Why Use a Buyers Agent?

What is a Buyers Agent?
Buying a home is probably the most important purchase you will ever make. Do you want to handle it alone? Until a few years ago, home buyers had no choice. They decided upon a home to buy and negotiated the contract without representation.

Traditionally, all residential real estate agents represented the home seller. This was true of the “listing agent” who put the home up for sale, as well as the agent who found the buyer. The agent, who helped the buyer find the right home, actually worked for the seller as a “subagent” of the listing agent. Under that traditional system, all agents were legally bound to represent the seller, and the buyer had no representation.

Now Buyers Have a Choice:
Buyers no longer need to represent themselves during the home search and purchase. Smart home buyers today can receive undivided confidential representation by choosing a “buyer’s agent.” In fact, 71% of home buyers surveyed in a recent Gallup Poll for the National Association of Realtors said they would use a buyer’s agent next time they purchased. At last, you don’t have to buy a home alone. Now you, like the seller, can have someone on your side looking after your best interests.

What will a Buyer’s agent cost me?
Perhaps the right question is, “What will it cost me if I don’t use a buyer’s agent?” Purchasing a home without representation is possibly the biggest financial mistake you can make.
A buyer’s agent can guide you each step of the way to prevent costly errors. Failure to find out about defects in the property or the actual value of the property can certainly be an expensive mistake. Failure to negotiate a contract that works for you can cost you money as well as time. With a buyer’s agent, you can ask for and receive advice and assistance in selecting the best property and determining an offering price.

Who pays the buyer’s Agent fees?
Surveys show in most instances buyer’s agents are paid like seller’s subagents; that is, buyer’s agents generally receive a share of the sales commission built into the list price. All listings in MLS will indicate how a commission will be paid.
However, there are other ways buyer’s agents may be paid. Be sure you understand from the start how the buyer’s agent will be paid before you commit to a relationship. Remember, the question you really need to ask yourself is: “Can I afford to buy a home without a buyer’s agent?” For most home buyers today, the answer is “NO”!

How can a Buyer’s agent help me?
Buyer’s agents owe certain duties to their home buyers, such as care, confidentiality, full disclosure and accurate accounting. State laws define these responsibilities, the REALTORS Code of Ethics, general principles of agency and court decisions. That’s the legal definition. But what does a buyer’s agent actually do for the homebuyer? Like other agents, a buyer’s agent will show the buyer available homes, point out the property’s features, provide financing information and submit the offer to purchase. But that’s not all. As your representative, a buyer’s agent will share valuable and essential information with you if the agent knows it such as:
• The seller’s reason for selling and timetable;
• Length of time the home has been on the market;
• Previous offers and counter offers for the property;
• Strengths and weaknesses of the property;
• Determining an offer price based on past comparable sales; locating suitable property not currently on the market.

You owe it to yourself to be the most knowledgeable buyer you can be. Most important for many buyers, you can ask a buyer’s agent for advice and assistance in setting your offering price and structuring the other terms of your offer. What’s more, you’ll have peace of mind knowing an advocate is working on your behalf to help you buy at the best possible terms. A buyer’s agent’s goal is to help you buy the home you want – and buy it at the right price.

If you are working with a buyer's agent, he or she is required not to tell the seller of your top choice. In addition, he or she is also focused on getting you the lowest asking price.

Also, when you use a buyer's agent, you will see more properties. Not only are they plugged into their Multiple Listing Service, but also they are actively finding homes that are listed as FSBO, or homes that sellers are thinking about listing.

Benefits of Owning Your Home
• The Best Investment
• Income Tax Savings
• Stable Monthly Housing Costs
• Forced Savings
• Freedom and Individuality
• More Space

Build a Plan of Action When Buying A Home:
Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It's important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.

Before you can build a plan of action, take the time to lay the groundwork for your decision-making process.

First, ask yourself how much can you afford to pay for a home? If you're not sure on the price range, find a lender and get pre-approved. Pre-approval will let you know how much you can afford so that you can look for homes in your price range. Getting pre-approved helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range.

Second, ask yourself where you want to live and what is the best location for you and/or your family. Things to consider:
• Convenience for all family members like proximity to work or school
• Local school ratings
• Crime rate of neighborhood
• Local transportation or access to major roads
• Types of homes in neighborhood, for example condos, town homes, single family etc.

The Buying Process

• You can search for a home by yourself driving around and through newspapers. It is possible but very time consuming and not economical at all.

• Hiring a realtor does not cost you extra but opens up new doors for you in your search. Realtors buy and sell houses every day for a living; they have first hand knowledge of all the crucial information you are yet to learn. Save time and aggravation get a professional to help you!
• Meet with your realtor and with a loan officer get pre-approved; by sharing income and other financial information, you will know the price range for which you are qualified.
• Financing Details Affect Your Offer
• Amount of down payment
• Interest Rates
• Closing Costs and Financing Incentives
• Seller Financing
• Cash Offers
• Other Financing Details in Your Offer
• How FHA and VA Financing Affects You

Begin viewing homes with your realtor, when possible, all decision-makers should visit the various homes together.
• Always be candid with your realtor-- it will help them understand your particular needs and desires and enable them to select homes you'll want to see.
• When you find a house you love and all other factors fall in to place you prepare the offer.

Major Factors Influencing your Offer Price:
• Property condition, home improvements, current market condition as well as seller motivation will affect your final decision on your offer price.
• Comparable Sales in the public record as well as comparable sales and pending transactions in the Multiple Listing Service will help you to determine if your expectations are realistic.

Your REALTOR will provide you with all that information and will help make sense of it.
Your Realtor will go through the contract and complete your offer. Make sure you are clear on:
• Contingencies in a Purchase Offer
• Earnest Money Deposit
• The Closing Date
• Transfer of Possession

Negotiations will proceed until both buyer and seller agree on all terms and sign the contract.

All documents will be sent to the title company where a file will be opened, and title commitment and property tax information ordered.

At that point you should receive a Property Disclosures from the Seller
• Condition of the Property upon Transfer

Inspect The Property:
• You Should Require an Inspection
• Select an inspector and arrange for both a general inspection and wood-destroying insect inspection.
• Your Realtor also can provide information about other environmental assessments.

Appraisal and survey of property:
• The lender and Title Company will make arrangements for the property appraisal and survey.
• Buyer will be provided a copy of the Title Commitment Letter.
• Buyer will make arrangements for homeowner's (hazard) insurance, and arrange for the insurance agent to talk with the closing officer at the title company.

• Buyer receives a copy of the closing statement for review prior to closing.
• Buyer does a final walk-through inspection of the property.
• The Realtor arranges a closing date and time with the buyer, seller and Title Company.
• Buyer brings a cashier check for all closing costs and the balance of the down payment

After The Closing:
• Documents are sent to the buyer's loan company for approval and funds are disbursed.
• The title company receives and funds all money from the loan company. Payment of any accrued expenses in connection with the closing are due including taxes, attorney's fees, professional real estate fees and title company fees.
• Legal documents will be recorded in the office of the county clerk and mailed to the buyer.
• Title Company prepares and issues the title policy, and sends it to the Loan Company and new home owner.

Common Questiong From First Time Buyers

Why Should I Buy, Instead of Rent?
Answer: There's more to owning a home than personal satisfaction. You can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes, too, this adds up to hefty savings at the end of each year. And you're also allowed to deduct the property taxes you pay as a homeowner. If you rent, you write your monthly check and it's gone forever. Another financial plus in owning a home is the possibility its value will go up through the years.

Should I use a real estate broker? How do I find one?
Answer: Using a real estate broker is a very good idea. All the details involved in home buying, negotiations, legalities and paper work, particularly the financial one, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate professional will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the real estate professional can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and answer last-minute questions. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.

How much money will I need to come up with?
That depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover two costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house (it will become a part of your down payment once the offer is accepted). The amount of your earnest money varies; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house. When you make an offer on a home your earnest money are placed in an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. Closing costs - which you will pay at settlement - average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise.

Pre-Approval & Loan Documents

It used to be that buyers could go house shopping and when they have found their dream home, and then they go to get pre-approved. However, in today's market, that has proven to be one of the least effective methods in landing the dream home.

Most lenders can pre-qualify you for a mortgage over the phone. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be.

A pre-qualified letter is not verified and in essence, does not count for much if you are competing with other buyers who are pre-approved. When you are pre-approved, you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property.

In addition to being pre-approved, it's important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, mortgage brokers, and online lenders.

Items You Need When Applying For a Loan
It used to be that lenders mailed out verifications to employers, banks, mortgage companies, and so on, in order to verify the data supplied by borrowers. Nowadays, the interest is often in speed and getting answers quickly, so "alternate documentation" has become more widely used. Alternate documentation means that underwriting answers can be obtained with information supplied directly from the borrower instead of waiting around for verifications to come back in the mail.

Verifications are still mailed out, but usually as part of quality control procedures.

These are the things you need to supply to your lender to get a quick approval using alternate documentation:

Income Items:
• W2 forms for the last two years
• Pay stubs covering a 30 day period
• Federal tax returns (1040's) for the last two years:
   •if you are self-employed
   •earn more than 25% of your income from commissions or bonuses
   •own rental property
   •or are in a career where you are likely to take non-reimbursed      business expenses
• Year-to-Date Profit and Loss Statement (for self employed)
• Corporate or partnership tax returns (if applicable)
• Pension Award letter (for retired individuals)
• Social Security Award letters (for those on Social Security)

Asset Items:
• Bank statements for previous two months (sometimes three) on all accounts.    All pages.
• Statements for two months on all stocks, mutual funds, bonds, etc.
• Copy of latest 401K statement (or other retirement assets)
• Explanations for any large deposits and source of those funds
• Copy of HUD1 Settlement Statement on recent sales of homes
• Copy of Estimated HUD1 Settlement Statement if a previous home is    for sale, but not yet closed
• Gift letter (if some of the funds come as a gift from a family member)
• Gifts can also require:
   • Verification of donor's ability to make the gift (bank statement)
   • Copy of the check used to make the gift
   • Copy of the deposit receipt showing the funds deposited into bank      account or escrow

Credit Items:
• Landlord's name, address, and phone number (for verification of   rental)
• Explanations for any of the following items which may appear on your    credit report:
• Late payments
• Credit inquiries in the last 90 days
• Charge-offs
• Collections
• Judgments
• Liens
• Copy of bankruptcy papers if you have filed bankruptcy within the    last seven years

Other Items:
• Copy of purchase agreement (if you have already made an offer)
• To document receipt of child support (if you desire to show it as    income)
• Copy of Divorce Settlement (to show the amount)
• Copies of twelve months canceled checks to document actual receipt    of fund

FHA Loans (Federal Housing Administration)
• Copy of Social Security Card (or other documentation of social    security number)
• Copy of Driver's license

VA Loans (Veteran Affairs)
• Copy of DD214

• Copy of Note on existing loan
• Copy of HUD1 Settlement Statement on existing loan
• Name, address, phone number, loan number of existing loan/lender

What Not to Overlook on a Final Walkthrough

Be Sure That:
• Repairs you’ve requested have been made. Obtain copies of paid bills    and any related warranties
• All items that were included in the sale price—draperies, lighting    fixtures—are still there.
• Screens and storm windows are in place or stored.
• All appliances are operating.
• Intercom, doorbell, and alarm are operational.
• Hot water heater is working.
• HVAC is working.
• No plants or shrubs have been removed from the yard.
• Garage door opener and other remotes are available.
• Instruction books and warranties on appliances and fixtures are there.
• All personal items of the sellers and all debris have been removed.

REALTOR.ORG Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® . Copyright 2003. All rights reserved.

Importance of an Inspection:

As a buyer, you are entitled to know exactly what you are getting. Don't take for granted what you see and what the seller or the listing agent tells you. A professional home inspection is something you MUST do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition.

Beforehand, make sure the report will be done by a professional organization, such as a local trade organization or a national trade organization such as ASHI (American Society of Home Inspection). (See bellow for more info). Not only should you never skip an inspection, but also you should go along with the inspector during inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. You have to demand an inspection when you present your offer. It must be written in as a contingency; if you do not approve the inspection report, then you don't buy. Most real estate contracts automatically provide an inspection contingency.

Ten Questions to Ask a Home Inspector:
• What are your qualifications? Are you a member of the American Association of Home Inspectors?
• Do you have a current license? Note, Inspectors are not required to be licensed in every state.
• How many inspections of properties such as this do you do each year?
• Do you have a list of past clients I can contact?
• Do you carry professional errors and omission insurance? May I have a copy of the policy?
• Do you provide any guarantees of your work?
• What specifically will the inspection cover?
• What type of report will I receive after the inspection?
• How long will the inspection take and how long will it take to receive the report?
• How much will the inspection cost?

Portions adapted from Real Estate Checklists and Systems and used with Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® . Copyright 2003. All rights reserved.

Hidden Home Defects to Watch For:

No home is flawless, but certain physical problems can be expensive.

Watch For:
• Water leaks. Look for stains on ceilings and near the baseboards,    especially in basements or attics.
• Shifting foundations. Look for large cracks along the home’s    foundation.
• Drainage. Look for standing water, either around the foundation of    the home of in the yard.
• Termites. Look for weakened or grooved wood, especially near ground    level.
• Worn roofs. Look for broken or missing copings and buckled shingles    as well as water spots on ceilings.
• Inadequate wiring. Look for antiquated fuse boxes, extension cords    (indicating insufficient outlets), and outlets without a place to plug in    the grounding prong.
• Plumbing problems: Very low water pressure, banging in pipes.

© 2006 All Rights Reserved.