WHAT THE BUYER DOES
This is your house you are buying. You have to monitor and control what is happening. You will work with professionals; such as your agent, lender and escrow officer to help you create and manage the real estate transaction that you want & need.
Buying a home is an important milestone for anyone, but it can be intimidating when you’re not sure what to expect. We’ve highlighted the main points in the home buying process to prepare you for this exciting step in your life.
KNOW THE STEPS TO BUYING
Even before you start looking for that perfect home, you need to ensure that you have a strong credit score, money saved for a down payment and closing costs, preapproval for a loan, and the appropriate representation. You need to be prepared.
The best way to prepare is to know exactly what to expect. Here are the 12 steps that you will need to accomplish before you can receive the keys for your new home.
- Step 1: Check Your Credit Score
- Step 2: Save For A Down Payment And Closing Costs
- Step 3: Determine How Much Home You Can Afford
- Step 4: Choose A Lender
- Step 5: Get Preapproved For A Loan
- Step 6: Find The Right Real Estate Agent
- Step 7: Determine Your Priorities
- Step 8: Start House Hunting
- Step 9: Make A Smart Offer
- Step 10: Get A Home Inspection
- Step 11: Make Sure The Home Is Appraised
- Step 12: Close On Your New Home
Before you begin the process of buying a house, you want to make sure that you’re actually in a position to take on this significant milestone. That’s why the first step is to check your credit score and review your finances.
Obtaining a loan is not always an easy feat. All mortgage lenders will look at your credit score and financial history before agreeing to provide you with a loan. You should be one step ahead of them.
To obtain a conventional loan, you’ll need a credit score of 620 or higher. However, if you qualify for an FHA loan, the minimum credit score requirement is 580.
Does your credit score meet the requirements? If you’re unsure, you can find out by creating an account with a credit monitoring website. After signing up, you’ll receive a free credit report, which is updated every week, and have access to resources that can help you improve your credit.
Your credit and financial history will dictate whether you’re able to obtain a mortgage and at what interest rate. Buyers with higher credit scores tend to secure better interest rates, so you must get a sense of where you stand before you get deeper into the process.
2: SAVE FOR DOWN PAYMENT AND CLOSING COSTS
Although a mortgage spreads out the cost of buying a house over many years, you’ll still need to provide some money up front to pay for your down payment and closing costs.
Unless you’re getting a VA loan or a USDA loan – which don’t require a down payment – you’ll need to make sure you have funds saved for a down payment. The minimum on a conventional loan, like a 30-year fixed loan, is 3%. An FHA loan is available with a down payment of 3.5%.
Keep in mind, the larger the down payment, the more equity you’ll have, and the lower your monthly mortgage payments will be. By paying more up front, you’ll save on interest and be less likely to have to pay private mortgage insurance.
Along with your down payment, you’ll have to save money for closing costs (fees associated with processing and securing your loan). Although the amount you’ll need will vary depending on your loan amount and the tax requirements in your area, you can generally expect closing costs to be 3% – 6% of the purchase price.
To ensure you know exactly what you’ll owe, your lender will provide you with a Loan Estimate within three days of receiving your home loan application. This three-page form, which is required by law, will itemize the loan terms, projected payments and closing costs for your potential mortgage, so you are aware of precisely what you’ll need to have saved.
3: DETERMINE HOW MUCH HOUSE YOU CAN AFFORD
Before you speak with a mortgage lender, it’s useful to calculate how much house you can afford on your own. A lender will tell you how much money you qualify for, but you want to make sure you won’t be overextending yourself by determining your budget and what you realistically can afford to spend on mortgage payments each month.
When determining how much house you can afford, you should use the 28/36% rule of thumb, which stipulates that you should not spend more than 28% of your gross monthly income on housing expenses (your salary before taxes) and 36% on your total monthly debt payments.
Your housing expenses are your monthly mortgage payment, which includes:
- Principal: The money that you borrowed to purchase your home.
- Interest: The fee that the lender charges you to borrow the funds.
- Taxes: The property taxes that you’re required to pay the government based on the value of your home.
- Insurance: The homeowners insurance that protects your home against any damages.
- Association dues: The fee you must pay if your home is part of a homeowners association. Note that if your home is not part of a homeowners association, you will not be required to pay this fee.
To calculate how much home you can afford, you can use the Quicken Loans Home Affordability Calculator or do the following calculations yourself:
Maximum Monthly Housing Expenses = (Gross Monthly Income X 28) / 100
Maximum Total Monthly Debt Payments = (Gross Monthly Income X 36) / 100
But, once you’ve determined how much you can afford, be sure to consider the lifestyle that you want to maintain and leave yourself a cushion in case of emergencies.
4: CHOOSE A LENDER
Many buyers don’t realize that they can and should shop around for lenders before choosing one. There can be variations in the interest rates, terms and closing costs that each lender offers, which is why it’s essential to do your homework.
When comparing different lenders, you should ask each one to provide you with a Loan Estimate, which – as discussed above – will spell out the loan terms, projected payments and closing costs for your potential mortgage. This form is provided in a universal format, meaning that it will allow you to clearly see the differences between what each lender is willing to offer you.
However, one crucial factor that is not included in a Loan Estimate is customer service. Getting a mortgage and making payments is not always an easy process. Unfortunately, there may be hiccups along the way, which is why you want a lender that can make the mortgage process as simple and convenient as possible.
The ideal mortgage lender will guide you through each step of the way, make you feel comfortable asking questions and respond with a sense of urgency.
5: GET PREAPPROVED FOR A LOAN
Contrary to popular belief, getting prequalified for a loan is not a guarantee that you’ll actually be able to obtain a loan. When you get prequalified, lenders will only estimate your finances based on the information you provide.
On the other hand, getting preapproved for a loan requires a thorough investigation of your finances that includes the verification of your income, assets and credit rating. When you get preapproved for a loan, you are guaranteed that you’ll be able to obtain the loan, assuming your finances don’t change.
A preapproval will tell you exactly how much the bank is willing to lend you and specify the costs of obtaining the loan. Furthermore, getting preapproved will demonstrate to sellers that you’re a serious buyer who is ready and able to buy their home.
There are three different levels of approval offered by most lenders:
- A Prequalified Approval, which provides an estimate of what you can afford based on your credit report, as well as the information you provide us about your income and assets.
- A Verified Approval, which goes a step further to verify your income and assets. By allowing us to verify your information, you are provided with the assurance that you’ll be able to obtain a loan.
- A Rate Locked Approval, which not only assures that you’ll be able to obtain a loan but also lets you lock your interest rate for up to 90 days while you search for a new home. If rates go up, your rate stays the same. If rates go down, your rate drops.
Getting a Rate Locked Approval is the most effective way to prepare for buying a house, as it will ensure that you have the ability to get a mortgage at the best rate possible. Once you lock in your interest rate, you’re protected against rising rates and are still able to secure a lower rate should they fall before you find a home. It’s a win-win!
6: FIND THE RIGHT REAL ESTATE AGENT
There are some buyers who decide that they don’t want to work with a real estate agent, but that is often a huge mistake. A real estate agent will represent you throughout the home buying process to ensure that you find the right home, ask the important questions, make an appropriate offer, have the power to negotiate and receive the necessary disclosures.
Real estate agents take the stress out of the experience by providing buyers with knowledge of the market and skills in the negotiation process. Furthermore, agents’ expertise and skill are provided to buyers without charge.
How is this possible? Well, as a buyer, your agent is only paid a commission if you close on a new home. And the commission that they receive is paid through the purchasing price of the house. So, it’s technically the seller who pays for your representation.
Therefore, the question shouldn’t be: Should you find a real estate agent? It should be: How do you find the right agent?
The way to find a good agent is by asking the right questions. Some questions to ask may include:
- How long have you been working as a real estate agent?
- What makes you different than other agents?
- How many customers/clients are you currently working with?
- What experience do you have finding homes in my price range?
- How knowledgeable are you about my desired area?
- Are you willing to provide me with references?
Real estate agents play a big role in a successful and stress-free home buying experience, so it’s crucial that you find a good one. Once you select the best agent for you, he or she will look over your approval letter, discuss your budget and help you set your priorities.
7: DETERMINE YOUR PRIORITIES
Once you’ve determined how much you can afford to spend on a home and found the right agent to help you through the process, you should start to talk to your agent about what your ideal home looks like. During this time, you should consider:
- Location: Which neighborhoods would you prefer to live in?
- Type: Would you like a single-family house, multifamily house, townhouse, condo, etc.?
- Lot: How much land, if any, are you looking for?
- Size: What is your ideal square footage?
- Bedrooms and bathrooms: How many bedrooms do you require? Does every bedroom need its own bathroom?
- Age and condition: Are you willing to do work on the home?
Although your real estate agent will send you listings after you’ve discussed your needs, it’s useful to do a search yourself prior to this conversation. By conducting your own search, you’ll be able to get a sense of what’s available on the market.
You won’t have access to your local Multiple Listing Service, which provides your agent with a full list of all homes currently on the market. However, you can browse homes listed on various websites, like Rocket Homes, which will allow you to see the many homes on the market and filter the results by price, location, type, square footage, rooms and year built.
As you begin to look at listings, you’ll most likely notice that your perfect home is not available on the market or in your budget. That’s to be expected – after all, it is your ideal home. That’s why it’s vital that you figure out what your priorities are now before you get deeper into your house search.
Determining your priorities really means that you need to decide what you’re willing to sacrifice. Start by asking yourself: Which aspects of a home do I absolutely need and which would I prefer to have?
For example, if you have three children, is it necessary for all of them to have their own bedrooms, or is it more important that the house is close to the best schools?
Finding the best home is all about the give and take, so make sure you know what you’re willing to give up and what’s absolutely necessary to take.
8: START HOUSE HUNTING
After you’ve settled on your priorities and clearly communicated them to your real estate agent, it’s time to start house hunting. As you browse the listings your real estate agent sends you, or you find yourself, keep your priorities at the back of your mind. Remember, it is highly unlikely that any listing will perfectly match your dream home, so try not to be too picky until you see the listings in person.
You’ll find that the more houses you see, the more they all start to blend together. So, try to be organized and make sure that you talk to your agent about your likes and dislikes about each property.
When going to see each listing, reflect on the neighborhood that the home is in, as well as the home itself. Before every tour or open house, drive around the area. Consider what your commute would be like. Research the schools your kids would go to and figure out how long it would take them to get there. Find out where the closest grocery store and pharmacy is located. Overall, make sure the area fits your everyday habits.
When touring each house, take photos and make notes. Make sure each home meets your needs. Think about the style of the home: Is it conducive to your lifestyle? Are there enough bedrooms? Enough bathrooms? Does it get enough natural light?
If the home seems to check all of the boxes, it’s time to start thinking about the condition. Keep an eye out for these potential red flags:
- Plumbing and electrical issues
- Poor insulation or problems with the HVAC system
- Issues with the foundation, like slanted floors or significant cracks in the walls
- Visible water damage on ceilings or walls
- Chimneys or gas furnaces that need to be repaired or replaced
- Presence of radon, asbestos, lead paint or carbon monoxide
Although a house in poorer condition may seem like a steal, remember that you’re the one who will be left to make those repairs. Even homes with outdated appliances can be a nuisance because you’re the one who will have to pay to replace them ultimately. So, try to be as realistic as possible as you view each house by thoughtfully considering what you’re willing to live with and what your budget can cover.
9: MAKE A SMART OFFER
When you find the right place, ask your real estate agent to run a comparative market analysis to determine what a fair price would be based on recent sales of similar homes in the area. The less interest there is and the longer the house has been sitting on the market, the more power you’ll have to negotiate.
Beyond the price you plan to offer, you should also speak to your real estate agent about whether it makes sense to include any contingencies in your offer. A contingency is a stipulation included in an offer which states that if a particular condition is not met, the buyer is free to break the contract without any repercussions.
Although sellers often balk at offers made with contingencies, there are some contingencies worth making regardless of the seller’s feelings about them, especially if you’re negotiating from a position of power.
Mortgage Contingency
If your ability to afford the home is dependent on your ability to obtain a loan, you must include a mortgage contingency in your offer. This contingency will make it possible for you to back out of your offer if, for any reason, you’re unable to receive financing.
Even if you’ve been preapproved for a loan, you should still write this contingency into your offer. If you don’t, you’ll find that you’re still on the hook for the purchasing price regardless of whether you’ve obtained any funds.
Home Sale Contingency
If you’re planning to sell your home and require the funds from the sale to purchase this new one, you’ll want to ask for a home sale contingency. This contingency will provide you with a certain period of time within which to secure a buyer for your own home.
If you’re unable to find a buyer during that time, the home sale contingency will enable you to rescind your offer and reclaim your earnest money deposit without any recourse. Understand, many sellers will refuse this contingency, but it’s still worth a try in most cases.
Inspection Contingencies
Inspection contingencies are also worthwhile additions to any offer. After you make an offer, you’ll want to get the home inspected to make sure you have a full understanding of the home’s condition. It’s in your best interest to ensure that the seller is willing to do any work necessary before closing or take the respective cost out of the purchasing price.
With an inspection contingency, you’ll be able to not only renegotiate the offer based on any necessary repairs but also break the agreement if the home needs more work than you can handle.
The decision to include any contingencies in your offer should be made based on the transaction and your financial circumstances. If you’re in the middle of a bidding war, your agent will probably dissuade you from including any – as sellers are less likely to choose offers that require them. However, if there are no other offers on the table, it is worth the try. Contingencies can always be removed during the negotiation process.
Earnest Money Deposit
Along with your offer, you’ll also be required to provide an earnest money deposit, also known as an escrow deposit. This deposit is money that you provide up-front to show the seller that you’re serious about the offer, so the seller feels comfortable taking the home off the market.
The amount of money included in the deposit can be negotiable; however, an earnest money deposit is typically 1% – 3% of the purchase price. The money is held in an escrow account and applied to your down payment and closing costs at closing.
If you change your mind and decide that you won’t buy the home for any reason that is not specified in a contingency, the seller gets to keep your earnest money deposit. That’s why it’s vital that you consider the conditions in which you may need to pull out of the contract before you make an offer. Including a contingency in your offer can be the difference between keeping and losing your earnest money.
Step 10: Get A Home Inspection
After your offer is accepted, you should arrange for a home inspection to be completed. You’ll want to hire a professional, third-party home inspector to examine the home you’re preparing to buy. The home inspection is a crucial step as it will identify areas where major repairs or renovations require immediate attention, as well as any work that needs to be completed in the future.
If significant repairs are needed, you can request that the seller complete them before closing. If the seller declines to handle the repairs and an agreement can’t be reached, you may be able to withdraw your offer.
However, if you’ve included an inspection contingency in your contract, you’ll be able to guarantee that either repairs are made, the cost is deducted from the purchase price or the contract is broken, and your earnest money is returned.
11: MAKE SURE HOME IS APPRAISED
If you’re getting a mortgage to purchase your home, your lender will require the home to be appraised before they agree to release your funds. A home appraisal provides an estimate of how much a home is actually worth based on comparable sales in the area, market trends, public records and a comprehensive inspection of the property.
Generally speaking, home appraisals help you ensure that the purchasing price of the home is in line with the home’s true value. Therefore, these home valuations are a protective measure for lenders. By insisting that a home be appraised before money is lent, lenders can make sure that they’re not lending more money than the house is worth.
Whenever a buyer obtains a loan to purchase a house, the house itself is used as collateral. If the buyer is unable to keep up with monthly mortgage payments and defaults on the loan, the buyer would go into foreclosure, and the lender would sell the loan to recover the money lent.
However, if a lender didn’t require a home appraisal and mistakenly provided the buyer with more money than the home was worth, the lender would be at risk. If the buyer defaulted on the loan and the lender had to sell the house, it’s likely that the lender would not be able to recoup all the money that was initially lent.
So, when you get the home appraised, keep in mind that the lender will only provide funds to cover the appraised value of the house. If the appraisal comes in below the purchasing price, you’ll have to either renegotiate price or come up with the difference – which is one of the many reasons having a mortgage contingency (or appraisal contingency) is in your best interest.
12: CLOSE ON YOUR NEW HOME
Before closing, walk through the property with your real estate agent and make sure that everything is in order. If the seller agreed to make any repairs, the walk through is the time to ensure that the seller has actually completed them.
Then, review your Closing Disclosure. It will outline the terms, final closing costs and any outstanding charges or fees included in your loan. Your lender will send the disclosure to you at least three days before closing.
During closing, the property title will pass from the seller to you. A closing agent will oversee this process, which typically takes place at a title company, management firm, escrow office or your home.
The closing agent will ensure that all necessary parties are present at closing. The agent acts as a mediator between you and the seller and confirms that all required documents are signed. Once documents have been signed, the agent will ensure that all funds, including closing fees and escrow payments, are paid and properly disbursed.
During closing, you have two major responsibilities:
Signing legal documents: This includes the Closing Disclosure, promissory note, deed of trust and certificate of occupancy.
Paying closing costs: This may include fees for your mortgage application, appraisal, survey, title search and funds to establish an escrow account. An escrow account is used to pay for property taxes and insurance premiums.
While the home buying process can be confusing, these 12 steps will help you get through it unscathed. If you’re still unsure about any step, we’re happy to talk to you about it.
WHAT THE AGENT DOES
In a real estate transaction, there are usually two real estate agents involved: A buyer’s agent and a listing agent. The buyer’s agent works on behalf of the buyer, while the listing agent represents the interests of the seller.The buyer’s agent will aid the buyer in navigating the real estate landscape by finding listings and advocating for the buyer and their unique needs. The listing agent, on the other hand, is responsible for listing a property for a seller. A listing agent has a fiduciary responsibility to look out for the seller by ensuring that they secure the best terms possible for the sale of the seller’s property.Instead of hiring their own agent, some buyers believe they can find a property they like and work with the listing agent to actualize the sale. While this type of dual agency can be done, it’s highly discouraged because it leads to a conflict of interest. When it comes down to the negotiation process, there’s no way that one agent can be loyal to both parties of the transaction. Buyers and sellers inherently have distinct interests, especially when it comes to the purchasing price.
WHAT CAN A BUYER’S AGENT DO FOR YOU?
When working as a buyer’s agent, a real estate professional is responsible for acting as a resource for their clients by guiding them through each step of the home buying process. As a result, a buyer’s agent generally takes on the following tasks:
Finding and purchasing a home involves more steps than most buyers realize. A buyer’s representative can be an incredibly beneficial resource, helping you navigate the entire process. Here’s a partial list of everything they can do for you.
READY TO HELP THROUGH THE WHOLE PROCESS
- Answer questions in person, on phone, email, etc:
- The buyer’s agent will typically go with buyers to all showings and any particularly interesting open houses.
- While buyers tour the property, the buyer’s agent will be present to answer any of their questions and provide thoughts about the property based on their expertise.
- Furthermore, the buyer’s agent will ask the listing agent (or FSBO seller) questions the buyers may not know to ask and get more insight into the seller’s circumstances and property’s condition, taxes, etc.
HELP ARRANGE FINANCING, IF NEEDED
- Assist in locating sources of mortgage loans.
- Help you examine how much you can afford but how much you may want to spend.
- Assist in comparing different financing options.
- Provide information on purchasing incentives that may be available.
- Educate and discuss the differences between being prequalified and preapproved for a mortgage.
ASSIST IN FINDING RIGHT PROPERTY
- Identify your needs and wants in a property.
- Finding listings: At the outset of the process, the buyer’s agent will ask buyers about their needs and preferences to determine what their ideal home looks like. They will then use that information to begin searching for appropriate properties. As new listings enter the market, the agent will send the buyer any properties that match their needs.
- Find appropriate available properties.
- Set up an automated email alert system that immediately notifies you of properties that fit your requirements.
- Sort through inaccurate information about homes in the area.
- Provide ready access to all MLS-listed properties.
- Network with other agents for properties not yet in the MLS.
- Preview properties prior to showing.
- Help select for viewing only those homes that fit your needs.
- Aid in narrowing your search until you have identified your top choices.
- Assist in analyzing the pros and cons of each property.
- Disclose all known latent material defects.
- Assist you in evaluating properties for suitability, affordability, and resale value.
- Scheduling showings: The buyers will peruse the listings their agent sends them and pick out the ones they would like to view in person. The agent will then coordinate with the respective listing agents (or sellers if the home is for sale by owner (FSBO)) and schedule a time for the buyers to tour the property. The buyer’s agent will also inform buyers of any open houses that they may be interested in attending.
EDUCATE YOU ON MARKET CONDITIONS
- Educate you on whether it is a buyer’s market or a seller’s market.
- Show statistics on what percent of list price the sellers are currently receiving.
- Show trends, current average days on market, current absorption rate, and/or current months of inventory.
GUIDE YOU THROUGH MAKING OFFERS AND REPRESENT YOU ETHICALLY
- Pricing consultation: Once the buyers find a property they’re interested in, the buyer’s agent will ask the listing agent if there are any disclosures on the property (potential issues that the seller must reveal to buyers), which may affect the home’s desirability or pricing. Then, the agent will run a comparative market analysis to determine an appropriate offering price for the property based on similar properties that have recently sold in the area. The agent will recommend that the buyers make a particular offer based on the analysis and specifics of the property.
- Prepare a CMA so that you make an informed decision when offering a price.
- Advise you on what comparable properties are selling for.
- Explain common contract contingencies.
- Obtain appropriate seller disclosures.
- Prioritize your goals.
- Help create a negotiating strategy to achieve those goals.
- Ensure that you receive and understand all state and federally required disclosure forms.
- Handle the completion of the offer to purchase or sales contract.
- Educate you on the contents of the sales contract.
- Ensure that all appropriate additional forms are completed.
- Assist you in getting the best property at the best price with the least amount of inconvenience based on current market conditions.
- Prepare you for multiple offer situations and develop negotiation strategies specific to multiple offers.
- Negotiating with listing agent or FSBO seller: After making the offer on the buyers’ behalf, the buyer’s agent will negotiate both the price and terms. The agent will inform the buyers of any counteroffer made by the seller and consult them on whether to accept or amend it. The buyer’s agent will also inform clients of possible ways to make their offer more competitive, such as eliminating contingencies or adjusting the closing date. As soon as an offer is accepted by the seller, the buyer’s agent will work to draft the contracts.
- Recommending other real estate professionals: The buyer’s agent will guide and advise the buyers through closing. Before the closing date, they may refer other real estate professionals, such as real estate attorneys, inspectors, etc., to help expedite the closing process and ensure the buyers’ interests are protected.
GET YOU TO CLOSING AND SERVE AS YOUR TRUSTED REAL ESTATE SOURCE
- Recommend inspectors, lenders, attorneys, and other professionals as necessary.
- Be an advocate and advisor during the closing process.
- Review and discuss home inspection concerns.
- Monitor and communicate required contract deadlines to ensure that you meet them.
- Assist in coordinating communications between the listing agent, lender, attorneys, title company, appraiser, and other professionals.
- Accompany you on the walk-through prior to closing to ensure the property is in the same condition as when you entered into the contract.
- Remain a life-long trusted advisor regarding real estate questions, needs, or concerns.
WHO PAYS THE BUYER’S AGENT?
Typically, it’s the seller who pays the commission for both the buyer’s agent and listing agent. The usual process by which real estate agents are paid is important because it means that buyers get the benefit of working with buyer’s agents for free. If buyers are unable to find a home to purchase, the buyer’s agent doesn’t get paid.Unless otherwise stipulated in the sales contract (or exclusive agreement between agent and client), the commission is 6% of the purchasing price and split evenly between the listing and buyer’s agents. The reason the seller technically pays for both agents is that their fees are deducted from the proceeds of the sale.For example, if a home is purchased for $400,000, 6%, or $24,000, would be withdrawn from the seller’s net proceeds to pay the agents’ commission. Of the $24,000, the buyer’s agent and listing agent would each receive $12,000, and the seller would walk away with $376,000.
CAN YOU END A CONTRACT WITH A BUYER’S AGENT?
Since buyer’s agents only get paid if buyers find and close on a new home, some agents will insist that buyers sign a buyer’s broker agreement to solidify their working relationship. This contract stipulates the terms of the relationship and ensures that the buyers will work exclusively with the agent to procure a new home.The terms of these contracts are negotiable, though some brokerage firms may place restrictions on the extent to which agents can alter certain provisions. While buyers can often negotiate the duration of the contract, these agreements generally specify that buyers must work exclusively with the agent for a period of 90 days.If the buyers still haven’t closed on a new home once the contract expires, they are allowed to find a different agent. However, buyers should read the terms of their agreement carefully, as some contracts stipulate that the agreement automatically be renewed at the end of the 3-month period.So, if buyers don’t see eye-to-eye with their agent, their ability to end the contract will depend on its fine print. With that in mind, buyers may have more flexibility in terminating the contract if their agent fails to perform the duties listed in the agreement.To ensure that you don’t get stuck working with an agent with whom you don’t feel comfortable, you can try to avoid signing a buyer’s broker agreement or negotiate for a trial period. While some agents may refuse, it’s always worth asking if you can add a provision in the agreement that provides you with a 30- or 60-day opt-out period.
HOW TO FIND A BUYER’S AGENT
There’s no question that buyers should work with a buyer’s agent, given the free expertise they offer; however, you may wonder how to find a buyer’s agent who’s right for you. As mentioned, there are some agents who work exclusively with buyers, but most don’t. So, how do you determine who will be best at representing you?The trick is to interview a handful of agents and ask them enough questions to get a sense of their personalities and experiences. Your ideal agent will be someone who is not only experienced in finding homes in your desired location and price range but also makes you feel comfortable. To help you find that perfect buyer’s agent, you should ask the following questions when interviewing:
- How long have you been working in the industry?
- What are the hours you typically work?
- Do you specialize in working with buyers?
- How many different buyers/sellers are you currently working with?
- What experience do you have finding homes in my desired location/price range?
- Why should I work with you? What do you bring to the table that other agents may not?
As you describe your ideal home to the agents you interview, you should also pay attention to how well they seem to understand your needs and preferences. The right agent for you will be someone who gets you as well as they do the industry.
In a real estate transaction, there are usually two real estate agents involved: A buyer’s agent and a listing agent. The buyer’s agent works on behalf of the buyer, while the listing agent represents the interests of the seller.The buyer’s agent will aid the buyer in navigating the real estate landscape by finding listings and advocating for the buyer and their unique needs. The listing agent, on the other hand, is responsible for listing a property for a seller. A listing agent has a fiduciary responsibility to look out for the seller by ensuring that they secure the best terms possible for the sale of the seller’s property.Instead of hiring their own agent, some buyers believe they can find a property they like and work with the listing agent to actualize the sale. While this type of dual agency can be done, it’s highly discouraged because it leads to a conflict of interest. When it comes down to the negotiation process, there’s no way that one agent can be loyal to both parties of the transaction. Buyers and sellers inherently have distinct interests, especially when it comes to the purchasing price.
WHAT CAN A BUYER’S AGENT DO FOR YOU?
When working as a buyer’s agent, a real estate professional is responsible for acting as a resource for their clients by guiding them through each step of the home buying process. As a result, a buyer’s agent generally takes on the following tasks:
Finding and purchasing a home involves more steps than most buyers realize. A buyer’s representative can be an incredibly beneficial resource, helping you navigate the entire process. Here’s a partial list of everything they can do for you.
HELP ARRANGE FINANCING, IF NEEDED
- Assist in locating sources of mortgage loans.
- Help you examine how much you can afford but how much you may want to spend.
- Assist in comparing different financing options.
- Provide information on purchasing incentives that may be available.
- Educate and discuss the differences between being prequalified and preapproved for a mortgage.
ASSIST IN FINDING RIGHT PROPERTY
- Identify your needs and wants in a property.
- Find appropriate available properties.
- Set up an automated email alert system that immediately notifies you of properties that fit your requirements.
- Sort through inaccurate information about homes in the area.
- Provide ready access to all MLS-listed properties.
- Network with other agents for properties not yet in the MLS.
- Preview properties prior to showing.
- Help select for viewing only those homes that fit your needs.
- Aid in narrowing your search until you have identified your top choices.
- Assist in analyzing the pros and cons of each property.
- Disclose all known latent material defects.
- Assist you in evaluating properties for suitability, affordability, and resale value.
EDUCATE YOU ON MARKET CONDITIONS
- Educate you on whether it is a buyer’s market or a seller’s market.
- Show statistics on what percent of list price the sellers are currently receiving.
- Show trends, current average days on market, current absorption rate, and/or current months of inventory.
GUIDE YOU THROUGH MAKING OFFERS AND REPRESENT YOU ETHICALLY
- Prepare a CMA so that you make an informed decision when offering a price.
- Advise you on what comparable properties are selling for.
- Explain common contract contingencies.
- Obtain appropriate seller disclosures.
- Prioritize your goals.
- Help create a negotiating strategy to achieve those goals.
- Ensure that you receive and understand all state and federally required disclosure forms.
- Handle the completion of the offer to purchase or sales contract.
- Educate you on the contents of the sales contract.
- Ensure that all appropriate additional forms are completed.
- Assist you in getting the best property at the best price with the least amount of inconvenience based on current market conditions.
- Prepare you for multiple offer situations and develop negotiation strategies specific to multiple offers.
GET YOU TO CLOSING AND SERVE AS YOUR TRUSTED REAL ESTATE SOURCE
- Recommend inspectors, lenders, attorneys, and other professionals as necessary.
- Be an advocate and advisor during the closing process.
- Review and discuss home inspection concerns.
- Monitor and communicate required contract deadlines to ensure that you meet them.
- Assist in coordinating communications between the listing agent, lender, attorneys, title company, appraiser, and other professionals.
- Accompany you on the walk-through prior to closing to ensure the property is in the same condition as when you entered into the contract.
- Remain a life-long trusted advisor regarding real estate questions, needs, or concerns.
- Finding listings: At the outset of the process, the buyer’s agent will ask buyers about their needs and preferences to determine what their ideal home looks like. They will then use that information to begin searching for appropriate properties. As new listings enter the market, the agent will send the buyer any properties that match their needs.
- Scheduling showings: The buyers will peruse the listings their agent sends them and pick out the ones they would like to view in person. The agent will then coordinate with the respective listing agents (or sellers if the home is for sale by owner (FSBO)) and schedule a time for the buyers to tour the property. The buyer’s agent will also inform buyers of any open houses that they may be interested in attending.
- Asking and answering questions: The buyer’s agent will typically go with buyers to all showings and any particularly interesting open houses. While buyers tour the property, the buyer’s agent will be present to answer any of their questions and provide thoughts about the property based on their expertise. Furthermore, the buyer’s agent will ask the listing agent (or FSBO seller) questions the buyers may not know to ask and get more insight into the seller’s circumstances and property’s condition, taxes, etc.
- Pricing consultation: Once the buyers find a property they’re interested in, the buyer’s agent will ask the listing agent if there are any disclosures on the property (potential issues that the seller must reveal to buyers), which may affect the home’s desirability or pricing. Then, the agent will run a comparative market analysis to determine an appropriate offering price for the property based on similar properties that have recently sold in the area. The agent will recommend that the buyers make a particular offer based on the analysis and specifics of the property.
- Negotiating with listing agent or FSBO seller: After making the offer on the buyers’ behalf, the buyer’s agent will negotiate both the price and terms. The agent will inform the buyers of any counteroffer made by the seller and consult them on whether to accept or amend it. The buyer’s agent will also inform clients of possible ways to make their offer more competitive, such as eliminating contingencies or adjusting the closing date. As soon as an offer is accepted by the seller, the buyer’s agent will work to draft the contracts.
- Recommending other real estate professionals: The buyer’s agent will guide and advise the buyers through closing. Before the closing date, they may refer other real estate professionals, such as real estate attorneys, inspectors, etc., to help expedite the closing process and ensure the buyers’ interests are protected.
WHO PAYS THE BUYER’S AGENT?
Typically, it’s the seller who pays the commission for both the buyer’s agent and listing agent. The usual process by which real estate agents are paid is important because it means that buyers get the benefit of working with buyer’s agents for free. If buyers are unable to find a home to purchase, the buyer’s agent doesn’t get paid.Unless otherwise stipulated in the sales contract (or exclusive agreement between agent and client), the commission is 6% of the purchasing price and split evenly between the listing and buyer’s agents. The reason the seller technically pays for both agents is that their fees are deducted from the proceeds of the sale.For example, if a home is purchased for $400,000, 6%, or $24,000, would be withdrawn from the seller’s net proceeds to pay the agents’ commission. Of the $24,000, the buyer’s agent and listing agent would each receive $12,000, and the seller would walk away with $376,000.
CAN YOU END A CONTRACT WITH A BUYER’S AGENT?
Since buyer’s agents only get paid if buyers find and close on a new home, some agents will insist that buyers sign a buyer’s broker agreement to solidify their working relationship. This contract stipulates the terms of the relationship and ensures that the buyers will work exclusively with the agent to procure a new home.The terms of these contracts are negotiable, though some brokerage firms may place restrictions on the extent to which agents can alter certain provisions. While buyers can often negotiate the duration of the contract, these agreements generally specify that buyers must work exclusively with the agent for a period of 90 days.If the buyers still haven’t closed on a new home once the contract expires, they are allowed to find a different agent. However, buyers should read the terms of their agreement carefully, as some contracts stipulate that the agreement automatically be renewed at the end of the 3-month period.So, if buyers don’t see eye-to-eye with their agent, their ability to end the contract will depend on its fine print. With that in mind, buyers may have more flexibility in terminating the contract if their agent fails to perform the duties listed in the agreement.To ensure that you don’t get stuck working with an agent with whom you don’t feel comfortable, you can try to avoid signing a buyer’s broker agreement or negotiate for a trial period. While some agents may refuse, it’s always worth asking if you can add a provision in the agreement that provides you with a 30- or 60-day opt-out period.
HOW TO FIND A BUYER’S AGENT
There’s no question that buyers should work with a buyer’s agent, given the free expertise they offer; however, you may wonder how to find a buyer’s agent who’s right for you. As mentioned, there are some agents who work exclusively with buyers, but most don’t. So, how do you determine who will be best at representing you?The trick is to interview a handful of agents and ask them enough questions to get a sense of their personalities and experiences. Your ideal agent will be someone who is not only experienced in finding homes in your desired location and price range but also makes you feel comfortable. To help you find that perfect buyer’s agent, you should ask the following questions when interviewing:
- How long have you been working in the industry?
- What are the hours you typically work?
- Do you specialize in working with buyers?
- How many different buyers/sellers are you currently working with?
- What experience do you have finding homes in my desired location/price range?
- Why should I work with you? What do you bring to the table that other agents may not?
As you describe your ideal home to the agents you interview, you should also pay attention to how well they seem to understand your needs and preferences. The right agent for you will be someone who gets you as well as they do the industry.
