Get Pre-Approved FIRST
When you’ve decided you’re ready to buy a home, whether you’re a first time home buyer or you’ve bought several homes, it’s important to know that the first thing you should do is get with a trusted mortgage professional to get pre-approved. Finding out what all of your options are is key when purchasing a new home. Don’t assume anything. Even if you have great credit and money for a large down payment.
Knowing ALL of your options up front is key. You could have more buying power or options than what you think which could result in more leverage for you as the buyer against the seller in the negotiation process as well as open up the doors to a more expansive range of homes, which again gives you more leverage over a seller. Many buyers make the mistake of starting a home search or contacting a real estate agent BEFORE they get pre-approved and this is not the recommended way to approach buying a home. Don’t be the buyer who finds the home first then goes to look for the best mortgage financing.
Not all agents or brokers are REALTORS®
As a prerequisite to selling real estate, a person must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state by state basis, must be met. After receiving a real estate license, most agents go on to join their local board or association of REALTORS® and the NATIONAL ASSOCIATION OF REALTORS®, the world’s largest professional trade association. They can then call themselves REALTORS®.
The term “REALTOR®” is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes.
An agent is bound by certain legal obligations. Traditionally, these common-law obligations are to: Put the client’s interests above anyone else’s; Keep the client’s information confidential; Obey the client’s lawful instructions; Report to the client anything that would be useful; and Account to the client for any money involved.
NOTE: A REALTOR® is held to an even higher standard of conduct under the NAR’s Code of Ethics. In recent years, state laws have been passed setting up various duties for different types of agents. As you start working with a REALTOR®, ask for a clear explanation of your state’s current regulations, so that you will know where you stand on these important matters.
The difference between a buyer’s and a seller’s agent or broker
Myth: The buyer has to pay for the buyer’s agent. Myth Buster: False.
The seller actually pays for the buyers agent. When a is listed for sale with a real estate brokerage the seller has listed that home and signed a contract with the seller’s agent (listing agent) for their commission to be built into the sales price already. Generally that commission is 6%. If you hire a buyer’s agent to represent your interests and you sign a purchase agreement (aka contract) with the seller, then your buyer’s agent splits that commission of 6% with the listing agent (3% to buyers agent and 3% to seller’s agent).
If you don’t retain a buyer’s agent then the seller’s agent can legally represent you and the seller with something referred to as a “dual agent”. Does anything about dual or double agent sound fair to both parties? Of course not. The loyalty or primary allegiance is going to tilted more to one of those two parties. In the case of selling real estate, if the listing agent has built a relationship with the seller and a buyer comes in without and agent, who do you think the loyalty will primarily lie with? I’m sure you guess the seller. That’s absolutely correct. It’s like going to court in a civil case and you and the other party both have the same attorney! Sounds like a conflict of interest to me. But for some reason it’s legal and allowed.
Some people think that because of the accessibility of free online home sites like Zillow, Homes.com, Trulia, etc. that they can search homes themselves and why would they need a buyer’s agent. While that is true to an extent, there are some instances where the agent may have access to more listings than what are shown on the free home sites because of their exclusive access to MLS (multiple listing service), pocket listings (homes not officially on the market but about to be within coming weeks), or other For Sale By Owner homes for sale that you may have overlooked. But in reality, the true value of having a trusted buyer’s agent is not the home search factor but instead the skill and expertise of contract negotiations, their ability to help you identify issues beforehand, and their knowledge to help you navigate the home buying process.
Conclusion and Point: Get a buyer’s agent.
How to choose an agent
We recommend that you get a referral from family, trusted friends, co-workers, or the mortgage professional that helped you with your pre-approval. If you obtain more than one option, you’ll need to make a decision. In making your decision to work with an agent, there are certain questions you should ask when evaluating a potential agent.
- Is real estate their full-time career?
- What sets them apart from the other agents in your market? How do they go above and beyond the status quo?
- In exchange for your commitment, how will the agent help you accomplish your goals and make you feel that your interests are first and foremost?
- Doing a search in their system for the home parameters you recommend and sending that to you should not be the only thing they do. They should be able to tell you things about the home that you can’t find easily available online yourself using research they’ve done whether speaking to listing agent or accessing information online that most consumers don’t have, or wouldn’t think to access.
Don’t settle. If you feel that an agent is not giving you that warm and fuzzy feeling upfront that they’re not that excited to be working with you to help you make one of the largest purchases you’ll make in your lifetime, then that’s a sign that they may not be the agent you want on your team.