Buying or selling a home is exciting but overwhelming. While real estate brokers are there to guide you through the process, there are certain aspects they may not readily disclose. Knowing the unspoken tricks of the trade can help you make more informed decisions and potentially save you money. In this article, we’ll share some real estate broker tips to help you make smart buying or selling decisions.
Real Estate Agent Loyalty
Some real estate agents work for you, and some work for the seller. “Real estate agents do not generally represent the buyer,” says Florida real-estate attorney Barry Ansbacher. “But buyers think they do.”
This misconception can lead to potential conflicts of interest. When you respond to a listing or attend an open house, remember that the agent is typically employed by the seller, whether it’s a private individual or a corporate developer. Their primary goal is to secure the best deal for their client, i.e., the person selling the home.
To make sure you have someone looking out for your interests, work with a buyer’s broker. This type of agent works exclusively for you throughout the entire process, from property search to closing the deal.
The Truth About Open Houses
Open houses may seem like events designed to attract serious buyers, but they often serve a different purpose. “People turn up to get a sense of the market or the neighborhood, but they’re not ready to buy,” says John Kavaller, an agent with Catskill Sales Associates Inc., in upstate New York.
For agents, open houses are primarily networking opportunities. They collect contact information from attendees, hoping to build relationships with potential future clients. While open houses can be useful for getting a feel for the market, don’t be surprised if the agent follows up with you long after the event, even if you’re not ready to buy.
Negotiating Commissions and Fees
One of the biggest secrets in real estate is that many costs are negotiable, including agent commissions and various fees associated with buying or selling a home.
How To Bargain for Lower Commissions
The standard 6% commission rate isn’t set in stone. In fact, haggling over commission is a common practice in the industry. The broker commission is absolutely negotiable on a case-by-case basis,” Kavaller says. “On a one million dollar property we might be willing to drop a whole point.”
When selecting a listing agent, don’t be afraid to discuss commission rates upfront. Aim for a rate that provides enough incentive for the agent to work hard on your behalf while still saving you money. This is especially important if you believe your home will be relatively easy to sell.
Understanding Closing Costs and Title Insurance
Closing costs can add up quickly, but some of these fees are negotiable. Title insurance, in particular, often comes with a hefty price tag. “As much as 70% of the cost of title insurance represents a commission paid to lawyers or title agents handling the documentation,” Ansbacher points out.
Whether you’re the buyer or seller, find out if you’re responsible for these costs and consider negotiating. Instruct your lawyer to push for lower commissions on title insurance and other closing fees. Knowing these potential savings can make a major difference in your overall transaction costs.
The Realities of Property Listings
The way properties are listed and marketed can have a big impact on your buying or selling experience.
Why Big Agencies Aren’t Always Better
Many people assume that larger real estate agencies offer superior service and results. However, this isn’t always the case. Boutique firms often provide more personalized attention and may be more willing to negotiate on commission rates, especially in competitive markets like large cities.
“The big [companies] are really holding to the 6%. They have a wide net and first-rate marketing on their websites—and you pay for it,” says Brooklyn real-estate lawyer Howard Brickner. Smaller agencies may not have the same brand recognition, but they often list properties on the same Multiple Listing Service (MLS) as larger firms, giving your property similar exposure.
Pros and Cons of For Sale By Owner
Selling a home without an agent, known as For Sale By Owner (FSBO), is becoming increasingly popular thanks to online listing platforms. This approach can save you significant money on commissions, but it requires more effort on your part.
FSBO sellers need to create a marketing plan, list the property online, respond to inquiries, arrange showings, and navigate the closing process. While it’s more work, the potential savings can be substantial. However, be prepared for agents to try to convince you that you need their services. Some may even use aggressive tactics to get your listing.
Navigating the Home-Buying Process
The home-buying process can be complicated, so try to avoid costly mistakes.
Importance of Independent Home Inspections
While real estate agents often recommend home inspectors, prioritize choosing an independent professional. Some agents may suggest inspectors who overlook major issues to facilitate a quick sale.
As a buyer, select your own licensed inspectors who have a reputation for thoroughness. Look for professionals who can identify potential problems and advise on necessary repairs. This independent assessment can save you from unexpected costs and headaches down the line.
Decoding Real Estate Contracts
Real estate contracts can be complex and filled with legal jargon. Many buyers sign these documents without fully understanding their implications. “One of the biggest things I hear when I am litigating a dispute is that the buyer is confused as to why they were not better protected by the contract,” warns Ansbacher.
To protect yourself, consider hiring a lawyer to review contracts before you sign them. This small investment, usually less than $500, can save you from potential legal issues in the future. In addition, get all promises in writing as addendums to the contract or independently verify verbal assurances.
The Value of Hiring Your Own Lawyer
Hiring your own lawyer can provide valuable protection throughout the real estate process. A lawyer can review contracts, explain complex terms, and negotiate on your behalf to ensure your interests are protected.
For buyers, a lawyer can help you understand the implications of contract clauses and identify potential issues before they become problems. For sellers, legal counsel can assist in negotiating commission rates and ensuring all necessary disclosures are made to avoid future liability.
Potential Conflicts of Interest
Real estate agents may sometimes face situations where their interests conflict with those of their clients.
When Agents Favor Fast Sales Over Best Prices
While most agents strive to get the best price for their clients, some may prioritize quick sales over the highest profit. This is because agents often prefer a higher volume of sales rather than a few high-value transactions, which provides more stable income.
“When listing agents are competing for your business, they will talk about your lovely house and the high price they can get. Once they have you signed, that’s when they mention the old roof and tell you to drop your price for a quicker sale,” Ansbacher says. To counter this, consider getting an independent appraisal to set a solid asking price, and be prepared to wait for the right offer.
The Truth About Co-Brokering Deals
In most states, brokers are legally obligated to inform sellers about all offers on a property. However, competitive bids can sometimes fall through the cracks, especially if they involve co-brokering with another agent. A listing agent may be tempted to prioritize offers from unrepresented buyers to avoid splitting the commission.
Such practices can result in fines or license revocation, but they can be difficult to detect. As a seller, make sure you’re clear about your right to be informed of all offers, and consider working with a buyer’s agent to make sure your interests are fully represented.
Understanding Property Warranties and Zoning
When buying a home, especially new construction, it’s important to understand the limitations of warranties and potential zoning issues that could affect your plans for the property.
The Fine Print in New Construction Warranties
Developers and their agents often tout warranties on new home construction as a selling point. However, these warranties may not provide as much protection as you might think. “The definition of a ‘defect’ in those warranties is so carefully worded that most claims end up null and void,” says Ansbacher.
Before signing a contract for a new development, have your lawyer review the warranty terms carefully. Pay special attention to any clauses that waive your right to sue, and negotiate to remove or modify these if possible.
Navigating Zoning Challenges
Zoning regulations can impact your ability to modify or use a property as you intended. Real estate agents may not always disclose potential zoning issues, especially if they could complicate a sale.
If you have specific plans for a property, such as adding an extension or building a dock, do your own research on local zoning laws. Contact municipal authorities and homeowners associations directly to get accurate information about what is and isn’t allowed. This due diligence can save you from disappointment and unexpected restrictions after your purchase.
Protecting Yourself as a Buyer or Seller
In any real estate transaction, it is wise to take proactive steps to protect your interests. This often involves seeking independent professional advice and checking that all agreements are well documented.
How To Verify Verbal Promises
In the excitement of a real estate transaction, it’s easy to take verbal assurances at face value. However, these promises are often not legally binding unless documented in writing.
“Get everything in writing as an addendum to the contract (e.g., all pool equipment is included, seller will repaint the walls), or independently verify all promises (e.g., call the zoning board to confirm that zoning will allow the home to be expanded),” Ansbacher says. This approach guarantees that all parties are clear on what is included in the sale and helps prevent misunderstandings or disputes later on.
Our Conclusion
Navigating the real estate market requires more than just finding the right property or the right buyer. It involves understanding the often unspoken realities of the industry and taking steps to protect your interests.
Remember, knowledge is power in real estate dealings. Don’t hesitate to ask questions, seek independent advice, and do your own research. Whether you’re buying your dream home or selling a property, being informed and proactive can help you get the best possible outcome.
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