Disclaimer: Bryan Church’s Real Estate Corner is not presented or intended to be used as investment, legal, tax, or as any other advice and should not be used as a basis for any type of decision.  Consult a professional before making any decisions.  

Why Should a Person Use a Real Estate Agent? Part Two.

August 26, 2016

PART TWO OF TWO PARTS

This is Part Two of a two part installment:  Why Should a Person Use a Real Estate Agent?  Part One is located in our archives and was presented on 02/04/15.

 

Real estate agents are generally able to:

  • Probe buyers and sellers for motivation

  • Probe sellers for deliverability of the property

  • Assure buyers’ ability to close 

  • Provide industry expertise and contacts

Probe Buyers and Sellers for Motivation
The real estate agent probes both buyers and seller for motivation, and can help weed out sellers who are not really sellers.  This may occur when the husband and wife cannot agree on a price for the property, or whether they are going to sell the property at all.  One spouse wants to sell and the other doesn’t.  There may even be divorce implications.  Having an agent probing for motivation reduces the number of undeliverable properties on the market and assures the buyer that he is not wasting his time attempting to purchase the home.

 

Probes Sellers for Deliverability of the Property
Using a real estate agent is also beneficial because the agent will usually consult the tax record database to make sure the property seller’s, who are representing themselves as such, are actually the owners of the property.  Additional owners may surface during this search.

 

When a seller (especially when it is a husband AND wife) sit down to sign the listing agreement, it assures the buyer that they have actually considered selling the property and have made the decision (together) to actually sell it.  By signing the listing agreement, the sellers have both agreed to pay a commission when the property sells.  The important thing is that the listing agreement generally specifies that the seller will cooperate with the buyer’s agent and pay her part of the negotiated commission if she brings in the buyer. 

 

When a client buys a property, the agent is generally contractually assured of being paid a commission if the client decides to buy one of the exclusively listed homes marketed within the local MLS. A deliverable property where the seller is willing to pay the agent for her services is a win-win situation and is very common in California and the U.S.

 

Assures Buyers’ Ability to Close
Agents tend to weed out buyers who are ready and willing, but not able to buy a home.  A good agent will require a buyer to become pre-approved with a lender before starting to look for a home. Most of the graduates of the “no money down get rich quick” programs probably will be left at the curb, and not be allowed to waste the seller’s time.

 

A real estate agent makes sure that a buyer is actually able to purchase the property.  Prior to taking a buyer out to look at properties, the agent will usually have the buyer meet with a lender to make sure they are financially able to buy a home.  Smart real estate agents will have the buyer not only meet with a lender, but have them complete a loan application with that lender and have it submitted to underwriting to obtain a pre-approved loan.  A buyer with a pre-approved loan is more formidable than a buyer with only a pre-qualification letter, or nothing at all.  A pre-qualification letter usually states:  “Based upon unconfirmed information we may be able to make the loan, but maybe not.”

 

A pre-approved loan informs the seller that the buyer has submitted all their financial information to the lender’s underwriter and the lender has confirmed in writing that they will make a loan to the borrower for a stated amount, based upon certain funding conditions. These are usually an acceptable appraisal, the buyer's credit rating remains at the same level until funding of the loan, and other related underwriting criteria are met.  A pre-approved loan is very similar to having cash ready to go and gives the buyer an advantage when negotiating for the purchase of a home, especially during an upward-trending sellers’ market with multiple offers being submitted by many strong buyers. 

 

All-cash buyers are generally investors and they are usually not willing to overpay for a property.  They are making a business decision regarding the price of the property, its condition, present and projected future rental amounts, and price appreciation potential over the holding period.

 

An owner-occupied buyer, on the other hand, is looking for a home.  When a buyer finds a home that “feels right” it is probably the one they should consider buying.  Since homes that feel right are difficult to find, the buyer may want to consider offering ABOVE the property’s present market value when they find the “right” property. 

 

As long as the property appraises for the purchase price, the buyer may be able to obtain a loan.  If the home does not appraise for the purchase price, then the buyer will most likely be required to pay a larger down payment that will be needed to conform to the lender’s loan-to-value ratio requirements.  The other alternative is to renegotiate the purchase price down to the appraised value.

 

The buyer may not have a problem paying a little more than market value (i.e., outbid the investors who are paying all cash) because of the special nature of the property.   In other words, the buyer has finally found the right home and does not want to lose it.

 

Provides Industry Expertise and Contacts
A real estate agent will generally have many industry contacts, while a home buyer or seller will probably have none.  The buyer or seller will be able to take advantage of the agent’s contacts, which may include escrow, title insurance, pest companies, home inspectors, home warranty companies, and other companies.

 

There has been some very shoddy work performed by vendors who know a buyer or seller is a “one shot deal” and treat them accordingly.  They will many times be placed on the “back burner” if there isn't future revenue riding on satisfaction with their performance. 

 

A home buyer or home seller will probably be merely one transaction for the many industry vendors that are used during the home purchase.  The real estate agent on the other hand, will most likely represent considerable future business for those same vendors.  For this reason, the buyer or seller may be able to leverage their agent’s future business to make sure the vendors do a good job. 

 

So, hiring a team of professionals, such as a lender, escrow officer, title insurer, home inspector, home insurer, and pest inspector is critical to a favorable outcome when purchasing a home.  The real estate agent can refer the buyer or seller to vendors who can perform quality work on time.  It is critical to obtain a team of professionals to handle each and every step of the transaction.

 

There are many reasons for a buyer or seller to use a real estate agent to help them buy or sell a home.  Computers can make things more efficient; however, real estate is a people business and computers will have a difficult time replacing a live real estate agent when it comes to putting a deal together. 

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