Buying a Home 2 – Realtors, Escrow, Appraisals, Assessments

save-money-at-home realtors Realtors do I need them?

The most common way to buy or sell a home is through realtors (also called an agent).  The amount and who pays the realtors fee changes region to region, and country to country.  Typically the realtors fee is split 50-50 between the buyer and sellers agent. Generally it’s the seller who pays the realtor’s fee, so sometimes sellers list and sell the property on their own. If this is the case, than it doesn’t cost a buyer to use a realtor, and there typically isn’t a contract established before hand, so if you don’t like your realtor you can leave.

However if you use realtors to sell your home, than there is a contract that determines how long you have to stay with them, and how much you have to pay them. Generally the amount is 5-6%.  There are a few agencies that take 4% but limit the amount of help they give you.

The problem with the lower fees is some buyers agents will not show clients property where there potential fee is limited to 1-2%.   Realtors buy-in-large are worth the effort, since a good agent will increase the time and likelihood of your property selling, or you buying the right property.

How do I find a “good” realtor?

Realtors can pretty much be found everywhere, but good ones are not.  Remember it’s fairly easy to become a realtor and usually only need a few weeks or months of training. Here are four things to look for:

1. Make sure they work full-time, and have been in the industry for a while. There are many who work part-time, have just started, or have jobs “on the side”. However, one must remember this, “if they were any good at what they do, they wouldn’t have to work at another job on the side”.

2. Make sure the realtors you choose have experience and works with a reputable agency. It is important that the realtors and their company  have experience in both the location (region) you want, and the kind (residential, multi-family, commercial) you want. It is also important to make sure the realtor, and agency is reputable.  This can be done by calling the local realtors association, checking out the Better Business Bureau, Department of Commerce and Consumer Affairs, looking up references, and going online to research the current and past activities of the company.

3. Make sure the realtors have in writing what they do for their clients. If the agent is too lazy to put things in writing, and only verbally tells you what they are going to do, than you had better find another realtor.  Most realtors should at least make sure you are listed on some type of (MLS) Multiple Listing Service, LoopNet (more for multi-family and commercial properties), their own website, and various other online advertisements.

This ensures both realtors and people can find out the basic information about your property.  The other things they should do is put up appropriate signage and informational boxes on the property, place advertisements in the local papers or magazines, put the property on local realtor drive-bys so other agents can see and show the property, open houses for the public, and place advertisements on free sites like Craigslist, bulletin boards, partner realtor sites etc.

4 Make sure they are willing to list the selling or buying price at you are comfortable with. This does not mean that we can put any price on a property, and we should be willing to listen to the expertise of the person.  Work with your realtor to determine what price you want the listing contract, or buying contract to be, and how much you are willing to negotiate. However in the end you have to live with the consequences and not them.


I hear the term escrow all the time, what is escrow?

When we talk about escrow we are talking about the entire process of buying and selling a piece of property.  Rarely will an individual buy or sell a property without help from others including realtors and escrow companies (sometimes called title companies).  The name we give companies that handle all the transactions is called an escrow company (sometimes called title companies).  When someone makes an offer on a piece of property they usually put a certain amount of money into an escrow account to begin the transaction.

Then the escrow company will handle all the monetary transactions including researching who actually owns the property, are the taxes paid, is there any governmental actions against the property, and  basically make sure that all bills and fees are paid at the end of the transactions.  One of the most important services for buyers is to make sure that in the end they really own the property, and for the price agreed on.  The escrow is kind of like a middle man that makes sure everything goes fairly and smoothly.

How do I know if the property is a good deal and what is an appraisal?

There is no one thing that makes something a good deal.  A low price doesn’t make a property a good deal, if the property has many problems.  A great property at a low price doesn’t make it a good deal if the taxes, insurance, and maintenance fees eat into your living expense or inhibits any profit or income.

Even if a property has a high appraisal value it doesn’t mean it’s a good deal, because the appraisal is not necessary proof positive of the real value of a property.This is because an appraiser basically determines an appraisal.  The appraiser visits the property to evaluate the condition, type, amount of rooms, kitchens etc, and overall size of the buildings.  They then return to research and compare that property to other properties nearby, and what they have recently sold for (within the past 3 months).

They then put together a report with some photos, measurements, basic overview of the property, and a list of other properties sold or even for sale in the general area.  A price is then set on what your building and property should be worth, when compared to the others in your area.Of course this is somewhat subjective, because comparative properties may have been sold high or low for another reason, and the appraiser can set a higher or lower value determined by their own reasons. Sometimes the notes and explanation for the property’s value may not even be correct.  However most banks will use the appraised value to decide how much they are willing to loan you. Ultimately in the end, you have to determine what you want and what you are willing to pay for it to find what is a good value to you.


OLYMPUS DIGITAL CAMERAWhat is a home inspection (sometimes called and assessment)

A home inspection is not typically required by a bank or as part of escrow, but is a good idea.  A home inspector is usually hired by the buyer to determine the overall condition of a home and to point out safety concerns with a structure (not environmental concerns).  The inspector is a generalist (not code inspector) who performs a site visit, and then puts together a written report.A buyer can attend and walk along with the inspector, or come at the end if they choose.  The inspection basically covers the structure, roof, electrical, plumbing, HVAC, interior, exterior and basic site work of the home.

They may or may not give recommendations, and most will not try to persuade you to buy or not buy the home.  They are hired to basically provide overall assessment on the basic condition of the visible components on the home.  A commercial building inspection is typically done on certain parts of a building that the potential buyer or seller is concerned with.  Sometimes they include all the exterior, interior and site work.  Other times they might include only the exterior, or roof, or electrical components.  These may also include recommendations for repair, quotes on financial costs for repairs, potential safety concerns, conformance to various codes etc.

More articles on Buying a Home.

Buying a Home 1: Understanding Real Estate

Buying a Home 2 – Realtors, Escrow, Appraisals, Assessments

Buying a Home 3: Refinance, Foreclosure, Making Money in Real Estate