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Know thy agent
Will Rogers, the great American cowboy wit, said "I've never met a man I didn't like." It's the same with real estate agents. I've never met one that wasn't friendly, smiling and brimming over with positive ness. Dig deeper to know what you're getting in terms of loyalty, knowledge and experience. The right agent is a tremendous help—and often a necessity when it comes to finding the right house.
Get references from family, friends and colleagues. Take time to interview at least three agents in person. Ask to see their "activity lists." These show every property they sold during the past year—you want an agent who's experienced in the area where you want to live and who deals with buyers in your price range.
A seller's agent works for and gives complete allegiance to the seller; a buyer's agent does the same for the buyer. Most states require agents to tell the buyer for whom they're working. Even in the rush of house hunting make sure you find out this important piece of information. A buyer's agent will point out—rather than gloss over—any flaws with the house or neighborhood, help you negotiate a good deal, explain your other options and be unquestionably on your side.
Tip: The cost will be the same whether you use the seller's agent or get a buyer's agent: The two agents will split the commission.
Don't go overboard
Buy only what you can afford. Everyone can agree that a four-bedroom, three-bathroom house in mint condition on three lushly landscaped acres with a pool has more appeal than a two-bedroom, one-bath on a small lot. But there's nothing worse than winding up with such a big monthly payment that you've nothing left over for a vacation, the kids' camp or your retirement. A good rule of thumb: Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.
Remember that your mortgage payment is only one aspect of what you'll be paying. Budget for homeowner's insurance, property taxes, furniture, general maintenance and so on.
Pick the right mortgage
Mortgages are available from banks, mortgage companies and credit unions. You can also get one through a mortgage broker, who will contact several lenders for you to find competitive rates.
Get mortgage information from more than one source, and get the same information from each so you can compare the offers. The Federal Trade Commission (FTC) recommends that in addition to finding out the basic interest rate you ask each lender:
Is the rate fixed or adjustable? When interest rates rise, monthly payments for adjustable-rate loans eventually go up, too.
What is the loan's annual percentage rate (APR)? This includes the interest rate, points, broker fees and any credit charges you may have to pay, expressed as a yearly rate.
What will points be in dollars? Points are fees paid to the lender or broker for the loan. Ask each potential lender for a quote in the dollar amount (rather than just the number of points) so you'll know how much you will have to pay.
Is private mortgage insurance (PMI) required? If you make less than a 20 percent down payment, the lender will probably require you to purchase PMI, which protects the lender in case you fail to pay. Find out the exact monthly amount and how long you will be required to carry PMI.
You will also have to choose between a 30-year or 15-year mortgage. A 30-year mortgage will mean lower monthly payments but a higher interest rate. In the long run, you'll be paying more for your house because you'll be making more interest payments. With a 15-year mortgage, the monthly bill will be higher but the interest rate lower; thus you'll pay less for your house because it will be paid off in a shorter period of time.
Have each lender provide you with a written statement of all fees connected to the loan. Then, ask each to reduce one or more of the fees. Use the lowest amount of fees to negotiate with the other lenders to see if they'll reduce their fees.
Also, check out the FTC's publication Looking for the Best Mortgage.
Tip: If you have an excellent credit rating, you may qualify for a lower down payment through a special Fannie Mae program: The Flexible 100™ requires no down payment while the Flexible 97™ requires just 3 percent down.
Get a pre-approval letter
This gives you substantial leverage: Sellers immediately see you as a serious buyer. Not only will you know the exact price range you can afford, you'll be able to negotiate a better deal and move faster when you see a house you like. Work with your lender to get pre-approved—you'll need to supply information to verify your income, credit history, debts and assets. The lender will then issue a letter stating that your mortgage is approved for a certain dollar amount for a certain time period. Don't confuse pre-approved with prequalification: The latter is a non-binding estimate of how much mortgage you can afford.
Once you get pre-approved for a mortgage, avoid taking on any serious new debt and make timely payments on all existing debts. Otherwise you risk degrading your credit rating partway through the buying process.
Tip: If you're charged a pre-approved fee, negotiate to have it refunded at the closing.
Lock in your interest rate
Once you get what you think are the best terms possible, ask for a written rate lock. It will include the interest rate, how long the lock-in will last and the number of points to be paid. A lock-in protects you from a rate increase if rates go up during the time your loan is being processed.
Play it close to the chest
If you fall in love a house, keep your feelings to yourself. Don't let the seller or the seller's agent know. Handing over that bit of information will empower them to hold out for the asking price. Keep in mind that there's always another house at the right price.
Tip: Visit at night and on a weekday. Most people look at homes on weekends in the daylight; before you buy, find out what the neighborhood is like at other times. Is it quiet? Noisy? Full of traffic? Dead as a doornail? Also, drive the surrounding few blocks in each direction from the house, to make sure there aren't unsavory areas or unexpected industrial sites nearby.
Negotiate
Before making an offer, ask the agent for a Comparative Market Analysis (CMA). The CMA lists the addresses of recently sold homes in the same neighborhood, with the date sold, the price and the number of bedrooms and bathrooms. Your offer should be comparable and not necessarily based on the seller's asking price.
Then, insist that the contract include two types of escape clauses: a financing (or mortgage) contingency and an inspection contingency.
If you make an offer but then are ultimately turned down by lenders, the financing contingency will release you from the contract. You'll also get back your earnest money (your deposit).
If a professional inspection finds damage or structural flaws in the house, the inspection contingency will release you from the contract and your deposit will be returned. Usually you can also opt to use the inspection contingency to negotiate for repairs to the house or for a lower selling price. There are different types of inspection contingencies; work with your agent to put the type you want into the written offer you make on the house.
Tip: Never use an inspector recommended by the seller's real estate agent.
Watch out for predatory lending
Every once in a while, the FTC issues a warning about unscrupulous lenders. Signs of trouble:
Being asked to include false information on your loan application.
Being asked to sign a blank form.
Being pressured into borrowing more money than you need or can afford.
Being promised one thing but delivered another. If you get new numbers or new terms at the closing, ask for an explanation. Tell your lawyer you are prepared to walk away.
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Tips for Selecting an Agent or Realtor® |
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Most of the articles I’ve seen on the Internet have been written by REALTOR or agents trying to sell their services. These notes are a combination of my personal experience of actually being a home owner, and the results of your selection don’t effect me directly. With this in mind, I would feel comfortable in saying that this is an honest home owners perspective not a seller's pitch. The right agent makes all the difference, and if you follow these guidelines, you'll find that buying or selling a home could be a pleasant experience.
Q: Realtor versus real estate people?
Q: Does your agent have any written referrals?
Q: Referrals versus Confidentiality.
Q: Is your agent a residential expert?
Q: How many homes has your agent SOLD in the past 2 years?
Q: How many buyers does your agent currently represent exclusively?
Q: Do they have a means accessibility?
Q: Are you comfortable with your agent?
Q: Does the agent have the qualities important to you?
Q: 80 / 20 - Your choice?
Interviewing Agents on the phone first.
Questions to ask on a phone interview.
The SECOND interview of a Agent.
Q: REALTOR versus real estate people?
All real estate people are not REALTOR'S. The term REALTOR can only be used by members of the association. There is some additional education as well as conformance to a code of ethics required. I would strongly recommend only using a REALTOR.
Q: Does your agent have any written referrals?
Be sure to ask for referrals and testimonial letters. This should include letters specifically for selling or buying homes. Some agents have a natural knack for buying or selling. I would recommend finding out the agents ratio of buying versus selling a home.
Q: Referrals versus Confidentiality.
If you ask for the names and numbers of past clients for referrals, there is a confidentiality problem here. Client information is supposed to be confidential. This is why written referrals are a common practice in the industry. If a agent provides names and phone number without prior consent of the past clients, this may be a agent you do not want to work with in buying or selling your home.
Q: Is your agent a residential expert?
How well does the agent know the neighborhoods? To fill the specific residential needs of home buyers and sellers, I would recommend selecting an agent that is familiar with the area. An agent that not only has lived in the area, but is active in the neighborhood events. Make a list of things that are important (i.e. schools, transportation, churches), and make sure they are familiar with your requirements in the selected area.
Q: How many homes has your agent SOLD in the past 2 years?
Another thing to make sure of is that the agent you select has a strong personal sales record. This shows they have the skills, knowledge, and experience to get result. How many sales transactions has the agent personally (not company) completed in each of the past 2 years? Make sure the number provided is the sales and not transactions including purchases. Some agents excel more in selling then purchasing, or the opposite. How does their sales compare to the industry averages in the area?
Q: How many buyers does your agent currently represent exclusively?
Don't ask for anything less than extraordinary service. Make sure your agent has the time and dedication to your needs. Your agent my have too may clients at one time, and your needs may get lost in the shuffle.
Q: Do they have a means accessibility?
Does the agent have a pager, voicemail, and/or cellular phone. This is critical when time is not on your side and a quick yet effective means of communication is necessary.
Q: Are you comfortable with your agent?
Buying or selling a home is one of the most crucial financial transactions of your life. It can be a confusing and sometimes difficult process. It does pay to leave as little to chance as you can.
Q: Does the agent have the qualities important to you?
Integrity, market knowledge, thoroughness, someone who succeeds where others have failed, and real estate expertise. These were some of the requirements I had when I was looking for my Realtor.
Q: 80 / 20 - Your choice?
Have you ever heard that in the general work force that 80% of the work is done by 20% of the people? I'm a firm believer in this breakdown by in my past professional experience. This also applies to Real Estate too. (The percentages vary depending on neighborhoods & number of part-time agents)
Let’s that 80% of all Real Estate transactions are performed by 20% of the salespeople. Who would you want to be your agent? One of the 20% right!
80% of all new salespeople will quit the business within one year.
Only 20% of new sales people will survive more than ONE year in Real Estate.
The agents in the 20% bracket, have 20 times as many buyers per agent.
Interviewing Agents on the phone first.
This is a good way to eliminate some of the agents before you have spent too much of your valuable time with them. When calling, don't always expect the agent to be in the office, you may have to leave a message, and have him/her call you back. The reason is that the agent you want to choose is most likely to spend less time in the office, not at a desk. Call at least 6 people until you have least 2 or 3 likely people you feel comfortable enough to handle all aspects of your home.
Questions to ask on a phone interview.
How long have you been in the business?
If less then 2 years, you may consider another agent.
What type of license do you have?
If they respond with a type of brokers license, (the exact name varies by state, usually broker, associate broker, broker-salesman, etc.) you are on the right track.
If they respond with an agents license or a salespersons license is a defiant warning flag to consider another agent.
If they respond with the answer "licensed REALTOR" is a concern. The term REALTOR is a designation, not a license. The reasoning behind this is that an agent’s license is relatively easy to get, whereas a brokers license requires additional education (usually more experience)
Are you a part time agent? Would you want to work with someone that is part time agent? Actually, how many part time doctors have you met?
What additional education pertaining to Real Estate do you have? Any additional education beyond a simple licensing course such as GRI, CRS, or possibly a B.A. or better in real estate. Any of these is an indication that you're dealing with an educated professional. However, some people are great at passing a test, but fail in the business world. Don’t base your entire decision on awards alone.
Where do you get most of your clients from? Good answer is personal referrals. OK answer is advertising. An answer like we're the biggest or best office, you may try a different agent that has a personal experience, and isn’t riding on the coat tails of office’s reputation.
Can you come over right now? If yes, keep in mind most top agents will be busy and will need to schedule an appointment with you.
The SECOND interview of a Agent.
After you have selected several agents that have passed the "phone interview" (at least 6 agents), narrow the list down to 2 or 3 agents. Invite them over to your home. As you invite them over to your home, make sure that they know this is a second interview, and that you are not promising anything. Take this opportunity to get a feel for them as a person and as an agent. I went through several agents before I found the one that met all of my expectations, and I never felt disappointed with my REALTOR'S performance.
When you make appointments for the agents to inspect your property, allow at least one hour with each agent.
Things to prepare and expect during an agent interview.
Treat this first meeting like a job interview. The agent is applying for the job to sell you home.
Provide a tour before discussing anything in detail. It’s nice to be familiar with your property before being able to discuss it.
Expect a agent to do there homework BEFORE they arrive for the first contact. They should have already obtained a great deal of information on your home before they arrived. i.e. - taxes, age, square footage, schools etc. This is one of my personal pet-peeves. One of the first agents I met wasted my valuable time while clicking away on his portable scheduler to get information. BORING!
Point out any improvements you've made, as well as any defects that you know about. Be honest. It's best that your agent has accurate information to advice a possible solution or prepare for any problems that may arise.
For home improvement referrals, I would also recommend shopping around. Your agent maybe getting kickbacks from referred contractors. It’s always best to have at least 3 estimates. Please see our contractor referral section for more details on selecting a contractor.
Trust your instincts. If you don't feel that they are competent in areas that are important to you, they are probably not right agent for you.
Don't be shy! Ask questions! If you don't like something say it!
Discuss marketing options in newspapers, magazine advertising, Internet postings, yard signs, open houses (at least once a month), agent tours, brochures, take one boxes, targeted mailings, etc.
List Price
You be tempted to immediately discuss the price/value of your home, but I would recommend discussing other aspects of the sale of your home first. This will allow more time to get to know the agents personality.
However when it does come time for setting an asking price, a good agent won't just pull a number out of thin air. They'll have hard data, and they'll take the time to show you exactly how they arrived at the market value for your home.
Don’t be fooled by listing with an agent that has the highest list prices. Some agents may highball you on a list price just to get the listing. This could cost you time and money in delays.
Listing with the agent who use flattery like "You're home is so pretty, it'll sell in no time.", may not always be the right agent for the job. Remember to keep your ego and emotions as far out of the way as possible.
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