While buying your home, there’s lots of moving parts. Just the amount of paperwork can be overwhelming. Let’s look at a few people who can help along the way.

Realtors do I need them?

The most common way to buy real estate is through realtors (also called an agent).  The amount, and who pays the realtors fees will change region to region.  Typically the realtors fee is 4-6% of the selling price and is split 50-50 between the buyer and sellers agent. Generally, it’s the seller who pays the realtor’s fee.This means buyers basically have someone working for them for free.

Sellers who use agents, are typically under a short term contract of representation. The realtor sellng the property will spend their own money to list and advertise the property. This means the seller, and their realtor, is under the gun to sell the property. As a buyer, you need someone in your corner. I have worked with hundreds of agents and been involved in dozens of transactions, and found many unscrupulous people in real estate. This means both sellers and sometimes their agents may lie, hide issues, manipulate data, give false information, and make up anything they think buyers want to hear. LIke they say buyer beware.

So find a good agent. They can help you tremendously.

4 ways to find a “good” realtor?

Realtors are found everywhere, but good ones are not.  Here are a few tips.

1. Make sure they work full-time. There are many agents who work part-time or view it as their “side-job”. My opinion is – if they were any good, they wouldn’t have to work somewhere else!

2. Make sure the realtor has experience and works with a reputable agency. It’s important that the realtor, and their company,  has experience in both the location and kind of property you want (especially if its commercial property). Make sure the realtor, and the agency (sometimes called brokers) are reputable.  This can be done by

• Calling the local realtors association,
• Checking the Better Business Bureau and Department of Commerce and Consumer Affairs.
• Contacting their references.
• Doing an online research of current and past activities of the realtors agency.
• Viewing the rankings and ratings of the agent on various real estate listing websites.

3. Get in writing what the realtor does for their clients. If the agent is too lazy to put in writing what they do, than you’d better find another realtor. The best realtors will have schedules or itemized reports of what they do for their clients. This includes both buyers and sellers. Some examples include:

• Placing their listing (houses) on numerous digital and printed mediums (MLS, Loopnet, Online brochures, partner sites, realtor.com, bulletin boards etc).
• Having appropriate signage and informational boxes on the property.
• Having local realtor caravans and open houses (Opening homes for groups of agents/clients to view property together).
• Actually taking you out to see properties (and not just online information in their offices).
• Taking whatever time is needed to review all the paperwork and processes that goes with purchasing a property.

4. Make sure they’re willing to write up whatever offer you see fit. Work with your realtor to determine what offering price you’re willing to submit, and your negotiating perameters. Don’t let anyone pressure you to pay more or negotiate less than you feel comfortable with. Just remember, you have to live with the consequences and not them.

What is escrow?

Escrow is often used for the process of buying and selling a piece of property.  Escrow, in reality, is a specific company hired to handle the financial transactions. Rarely will an individual buy or sell a property without help from an escrow company (sometimes called title companies).  When someone makes an offer, they will open an escrow account to begin the transaction.

When you hire an escrow company, they will handle all the monetary transactions, down payments, research who owns the property (title or land deed), tax issues, actions against the property (liens), and  basically make sure that all bills are paid (home inspection, pest control, appraiser etc).   The escrow is kind of like a middle man that makes sure everything goes fairly and smoothly.

What is an appraisal?

The appraisal is an estimate as to how much the property is worth. Many look at the appraisal to determine if they are getting a good deal. But, a low price doesn’t make a property a good deal, if that property has hidden problems not covered in the appraisal.  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. The reason is it’s just an estimate made by one person – the appraiser.

The appraiser visits the property to evaluate the condition, type, amount of rooms, kitchens, baths, outbuildings and the overall size of the buildings.  They then compare your property to other properties of similar size nearby (like a half mile radius). Usually they want at least three comparable homes of similar size and condition, and what these houses sold for during the past 3 months or so.  Finally, they put together a report with some photos, measurements, basic overview of the property, and a list of other properties sold, or for sale, in the general area.  A price is then set on what your building and property should be worth, when compared to the similar homes in your area.

Of course this is somewhat subjective, because comparative properties (called comps) may have been sold high or low for another reason. Comps may also not truly reflect the actual square footage or condition of the home being appraised. The appraiser also has some latitude of setting prices either higher or lower depending on their own opinions. However, most banks will use the appraised value to decide how much they are willing to loan you.

What is a home inspection?

A home inspection is not typically required by a bank, or as part of escrow, but its 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.  The inspector is a generalist (not code inspector) who performs a site visit, and then puts together a written report for the buyer. The inspection basically covers the structure, roof, electrical, plumbing, HVAC, interior, exterior and basic site work of the home. As the buyer, you can attend and walk along with the inspector, or come at the end for a verbal overview. 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 an overall assessment on the basic condition of the visible components to help you make a decsion before you buy your home.