How do I choose a Real Estate Agent?
Selecting a real estate agent may be the most important decision you make when you buy a home. And it does not matter whether you are a first time buyer or if you have bought and sold many homes. A good real estate agent can mean the difference between getting the right home and the wrong one, paying a fair price versus too high of a price, and peace of mind during the process versus watching your stress levels, and your blood pressure, rise beyond healthy levels.
As a buyer, you need a real estate agent as a guide. This is someone who will listen to your concerns, help you weigh your wants and needs, and then lead you through a minefield of common mistakes that inexperienced—and overconfident—buyers often make. Let’s talk a little about what makes a real estate agent a “good” agent.
First, you need to understand what a real estate agent is. First and foremost, real estate agents are salespeople. This means that they get paid only on the completion of a successful transaction. For a buyer, the services of a real estate agent are paid by the seller at closing as part of the transaction—in other words, the services of the agent are essentially free to the buyer. In most instances, it is simply one of the costs of selling a home. Even in the case of a For Sale By Owner property, most sellers will gladly pay the buyer’s agent fee for bringing the buyer to the deal.
So now that we know that a real estate agent is at no cost to the buyer, how do I choose one? The key is to make a list of what you expect from the agent. For example, if you are a first time home buyer, you may want an agent who can serve as a mentor. Top producing agents may not be a good fit for you–they are busy closing transactions and do not have the time for hand-holding and educating clients.
On the other hand, if this business is old hat to you, you may want someone who is all business. So an agent that specializes in first time buyers will probably not meet your needs—you probably don’t want the hand-holding. So knowing exactly what you want is the first task at hand.
When you have defined what you want, you can start talking to people who have purchased a home. A five year old referral is no help, so focus only on people you know who have bought within the last year or so. People that are happy with their agent will gladly offer a referral. Be specific in your conversations and focus on the transaction itself–not the agent. You are interested in the agent’s work, not necessarily how nice and personable the agent was. Did the transaction go smoothly? Did the agent handle issues efficiently and quickly? Was al paperwork on-time and accurate? Was the agent’s advice on-target, clear, and precise?
After you have selected two or three agents, meet with them at a neutral site and don’t be afraid to put them on the spot. Present a scenario or two about buying a home and see if their answer matches yours. A great question is: “if we find a great home but the seller is not willing to come down in price, will you be willing to cut your commission to help us get the property?” It’s a tough question, but it can tell you a lot about the agent. Let’s face it, if the agent will give away their own money so easily, what makes you think they will be more careful with yours?
In the end, the agent you choose should match up with your expectations. And remember, although you are not paying them directly, you need to hold them accountable for their performance. Buying a home is one of the biggest decisions you will make, and it starts with choosing the right real estate agent.
Should I buy a home in today’s market?
For the average buyer, the state of the real estate market should not really be a major consideration when purchasing a home. If you treat a home like a stock and buy and sell each year, then buying low and selling high is obviously important. Most of us, however, treat a home as a place to live. That means we will, hopefully, live in our home for a while. The longer we live in our home, the less impact the initial purchase price makes on our investment because of appreciation and the pay down of the mortgage.
For many Americans, a home will eventually represent a sizeable portion of our wealth. This wealth, however, is generally built over many years through many up-and-down cycles in the real estate market. The single family home has survived as our biggest investment through many market scares, including most recently the savings and loan fiasco of the 1980s. The reason it survives as a vehicle for wealth is that we all need a place to live and over the long term the single family home has always appreciated in value. This means that even today, there are still buyers! You’re considering buying a home, aren’t you?
Let me answer the question “should I buy a home in today’s market” by finding out if you are ready to buy a home:
- Do you have stable income and is your source on solid ground?
- Is your credit in decent shape? Your credit score should be above 600 with no negative marks in the last 12 months.
- Are you living within your means? In other words, are you putting a little bit into savings each month?
- Do you have 5% of the purchase price saved up? For example, if the purchase price is $100,000, do you have $5,000 in savings? If not, is someone gifting this amount to you?
If you answered no to any of those questions, then you might want to get your financial situation in order before buying a home. Here’s why… Most foreclosures happen simply because the home buyer cannot weather a brief downturn in their financial situation. Moving into a new home is expensive and if you are not prepared for the added expenses, you can easily find yourself in a bad position.
If you answered yes to those questions, then the answer to “Should I buy a home in today’s market?” is a resounding yes! Today is a terrific time to buy a home! Inventory is high, prices are low, and mortgages are available to buyers with decent credit and steady income. What this means to a buyer is there are a lot of homes to consider and there are still mortgage companies with lots of money to lend to qualified buyers!
Also, now is a great time to sell if you are moving up in the market, in other words into a more expensive home. While you will probably sell your current home for less than you could have two years ago, those same forces are at work across the entire market? Because all sellers are taking a hit on the price of their home, you are trading your small hit as a seller for the bigger hit the seller takes when you buy! A savvy real estate agent can help you work this market to your advantage!
So are you ready to take the next step? Let’s discuss how to choose a real estate agent…
Choosing Real Estate Related Services
Buying a home is a big financial commitment — very likely, the biggest financial investment most people make. If you choose to work with a real estate professional, finding someone who understands what you are looking for and how much you can afford to spend is critical. Ask friends, family members, neighbors, or co-workers who have bought or sold recently for recommendations. Interview several agents about their experience, style, and market knowledge. Expect an agent to be professional: to return your phone calls promptly, to be organized, to listen to your preferences, and to communicate clearly. Here are some questions you may want to ask:
- How many homes have you sold in the past year?
- How many in the neighborhood I’m interested in?
- Can you provide a list of references?
- Are you willing to represent only my interests? Do you have any obligations to the seller?
- What is the commission you are interested in? Are you willing to negotiate that? Will you accept a lower commission?
- How many homes are you prepared to show me? Where will you look for these?
- Will you show me homes that offer lower commission rates? Homes offered by non-traditional brokers?
- Homes that are For Sale By Owner?
Once you sign your purchase agreement, your agent may recommend companies for financing, inspections, moving, insurance, and other related services. It may be convenient for you to use these providers, but it isn’t required. Shopping for these services is just like shopping for any services: Compare prices and ask for references before you make your choices.
Go to www.ftc.gov/realestate for more information about buying a home and a glossary of real estate terms. The FTC works to ensure a competitive marketplace and to provide information to help consumers spot, stop, and avoid fraudulent, deceptive, and anticompetitive business practices. To file a complaint or to get information on many more consumer issues, visit www.ftc.gov, or call 1-877-FTC-HELP (342-4357).
Sales Commissions Home Loans
The most common type of real estate commission is a percentage of the home’s sales price, an arrangement that benefits both the seller and the agent. As the buyer, you may not pay your agent directly, but the services of your agent are not “free.” Sellers may increase the sales price of their home to offset the cost of the commission, a situation that makes buyers responsible for bearing some of that cost.
Although the sales commission usually is spelled out in the listing agreement with the seller, you might consider trying to negotiate a reduction in your agent’s portion of the commission. In some states, agents can rebate some of their share of the sales commission to the buyer. But flexible commission rates may come with changing incentives. Asking the right questions up front will help you and your agent understand each other.
Agents and Brokers
Before you contact any real estate professional, it’s important to know the difference between brokers and agents. Real estate brokers are licensed professionals who help sellers and prospective buyers of homes, and often operate as part of a brokerage firm or franchise. Real estate agents are licensed professionals who work under the supervision of a licensed real estate broker. In return, the broker pays the agent a portion of the commission earned from the sale or purchase of the property.
In a typical home sale, there are two real estate pros: one who works with the seller — called the listing agent — and one who works with the buyer — called the selling agent. The listing agent generally shares the sales commission with the selling agent who finds the buyer for the home. But the seller pays both agents, usually from the proceeds of the sale. Depending on where you live, your agent may not have any obligation to keep the information you have shared confidential until you enter into a formal relationship. In fact, sometimes, your agent actually may be bound to represent the seller’s interests unless you establish a relationship where the agent represents your interests.
In most states, agents are required to disclose the type of relationship they have with you, and then, it’s up to you to decide whether you want them to represent you. Whether you meet an agent at an open house or get in touch with one on your own, be aware that they need to disclose important information about their business relationship with you. You can feel free to ask them about that.
Buying a Home: It’s a Big Deal
Whether you’re shopping for appliances or automobiles, groceries or gadgets, travel services or tax preparers, the Internet has changed the way most people gather information about products and services. For people who are thinking about buying a home, the change is apparent, as well. The Internet now is the source of information that traditionally came from real estate agents, with online listings of homes for sale featuring panoramic pictures, prices, information on neighborhoods and schools, comparable sales, taxes, financing options, and more. Indeed, potential buyers who choose to use the Internet to access new listings and narrow their search may be the best informed and most efficient that real estate professionals have ever dealt with.
It’s no surprise that real estate professionals have responded with new sales models. For example, in a limited service model, some brokers might offer to list a home in the local Multiple Listing Service (MLS) for a fee, while they hand off other aspects of the sale to the seller. This kind of arrangement can reduce the cost of selling the home, which in turn, can result in a lower purchase price. Other brokers might offer a menu of services from which the seller can choose. Some agents may be reluctant to deal with brokers who are using non-traditional sales models, but the Federal Trade Commission (FTC), the agency that works for a competitive marketplace, says these new sales models for buying and selling a home mean more choices for consumers.
The FTC says that the more consumers know about the home buying process before they start looking — either for properties or real estate professionals to help in the search — the more time and energy they can save.
Recurring Closing Costs versus Non-Recurring Closing Costs
Non-Recurring Closing Costs
Non-recurring closing costs are simply the fees that are paid once. These fees are one-time charges:
• Title Policies
• Escrow or closing
• Notary
• Wire fees
• Courier / Delivery
• Attorney fees
• Endorsements
• Recording
• State, County or City Transfer Taxes
• Home Protection Plans
• Natural Hazard Disclosures
• Home Inspection
• Lender fees paid in conjunction with the loan on the HUD-1, line 800.
Recurring Closings Costs - The Prepaids
Recurring fees are paid throughout your loan, which deal primarily with taxes, insurance and interest. They include:
• Fire Insurance Premium
• Flood Insurance (if required in your area)
• Property Taxes
• Mutual or Private Mortgage Insurance Premiums
• Prepaid Interest
What Are The Closing Costs For A Home Loan?
Typically, closing costs to buy a home run anywhere from 2 to 4 percent of the purchase price. Much depends on the points and origination fees a lender charges to make the loan. To see the fees a lender charges, ask your loan officer for a Good Faith Estimate (GFE). A GFE is a disclosure that contains a lender’s “best guess” estimate on all of the cost that will be associated with your particular loan. A lender must provide a GFE within 3 days of the loan application.
VA Loan Eligibility Frequently Asked Questions
Here you can find detailed Questions and Answers about who is eligible for a VA loan and reuse of eligibility for another VA loan.
Q: How do I apply for a VA guaranteed loan?
A: You can apply for a VA loan with any mortgage lender that participates in the VA home loan program. At some point, you will need to get a Certificate of Eligibility from VA to prove to the lender that you are eligible for a VA loan.
Q: How do I get a Certificate of Eligibility?
A: Complete a VA Form 26-1880. Request for a Certificate of Eligibility: You can apply for a Certificate of Eligibility by submitting a completed VA Form 26-1880. Request For A Certificate of Eligibility For Home Loan Benefits, to the VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it’s best to provide such evidence.
Q: Can my lender get my Certificate of Eligibility for me?
A: Yes, it’s called ACE (automated certificate of eligibility). Most lenders have access to the ACE (automated certificate of eligibility) system. This Internet based application can establish eligibility and issue an online Certificate of Eligibility in a matter of seconds. Not all cases can be processed through ACE - only those for which VA has sufficient data in our records. However, veterans are encouraged to ask their lenders about this method of obtaining a certificate.
Q: What is acceptable proof of military service?
A: If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which identifies you and your social security number, and provides your date of entry on your current active duty period and the duration of any time lost. If you were discharged from regular active duty after January 1, 1950, a copy of DD Form 214, Certificate of Release or Discharge From Active Duty should be included with your VA Form 26-1880. If you were discharged after October 1, 1979, DD Form 214 copy 4 should be included. A PHOTOCOPY OF DD214 WILL SUFFICE…..DO NOT SUBMIT AN ORIGINAL DOCUMENT. If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which shows your date of entry on your current active duty period and the duration of any time lost. If you were discharged from the Selected Reserves or the National Guard, you must include copies of adequate documentation of at least 6 years of honorable service. If you were discharged from the Army or Air Force National Guard, you may submit NGB Form 22, Report of Separation and Record of Service, or NGB Form 23, Retirement Points Accounting, or it’s equivalent. If you were discharged from the Selected Reserve, you may submit a copy of your latest annual points statement and evidence of honorable service. Unfortunately, there is no single form used by the Reserves or National Guard similar to the DD Form 214. It is your responsibility to furnish adequate documentation of at least 6 years of honorable service. If you are still serving in the Selected Reserves or the National Guard, you must include an original statement of service signed by, or by the direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters showing the length of time that you have been a member of the Selected Reserves. Again, at least 6 years of honorable service must be documented.
Q: How can I obtain proof of military service?
A: Standard Form 180, Request Pertaining to Military Records, is used to apply for proof of military service regardless of whether you served on regular active duty or in the selected reserves. This request form is NOT processed by VA. Rather, Standard Form 180 is completed and mailed to the appropriate custodian of military service records. Instructions are provided on the reverse of the form to assist in determining the correct forwarding address.
Q: I have already obtained one VA loan. Can I get another one?
A: Yes, your eligibility is reusable depending on the circumstances. Normally, if you have paid off your prior VA loan and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send VA a completed VA Form 26-1880 to VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.
Q: I sold the property I obtained with my prior VA loan on an assumption. Can I get my eligibility restored to use for a new loan?
A: In this case the veteran’s eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.
Q: My prior VA loan was assumed, the assumer defaulted on the loan, and VA paid a claim to the lender. VA said it wasn’t my fault and waived the debt. Now I need a new VA loan but I am told that my used eligibility can not be restored. Why?
Or,
Q: My prior loan was foreclosed on, or I gave a deed in lieu of foreclosure, or the VA paid a compromise (partial) claim. Although I was released from liability on the loan and/or the debt was waived, I am told that I cannot have my used eligibility restored. Why?
A: In either case, although the veteran’s debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran’s eligibility to be restored until the loss has been repaid in full.
Q: Only a portion of my eligibility is available at this time because my prior loan has not been paid in full even though I don’t own the property anymore. Can I still obtain a VA guaranteed home loan?
A: Yes, depending on the circumstances. If a veteran has already used a portion of his or her eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. The veteran would have to discuss with a lender whether the remaining balance would be sufficient for the loan amount sought and whether any down payment would be required.
Q: Is the surviving spouse of a deceased veteran eligible for the home loan benefit?
A: The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. If you wish to make application for the home loan benefit as a surviving spouse, contact our VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120. In addition, a surviving spouse who obtained a VA home loan with the veteran prior to his or her death (regardless of the cause of death), may obtain a VA guaranteed interest rate reduction refinance loan. For more information, contact VA Loan Eligibility Center, PO Box 20729, Winston-Salem, NC 27120 [NOTE: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 16, 2003 that are received after December 15, 2004.]
Q: Are the children of a living or deceased veteran eligible for the home loan benefit?
A: No, the children of an eligible veteran are not eligible for the home loan benefit.
Who Can Qualify For A VA Home Loan?
The following people may qualify for a VA home loan:
- Veterans who served active duty in the Armed Forces after World War II and were discharged under terms other than dishonorable.
- During war time periods, and active duty service, the veteran must have, at the minimum, 90 days of service on their records.
- If a veteran has served only during peacetime periods, the active service requirement is 180 days, which is true for active duty military personnel.
- Enlisted service veterans who served after 1980 and officers who served after 1981 must have completed 2 years of service to be eligible.
- Selected Reserve and National Guard members are also eligible if they have served 6 years of service and were honorably discharged.