Buyer Education

Why Should You Use a Real Estate Agent To Purchase a Home?

It is a proven fact that 80 % of all homes are listed with a real estate agent. Of that 80%, the seller has already agreed to pay a commission to the Listing Agent, so it does not typically cost the buyer to compensate for buyer representation (having their own "buyer" agent"). The commission factored out of proceeds from the seller goes to compensate the "buyer" agent.

To understand further, look at things from the seller's perspective: When selling by owner, there may be more flexibility on the price of the home, but the sellers are not likely to give away all the commission savings or they would have listed their home with an agent. The seller's motivation is to keep all or part of what she would have paid in commissions.

For example, let's say a typical commission in your market is 6 %, and you save half the commission, or 3%, by purchasing a By Owner listing. Let's also say the homeowner expects to sell for $150,000. Then she's saving $9,000 on commissions by not listing the property and may be willing to sell the house for $145,500, splitting the commission savings with the buyer. Translation: You save $4,500.

However, know that you will spend at least some of that savings in additional time and effort needed in searching for and finding a home. Additionally, you must do your own research to learn what costs are customary for a seller to pay in your market and what cost the buyer usually pays. You must also be able to select a home and termite inspector, both of which usually come recommended by an agent. A real estate agent would also ensure you close on your home in a timely manner.

Regardless of whether you use an agent or not, you will need a real estate attorney to review the closing transaction, because an agent cannot provide legal advice. However, if you don’t use an agent, you will need many more hours of the lawyer's time, at a much higher cost than if an agent had done much of the services.

A first-time homebuyer is well served by selecting a buyer's agent to represent the buyer’s interests in a real estate transaction, as long as the buyer takes the time to sign a buyer’s contract with the agent. Otherwise, the agent will always represent the seller, even if the buyer brought the agent into the transaction!

While the listing agent and the buyer's agent will typically split the commission, you need to ensure your agent is paid in that manner and won't come to you for any part of the commission. The written contract you sign with a buyer's agent should stipulate that the buyer's agent's commission is to be paid solely by the seller from the sales transaction proceeds. A real estate attorney should read the contract before you sign.

In conclusion, it is preferable to hire a real estate agent to guide you through the perilous task of buying a home. It is also best to have an exclusive buyer's agent rather than a dual agent who represents both seller and buyer. As a homebuyer, you want to know 'your' agent is working for you.

WHAT YOUR REAL ESTATE PROFESSIONAL CAN DO FOR YOU

Whether you are buying or selling a home, your real estate agent could be one of your most valuable resources. For one thing, a real estate agent can suggest ways to accrue the down payment on a new home. Your agent can also explain alternative financing methods. In addition to knowing the local money market, he or she also can tell you what personal and financial data to bring with you when you apply for a loan.

Your real estate agent is already familiar with current real estate values, taxes, utility costs, municipal services and facilities, and may also be aware of local zoning changes that could affect your decision to buy. She can usually research your housing needs in advance through a Multiple Listing Service--even if you are relocating from another city, to show you only those homes best suited to your needs--size, style, features, location, accessibility to schools, transportation, shopping and other personal preferences.

Your agent can often suggest simple, imaginative changes that make a home more suitable for you and improve its utility and value. Because a real estate agent is sensitive to the importance you place on this major commitment, he or she can facilitate negotiation of a win-win agreement that will satisfy both buyer and seller.

Choosing Your Home Type / Choosing Your Neighborhood

BASIC HOME TYPES-A PRIMER

As you prepare to enter the world of home ownership for the first time, most likely the very first question that needs to be answered is, “What kind of place do I want to live in?” With few exceptions, the answer basically boils down to one of three options – a house, a condominium/loft, or a townhome. A fourth option might be a commune but that’s a completely different story.

Especially for those of you who’s only living quarters – outside of the friendly confines of Mom and Dad’s house -- has been of the rental variety, an introduction dealing with basic distinctions between these three types of housing might be in order.

House: This is the most recognizable and perhaps the oldest form of housing. A house denotes a free-standing structure as a dwelling, usually intended to be a single-family residence. The scope of ownership responsibility entails the structure and the land it rests upon, as well as the land which surrounds the structure – up to the limits of the property boundaries. The owner assumes responsibility for the maintenance of the house itself, the lawns, landscaping, auxiliary buildings – such as a detached garage or lawn implement shed – and property taxes.
Condominium: This word has is origins in Latin and means, “common ownership” or “common control.” In fact, the term condominium, more accurately refers to a type of ownership, as opposed to the actual structure. Otherwise known as a condo, this type of residence is almost indistinguishable from an apartment in that they both comprise a collection of adjoining rooms. And, like a rental apartment, a condo is usually a part of a multi-story building, and shares common walls with other units in the building. Oftentimes, the condo has one outside entrance, although some maintain only an entrance to a common hallway. Like his house-owning counterpart, the condo owner also owns the rooms making up the living space, as well as any attic space, and balcony or porch, if present. As well, the condo owner is also responsible for property taxes.
However, the major difference between a house and a condo – aside from obvious physicality aspects -- pertains to ownership parameters. After buying a condo, owners become part of a Common Interest Community in a Planned Unit Development (PUD). As a result, condo owners share ownership responsibilities and costs of ownership with each other. These costs are paid for via monthly condo association fees collected from individual owners, and are usually managed by a management company associated with the condo complex. Typically these fees pay for the following:
Maintenance of shared amenities, such as swimming pools, tennis courts, racquetball courts, fitness rooms, saunas.
Maintenance of grounds, common areas, adjoining hallways.
Maintenance of outer portions of the building, including roofs.
Trash removal
Water and sewage
Hazard insurance, which covers the building structure.
Townhome or Townhouse: This type of dwelling can be thought of as a kind of hybrid, in that it shares similarities with both houses and condos. The term townhouse refers to the type of dwelling, rather than the type of ownership, as is the case when referring to a condo. Townhomes are usually constructed as a row of connected one-story or two-story small homes, which resemble houses more than anything else.
Like a condo, individual owners share ownership responsibilities with each other in the form of association fees. These fees entitle owners to the use of many of the same kinds of amenities and services condo owners enjoy. Yard maintenance – taken care of by the association -- is usually limited to the front yard, though. Likewise, a townhome is also not a free-standing structure, like a house.
As for similarities to a house:
A townhome usually sports a back yard (albeit, a tiny one), as well as a front yard. There’s no side yards, due to the presence of adjoining townhomes. The exception would be townhomes located at either end of a row.
There are outside entrances on the front and back sides of the home.
Most townhomes include an attached garage (usually one-car).
Ownership includes the ground upon which the home sits. Actually the owner owns from the ground to the sky, unlike with condos, where there can be other units situated on the story above, and the owner doesn’t own the land the condo sits upon – as first-floor units.
Townhomes can include a basement.
Oftentimes, a patio is included.
And like condo and house owners, property taxes are the responsibility of the townhome owner.
Loft: This term denotes a dwelling most resembling a condo in its concept and legality. And, like condo and house owners, the loft owner holds title to his or her own living space.
However, there are two major distinctions between lofts and condos:
1. Styling: Many lofts feature spaciousness not found in most condos. Many lofts, in fact, came into being as conversions of former structures originally housing industrial concerns, or historical buildings -- in urban, industrialized areas. Thus, lofts often maintain design elements inherent in those buildings – including “reach-the-sky” ceilings, imposing structural concrete columns, and out-of-the ordinary finishes, such as granite, steel, concrete, and hardwood.
2. Zoning: Oftentimes, lofts are zoned with a “live/work” designation, whereby a business can legally be conducted from the home, if that’s the owner’s prerogative. This includes permitting “walk-in” customers, paid employees, and keeping inventories, as well as the other usual elements involved in running a business, just as if it resided in a commercial district. This differentiates them from condos, which are always zoned as “residential.”
CHOOSING A NEIGHBORHOOD

When Choosing a Neighborhood, It Pays To Do Your Homework

As a prospective homeowner, you’ve probably put forth a lot of time and energy into deciding on the type of home in which you wish to settle down. However, remember, the decision concerning the kind of neighborhood you will call home is equally important.

Depending on your lifestyle, desires, and needs -- not to mention, your budget -- you can evaluate prospective neighborhoods accurately if you follow a few simple guidelines. To do it right, though, requires time and a bit of diligence. But, in the end, it will pay big dividends, rewarding you with a sense of fulfillment and peace of mind. In addition, it can be financially rewarding to have chosen the right neighborhood, especially when it comes time to sell your home.

Most home shoppers already have a pretty good idea of the identity they would like to see their home neighborhood project. Taking a leisurely drive through the town or city in which you want to live will give you an idea of the different styles of neighborhoods it has to offer.

Once you’ve narrowed down your search to a particular district, and then, to a handful of different neighborhoods, a good place to start the process of elimination is a real estate agent. A good real estate professional will be able to provide you with helpful statistics regarding crime rates, quality of schools, taxes, demographics, economic condition, job growth potential, and home sales within the prospective community. Homebuyers with families will be particularly interested in school data, and the availability of churches in the area.

One thing that many home searchers often overlook (much to their chagrin) is the reality of change. Just because that quaint three-bedroom dream house you’ve got your eye on is situated next to a wooded empty parcel of land – which may provide a sense of peaceful seclusion – doesn’t guarantee that somebody will not slap some dreadfully noisy retail establishment on the vacant lot in the near future.

A good way to guard against this situation is to visit the city’s zoning/planning offices. By doing so you can find out if any large retail or road construction projects are in the planning stages. Often for large projects, certain documents need to be filed years in advance of commencement.

After taking these steps, you most likely have narrowed down your target search to a couple of neighborhoods. So, now is a good time to get down to determining the real character of the final candidates for your residence. This will require some legwork and a bit of socializing, but it will be well worth it. Here are some suggestions:

Visit the prospective neighborhoods at different times of day and night, driving in from different directions. Carefully observe the overall condition of the surrounding community as well as the neighborhood in question – signs of graffiti, unkempt houses, and litter in the streets are red flags, to say the least.
Observe the overall condition of surrounding homes – are they tidy, well-maintained, and with lawns it nice condition?
Chat with some of the residents to get a true feel for the quality of life you can expect there – after all, nobody knows the neighborhood better than the people who have lived there a while.
If public transportation is important to you, ask residents about accessibility to it.
Especially if you have kids, try visiting one or two schools in the immediate area.
Shop in some of the local retail stores or shops.
Check out a local newspaper or two – often these publications will help to give you a sense of the flavor of the local community.
Try getting acquainted with some of the locals by visiting a local church or two.
Visit the local park(s) to mix with some of the area residents.
For people who plan on driving to work each day, test out the commute during rush hour, from the neighborhood in question. A particularly frustrating commute may be reason enough to reject buying a home there.

Seek out profit potential:

Sooner or later, if you’re like most homeowners, you’ll be selling your beloved home someday. With that in mind, you’ll want to make doubly sure you do a good job of evaluating the profit potential of the home you settle on. Therefore, one of the most important considerations in evaluating a new neighborhood is the resale potential of the homes there. In particular, consider newer neighborhoods which sit on the fringe of desirable, well-established neighborhoods – the ones which experienced nice price gains during in recent times. Oftentimes, these new neighborhoods will benefit from this proximity and experience nice price run-ups as well. In addition, look for:

A relatively short time frame for homes to be on the market before being sold.
A decrease in the number of renters.
A high percentage of owner-occupants.
An increase in the number of new residents from other areas of the city or from out-of-town.
Home sales which had multiple offers.
Remodeling activity which is prevalent.
Proximity to a variety of shops and stores.
Good public facilities.
Convenient commuting options to metropolitan areas.

Above all, you want your new neighborhood to be the type where property values, at the very least, remain stable. Keep in mind that those kinds of neighborhoods are those with well-defined identities – something tangible or even intangible that tends to hold the community together, such as an excellent park, or a reputation for having a lot of residents who work in related professions.

Emotions Play Big Role When Homebuyers Consider New Home Purchase

Maybe it’s those unique smells associated with new paint, wood, or carpet. Or perhaps, it’s the idea that nobody has ever lived in it before. Or maybe, it’s the excitement of knowing that this home will be a distinct reflection of the buyer’s personality from the onset.

One thing is certain, though, according to many real estate industry analysts. When it comes to buying a new home, in particular, they say emotions play the most significant role of all the factors which influence the homebuyer’s purchase decision. They reason that the buying process for almost anything contains an emotional element. However, because buying a home usually represents the largest purchase of one’s life, those emotions are greatly heightened.

Real estate professionals say homebuyers, in general, view the purchase of a new home as being more special than buying an existing resale home. They liken it to going to a car dealership and being able to make all of the decisions regarding the features and options of a new car they wish to buy.

Likewise, the fact that they will be the very first people to choose their home’s color scheme, interior and exterior design, landscaping, appliance options, and other features is a thrill and emotional high like no other. There is something about being the first at anything that touches one’s inner core. It’s a uniqueness related to the fact that nobody has come before you. And since one’s home is the place where a person will probably be spending most of his or her time, this exclusivity is all the more appealing.

However, the magnitude of deciding which home to live in eclipses even a new car purchase. Homebuyers who anticipate living in a newly-constructed home relish the experience of strolling through a home builder’s model home complex. There, their fantasies blend with reality as they explore the seemingly endless possibilities. They might think, “This looks great, but if the kitchen island were positioned just a bit more to the left, it would be perfect,” or “If the fireplace is built in the corner of the room, it would be ideal.” They love the idea of being in control, and planning almost every aspect of the home from scratch. And, the wonderful thing is, for the most part, a builder will strive to cooperate with buyers to satisfy their requests.

As homebuyers walk through the builder’s array of model homes, they picture themselves coming home everyday to an inviting place which is much more that just a place to exist. They view it as a place, which, in very special ways, can make them better and enrich their lives. Images of warm, inviting evenings nestled next to a cozy, crackling fireplace with one’s spouse; raucous backyard barbecues on summer afternoons with kids joyfully running and playing in the safety of their ample-sized yard; or Christmas dinners set in the elegant, chandelier-enhanced dining room where family and friends are gathered for a reflective holiday celebration are conjured up in their minds.

In fact, the entire process of buying a new home – from choosing a home builder to selecting the doorknobs which are the most tasteful, evokes a host of emotional responses which the buyer will never forget. It can be both exhilarating and confusing at the same time, as perhaps, long-dormant emotions are revived again. But, have no fear, homebuyer – this is perfectly normal. And perhaps, many years down the road, when you reflect on exactly why you decided on buying a new home as opposed to an existing one, you’ll recall, with fondness, the invigorating emotions you felt.

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