The home buying process can seem complicated, but if you find a good REALTOR® and take things step–by–step, you will soon be holding the keys to your own home!
A REALTOR® will help you understand everything you need to know about the buying process. Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today can easily exceed $400,000. If you had a $400,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $400,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®!
Getting Started
The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity. If you give a real estate agent some basic information about your available savings, income and current debt, he or she can refer you to lenders well qualified to start helping you get the financing lined up.
Looking
Once you know how much you can and want to invest, the next step is to find the properties that most closely fit your needs. This is the time to choose a real estate licensee. When picking a real estate agent look for one who is also a REALTOR®. A REALTOR® is a member of the National Association of REALTORS®, a real estate trade association, and all members agree to abide by a Code of Ethics. A REALTOR® has many resources to assist you in your search. Sometimes the property you are seeking is available but not actively advertised in the market. It will take some investigation by your agent to find all available properties.
Choosing a Property
Your most important job is to make the final selection of the right property for you. This is when excitement and emotion run high. Your real estate agent can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of information and resources. REALTORS® can provide local community information on utilities, zoning, schools and other information. Be sure to have open, candid discussions with your agent on all your wants and needs to be sure the property is right for you.
Negotiating
There are myriad negotiating factors – including but not limited to – price financing, terms of sale, date of possession, and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
Due Diligence
With a negotiated agreement in hand, it is time to complete the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your agent can assist you in finding qualified, responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your agent, title company, or attorney can help you resolve issues that might cause problems at a later date.
Financing
As soon as you are reasonably sure the property is right for you, the process of tying up the financing begins. Your agent can help you in understanding different financing options and in identifying qualified lenders.
Closing or Settlement
Finally, there is the closing, or settlement, as it is known in different parts of the country. Every area has its own unique customs. In some areas, the title or escrow company will handle this process. In other parts of the country, an attorney does it all. Again, your real estate agent can guide you through this process and make sure everything flows together smoothly.
How should I select a REALTOR® when selling my home?
Once you’ve decide to sell your home, finding a REALTOR® is the first step in the process. In making this important decision you should understand:
Who is a REALTOR®?
The terms agent, broker, and REALTOR® are often used interchangeably, but have very different meanings. For example, not all agents (also called salespersons) or brokers are REALTORS®. Learn who is a REALTOR® and the reasons why you should use one. As a prerequisite to selling real estate, a person must be licensed by the Department of Real Estate or the state in which the property is located, 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, some agents go on to join their local board or association of REALTOR® 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 the requirements of 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.
How to Evaluate an Agent
Without any obligation, you can invite local REALTORS® to visit your home and give you a “listing presentation” about why they’re the best ones to market it for you. Two to three presentations will probably give you a good opportunity for choice. A listing presentation includes having the REALTOR® review with you the reasons why you should list with that particular individual, and providing you with information that will assist you in making initial decisions about selling your home.
Recent laws in every state have defined the duties of someone specifically retained as a real estate agent. Most states require a real estate agent to explain his or her role at the outset of any conversation. A professional agent will promptly provide this such disclosure. Look for an agent who:
- Is a member of the local board or association of REALTORS®
- Explains and discloses agency relationships (the role of the agent, i.e., who they are representing – the buyer or the seller) early on in the process, at “serious first contact”
- Advises you on how to prepare your home for the market
- Shows some enthusiasm for your property, listens attentively, instills confidence, operates in a professional manner, and has a complementary personality style to yours
- Has already researched your property in the public records and the MLS
- Brings data on nearby homes that have sold (or failed to sell) recently
The following are important questions to ask a potential agent:
Are You a REALTOR®?
- Do you have an active real estate license in good standing. To find this information, you can check with your state’s governing agency »
- Do you belong to the local Multiple Listing Service (MLS)? Multiple Listing Services are cooperative information networks that provide extensive information on most of the houses for sale in a particular region.
- What homes have you listed or sold in this neighborhood lately?
- Do you cooperate with buyers’ brokers?
- What share of the commission will you offer a cooperating broker who finds the buyer?
And in addition to the criteria mentioned above, there are a number of very important reasons you will typically prefer to work with a REALTOR®. Among them are the fact that they adhere to the National Association of REALTORS®, highest standards of ethical conduct and professional training. More Info »
What a REALTOR® Will Do For You
There are many important reasons to use a REALTOR®. Some of the duties your REALTOR® will perform for you include:
- Walk you through the process of selling your home from beginning to end
- Provide comparable information about the prices for which other properties have sold and analyze data for you to gain a true comparison
- Supply information regarding local customs and regulations you may want or need to consider
- Share information about your home through a Multiple Listing Service (MLS) and/or on the Internet
- Place advertisements for your home
- Field phone calls
- “Qualify” potential buyers to make sure they would be financially able to buy your property
- Negotiate the sales contract
- Alert you to potential risks
- Comply with the disclosures required by law
- Provide you with an estimate of the closing costs you will incur
- Help you prepare for a smooth closing of the transaction
Selling On Your Own
“You can get rid of the broker, but you cannot get rid of the broker’s work” is an old caution for those who intend to offer their homes “For Sale By Owner” (FSBO). Selling on your own is not an easy undertaking. It requires a significant amount of time to study the process, understand your obligations, and do some of the complicated work that a real estate agent does. In addition, selling on your own requires extra help from outside professionals, such as REALTORS®, accountants, or attorneys for some of the jobs that require specific expertise.
If you require only limited services, some REALTORS® will agree to help with the transaction for a predetermined fee. You can call real estate companies and ask for the managing broker and see if they’re interested in furnishing “unbundled services.”