but real estate law as well. A typical closing will involve more than the realtor, lawyers and notaries play an important role in the transfer of a home from one owner to another. Realtors are trained in the art of contracting home sales and usually have an established group of lawyers and notaries that they utilize in order to make the entire process easier on the buyer or seller.
Would you let a car mechanic fix your piano? It does not make a lot of sense does it? For the same reason you should seek the services of a professional realtor when buying or selling a home. Their experience, knowledge and professionalism will save you time, money, and most importantly the nervousness of wondering if everything has been done properly and in accordance with law and practice.
Daniel John & Sarah Dupuis are experienced and knowledgeable Seattle real estate professionals. The Seattle real estate market is a thriving and exciting market. Contact Daniel & Sarah soon for more information on homes in Seattle.
Real Estate 201: Finding Your Dream Home
OK, so you’ve read through Real Estate 101 and you’re pre-approved and you know how much you’re qualified to borrow. You’re ready to start shopping for houses! And you’ve found an agent with whom you feel comfortable working – by the way, this agent should be ME, if you’re in the Waco area. Why get an agent, you ask? Don’t they cost extra? You could always just get those nice, color real estate magazines and/or drive around neighborhoods you like and just call the agents in the ads or on the signs. You have to call all those agents anyway since they NEVER put the price in the ads or on the flyers. Besides, once you call them, they’ll get you all fixed up and look out for your interests.
OK, time for dirty little secret #2: The agent that has the property listed is working for the seller, not YOU! This isn’t really a secret since agents are required to disclose this if you have any substantive discussion about a house with them, but most buyers, especially first time buyers, don’t understand all the implications of this disclosure. Now the listing agent is not out to rip you off or anything, in fact we are duty bound to be honest and fair with all parties. Let’s say that you decide to make an offer on the house (under the asking price) with the listing agent, but you happen to mention that you’d be willing to pay the full price if that’s what it would take to get it. That agent is required to tell the seller that information, after all they are working for the seller and one of their common goals is to sell it for as high a price as possible. It is important to remember that in a scenario like this one that, as a buyer, you and your interests are not being represented, and the agent cannot give you advice and opinions.
Seem crazy? Well, it is! Thankfully there is another option in Texas: buyer’s agency. A buyer’s agent represents the interests of you, as a buyer. No big surprise there. The buyer’s agent is working for you to find the house you want and get you the best possible deal on it. Your agent will give you advice and opinions and use his training and experience to negotiate the deal for you. There is an agreement called a Buyer’s Representation Agreement that spells out the terms and details of this agency relationship. You may be wondering who pays the buyer’s agent. Well, actually the buyer’s agent and the listing agent split the sales commission so it is the seller who actually pays both agents, even though the buyer’s agent is working for the buyer.
You may be wondering what incentive the buyer’s agent has to get the buyer the best deal, since the seller is paying him and the higher the sales price, the more commission the agent makes. It boils down to integrity. That’s what Realtors are charged to do, look out for the client’s interest above their own. Plus the simple fact that the percentages are tiny – for say $1000 differential in price, the agent stands to make maybe $25 more. No self-respecting agent is going to sell his own client down the river for twenty five bucks, or for any amount. This is especially true because Realtors depend on referrals from past clients to get new business. If you feel like I didn’t work hard to represent your interests, you sure aren’t going to recommend me to one of your friends. Then there’s simple pride: any decent agent loves to outmaneuver his counterpart (the other agent) in negotiating a deal. A few dollars more (or even a few hundred more) of commission will never replace the bragging right you earns when you do some clever negotiating. Remember, our job is to get the best deal for our client and we want to do our job well, just like anyone else does.
There are some other benefits to having a buyer’s agent that might not come immediately to mind. Some of the best deals are sold “in-house” before they ever hit the MLS (multiple listing service – the computerized list of available properties for sale) or the open market. If one agent at a particular brokerage lists a great house for an awesome price, they will naturally tell their co-workers about it and should any of them have a buyer looking for something similar they are going to rush out and show the property and submit an offer before it’s even entered into the MLS. You will never find a deal like this looking through magazines or driving the neighborhoods.
Also, a good agent will automate the searching process for you. He will set it up so that you will receive an email the moment a property that meets your specifications enters the MLS, often before many Realtors know about the property. That way you can beat other buyers to the best deals, it’s quicker and easier than driving around town or sifting through magazine ads which are 2-3 weeks old at best when they first come out.
What if your dream home turns out to be one that your agent just listed? Or maybe you found your agent by calling his ad and that house just happened to be “the one”? Well, thankfully, there is a provision for that as well. It is the “intermediary” relationship. In Texas, you must have a Buyer’s Representation Agreement signed with the listing agent for them to be acting as an intermediary. Also, he must have written consent from the seller to act as an intermediary. Technically it is the broker who is the intermediary, but the agent will be representing his broker. The intermediary is bound not to disclose confidential details (like whether the buyer will pay more or seller will take less) to either party without written permission. Also, he is not allowed to give advice to either party – in effect he merely facilitates getting the deal done. Often a deal can be negotiated more quickly since there are fewer links in the chain of communication from potential buyer to seller.
You may be wondering just how you go about making offers and what takes place during the negotiating process that we hinted at earlier in this article. Well, check back soon for the next installment of this series. Offers & Counteroffers – Negotiating a Contract
Bill Patterson
Kelly, REALTORS
WacoHomeSellers.com
Real Estate 101: The Lender
As a Realtor, I frequently get calls from people that want to own a home, but have no idea of how to go about buying one. They may say, “I think I want to buy a house but I don’t know what to do.” Or, “I saw a house I would love to buy but I’m not sure where to start or how to do it.” Or even, “Can I afford to buy a home?” If you are thinking, “Yes! That’s me!” you’re in the right place. The question you should be asking is this: Can you afford NOT to buy one. OK, here is dirty little secret number #1: If you can afford to rent a house in Waco, you can afford to BUY one. Let’s be honest, landlords don’t buy a house and then rent it for less than the payments, insurance, taxes and upkeep cost them. They are making a monthly profit on that house (or apartment) you are renting — you could be putting that money in YOUR pocket, instead of theirs. The only real problem in making the transition from a renter to a homeowner (doesn’t that word have a nice ring to it?) is this: Can you come up with the necessary cash to buy that home you’ve always wanted?
Since most of us don’t have tens or hundreds of thousands of dollars in the bank or in a sock under our mattress, we come at last to the real crux of home buying, which is also, conveniently, the starting point of the process of buying a home. The home buying process starts with getting pre-approved for a loan (called a mortgage) with a lender. Why start there? Well, if unless you do have $100,000 in a sock under your mattress, you’re going to have to borrow it from someone willing to lend it to you. And if no one is willing to lend it to you, there’s not really much point in shopping for a house. If in fact you can’t find anyone to lend you the money to buy a home, a good loan officer should be able to point you in the right direction to get your finances in order so that you can buy that home you’ve always wanted. The other reason for starting with the lender is that they are typically the slowest aspect of the entire transaction. So it only makes sense to get them started on their part first.
Folks often wonder where they should go to borrow for a home. There are two basic types of lenders in Texas: banks and mortgage brokers. They do essentially the same thing except that banks are generally loaning their own money and mortgage brokers are lending the money of others. Banks obviously loan money to reap the benefits of interest and while mortgage brokers charge a fee for making the loan while the entities that actually loan the money receive the interest. So, banks must be cheaper right? Not necessarily. Banks also charge fees to make loans and sometimes they charge higher fees or possibly higher interest rates. How then to choose. I recommend talking to 3 or 4 different lenders and compare their fees and rates. They will give you a “good faith estimate” of what the interest rate, the various fees and your payment will be. A good place to start is with the financial institution with which you have your checking and/or savings account. Your realtor can recommend some other lenders that he/she has had favorable experiences with in the past and can help you make sense of all the numbers they will throw at you. As a general rule, a local bank with in-house underwriting makes for a quicker and smoother transaction than internet lenders.
The five stages to obtaining a loan are as follows: pre-qualification, application, underwriting, approval and funding. The lender can’t actually approve the loan until you’ve picked out a house but they can “pre-qualify” you. Most lenders these days can do this over the phone in 15-20 minutes. They will need some information from you regarding your income and expenses. So it will be much quicker if you are prepared when you make the call. For income they will want to know how much you make each week or month. This is easy for salaried employees but for hourly employees it’s a bit more complex. How much you make per hour is useful but then there are issues of hours and overtime, etc. Better to be prepared to provide a weekly/biweekly or monthly wage before taxes and Social Security and etc. are taken out (a few months of pay stubs are useful for making this calculation). You’ll also need to have information about any savings accounts, stocks/bonds or retirement plans you may have, as well as any other sources of income (trusts, rent or other royalties, etc.). Then you’ll be asked about your financial obligations: rent, utilities, and other debts such as car notes, credit cards, child support or any other loans you currently owe. For any loans or other sources of credit, you will need to provide balances, and monthly payments at the least. Of course, you can get “pre-approved” or “pre-qualified” without all this information in front of you but the more accurate a picture you can give to the lender, the better idea he can give you of what you might actually be able to borrow. If your estimates of these figures are way off, the amount that you’re pre-qualified to borrow may be way off as well.
With all the talk of pre- this and pre- that, you may wonder what it takes to be “qualified” or “approved” for a loan. The answer: documentation. Unless your credit score is very high, you will need to provide proof of all the numbers you give to the lender. You will have to make a formal application for the loan at this point. This will entail an application fee which varies from lender to lender. The lender will ask for bank statements, pay stubs, and other documents to verify the information you provide. It is very important to relay these documents to the lender as soon as possible after he requests them. When you make your application, the lender may give you the option to “lock” in your interest rate. This is not going to be a free option, however, and if rates don’t go up it could be money down the drain. If they do go up it could potentially save you a LOT of money over the life of your loan. It may only cause your payment to go up a few dollars but ask your lender or realtor to show you the effects of the additional interest in the long term.
Your lender is going to review your application and accompanying documentation and relay them along to the most difficult person to please in the entire lending process: the Underwriter. The underwriter is the person that reviews your entire loan package and accompanying documentation for accuracy and determines whether it meets pre-set guidelines. If the underwriter isn’t satisfied, it’s not going to matter how nice your loan officer is or how much he likes you, the loan is not going to be approved in the end. So, to that end, whenever your lender asks you for more paperwork, give it to them as soon as possible, that day if you can. This will speed the entire process along smoothly. Before your loan goes into underwriting, you will have to have a valid agreement between you as a buyer and the seller(s) to purchase a house. This agreement is called a contract and will be discussed in a future installment of Real Estate 101. Once the loan is out of underwriting, it is considered approved, but beware, things could still get messed up. If, for example you go and buy all new furniture the day before you are supposed to finalize your home purchase, you may find yourself unable to borrow that money after all, since this would likely unbalance the underwriter’s careful assessment of your ability to pay back the loan. Approval is conditional, you can get unapproved a lot quicker than it took you to get approved.
Funding is the final step in the process. This occurs after both parties (buyer & seller) have signed all the necessary paperwork, and the bank actually hands over the money so that the seller can be paid. Then you actually get the keys to your new home and the sellers finally begin smiling. In the good old days, funding typically happened at “closing”, the loan officer would come with a check and everyone would sit around the table and eat cookies, tell funny stories, and sign papers. It is becoming more frequent that funding occurs only after the underwriter or a bank lawyer has reviewed the loan documents (and often takes one last look at your credit) and the money is wired to the title company who then disburses it. Sometimes this happens quickly but all too often it takes what seems a ridiculously long while and the smiles are fewer and farther between. In Waco, there are still a few lenders that do things the old fashioned way, it sure is a lot less stressful that way.
Now that you’re up to speed on obtaining a mortgage, check back soon for the rest of the Real Estate 101 series:
2. Agents and Agency
3. Offers and Counteroffers
4. Under Contract and the Option Period
5. Closing
Bill Patterson
Kelly, REALTORS
WacoHomeSellers.com
