01-10-2013 12:34 PM
I am a newbie on this quest and after browsing some listings online and getting preapproval from a lender I am ready to take it to the next level. I have a few questions that I am not clear on:
1) I think as a first timer I should get a buyer's agent. Some websites state that the fee is paid by the seller, or the commision is split between listing agent and buyer's agent. How does that REALLY work? Should I be prepared to dish out the fee from my own pocket? I am looking at FHA loan 3.5% down, so the 3% fee for an agent seems like a lot. How do I find the right agent for me? I have a few recommendations from friends but their agents worked in ohter areas than I am looking at.
2) I emailed few people about the listings I saw online - Remax, Centrury21 etc and haven't heard back. Is it because I don't have an agent or because I am a first time buyer (though I mentioned I am preapproved). What should be my strategy to be taken seriously?
01-14-2013 12:26 PM
Get a buyer's agent. You can do without later, when you're experienced. But a buyer's agent can make all the difference between closing and not. (Getting your bid heard, and accepted, is only the first step in a chain of things that can go wrong.) Here's what a buyer's agent can do for you:
(1) Let you know which properties you like are good or bad deals, based on his understanding of how numbers are moving, and his access to information like rental values in the same neighborhood. A good agent will always be able to give you definite number for what a house is truly worth, based on things like comparable sales (which is what your appraiser will use to decide whether the bank can loan against the property) and rental parity (which will tell you whether buying makes more sense than renting, and prevent you from getting stuck in a negative cash-flow situation). Even if you know how to make those calculations, you don't have access to the necessary data.
(2) Tell you how to structure your bid for most success. Last year you could, and would, start off with a bit of a lowball, and then see how far the greed/fear nexus in the seller made you bid up. A good buyer's agent can give you a good opening and reserve bid. They can easily save you the cost of their commission in properly setting your bid. This year, an initial lowball seems less likely to succeed, but on the other hand, you don't want to overbid, either. Your agent can help you with other issues, like submitting convincing proof of ability to close (always important to a seller), speed of bids and responses, any minor concessions or things you can bring up to sweeten your bid.
(3) Cope with the back and forth of the bid process. It's not super common for you just to bid and go straight to closing. Usually there's at least a little back and forth. You may have bid/counterbid. You may have some odd wrinkles -- seller wants you to pay for this or that, you want seller to pay for this or that, seller wants to stay a little past closing, seller wants contigency on buying another house, you want contigency on selling your house, whatever. A good buyer's agent can help you negotiate this back and forth, understand the issues, what your options are, realistically. It's important that this go cleanly, not just so that you close on time, but also so that if the deal doesn't go down, you escape with your earnest money (typically 3% of purchase price) intact and the least amount of money down the rathole of a bad deal. Things can move fast once a bid is accepted, so you want to not make mistakes -- not waive contingencies prematurely, be sure your loan and inspections are lined up, et cetera.
(4) Of course, a good buyer's agent will also be able to warn you of dealbreakers and serious problems, e.g. that might come up with seller's ability to perform, or problems with your bank, or problems with the property that arise during inspections.
(5) A good reputable buyer's agent will know professionals you'll need, like inspectors, escrow agents, and loan brokers. He'll also know the right way to talk to them, when to push and when to chill, and what information each will need.
(6) Finally, of course, yes, you're right, a good buyer's agent with a strong reputation will always get a much prompter and more courteous treatment from listing agents -- because he has built a reputation for closing efficiently and courteously.
Generally the way it works is the seller negotiates with his listing agent when he lists the house for some commission, say about 6%, for selling the house. When your buyer's agent contacts a listing agent on your behalf, then the two agents negotiate some split of that commission, usually right down the middle, so each get 3%. That money comes out of the sales price of the house, so it is deducted from what goes to the seller. You might think that this means the seller pays it, but of course that's not true: YOU are always paying *both* halves of the commission, because you're the one supplying the cash price of the house. The money gets deducted from what *you* pay, and the remainder is handed to the seller.
Still, a good buyer's agent is, IMHO, completely worth the money, particularly for a n00b, and particularly in the hellhole that is California coastal RE. You may think he's getting a ton of money for not much work, if it all goes smoothly. Say $15,000 for what might end up being 30-40 hours of work, total. Nice wages! But what he's really getting the money for is making sure things *don't* go wrong, and you don't lose gobs of money. You're paying to avoid losses, not realize gains. So think of it like hiring your doctor to do a full checkup on you. You pay $100, say, for learning that nothing's wrong. Money wasted, because he didn't really do any doctoring? Not at all -- money well spent, to be able to sleep easy at night.
Probably the best way to find buyer's agents is through word of mouth, from people you've known a long time, and whose opinions you trust. Listen to what they say, and favor those who report their agent was prompt, courteous, kept them in the loop at all times, seemed to know what he was doing, prevented suprises, seemed to know the local markets reasonably, seemed to know how to deal with listing agents and mortgage lenders well. You can also find some formal reviews on Redfin and other RE sites. Plenty of realtors haunt these fora. There are also a number of "housing bubble" blog sites you can haunt to get names and ideas. Finally, once you start going around to open houses, you'll probably meet some realtors. You can size them up. Any realtor can and will act as both a listing and a buying agent at various times. So if, for example, you find an agent who is listing agent for a house that, it turns out, you don't want, but you really like her style and feel she knows your neighborhoods, you can approach her about being your buyer's agent, if you want.
You'll note that the one thing I *didn't* say a buyer's agent could do for you was find the right house for you. Maybe some people still do that, but my impression these days is that's more your own responsibility. You need to know your neighborhoods, your tastes, and your resources yourself, and make use of sites like Redfin, Trulia, Zillow, and just driving around to sift through what's for sale where, and pick out the relatively few properties on which you are confident you want to place a bid. Your buyer's agent will be able to get you in to see the properties, of course. But it may be the days in which you would just say "Find me a house!" and then sign on the dotted line on closing day are gone -- you may have to do a lot of the spadework related to your own tastes and resources yourself.
01-15-2013 12:12 PM
Wow, thank you, Seneca, for such an extensive explanation. I will definitely look into that. My next step is going to some open houses to get a feel for it all. I have a specific neighborhood in mind, so that makes it a bit easeir. I do look on Zuzilly often and compare whatever data is available to have a clue whether something "sounds" like a good deal or not. I hope that listing price of $399k can be ultimately negotiated down to $350k vicinity which is what I am hoping for.
01-21-2013 10:46 PM
Wow, thank you, Seneca, for such an extensive explanation. Benefits for a First-Time Home Buyer You should buy a home. That's what you've been hearing from friends and family, right? So, by now you have likely already weighed the benefits and decided that home ownership was the best decision for you. That's a major hurdle now passed. You are focused and certain.
01-31-2013 04:19 AM - last edited on 01-31-2013 05:33 AM by GabeV
As you are new and have noexperience in buying, you can take an expert's advice or ask an agent. They have some of the best deals available and you will never regret their services.
04-04-2013 01:14 AM
I would recommend you to get a buyer's agent. Again, there are processes that can go wrong if you take the risk yourself - considering that you are a first time home buyer. The next time you plan to buy a home is the time where you can now take the option of getting buyer's agent or not.
As explained above, those are the benefit that you can reap from having a buyer's agent. You are able to take the risk and taking the right decision by way of help from the realtor.