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The Cost Of Buying A Property Without A Buyers Agent
Dated: May 10 2016
About once a month I get a call from an owner asking me for help. As the conversation unfolds, I learn that these owners have purchased a property without representation and have run into a "problem" after closing. Wearing my therapist hat, I do hold an inactive clinical social worker's license, I listen to them and empathize with their problem and their feelings. The common thread in these calls is frustration and desperation. I get it. If I was in these owners' shoes I would be frustrated also. I would probably be asking myself "What was I thinking when I decided to purchase this property on my own?!"
I imagine buyers who decide to buy a property on their own may be operating under some myths such as:
Myth #1. "If the seller does not have to pay the buyer's agent commission I will get a discount and save money"
Listing agents don't necessarily give up their commission to have an unrepresented buyer purchase their listing. The listing agent will have to perform the duties of the buyers' agent in order to assist the unrepresented buyer with the purchase (educate the buyer, complete the contract and all of its addenda, facilitate showings, coordinate inspections and so forth). Why would a listing agent give up their commission if they can make the same money by having a represented buyer whose agent will perform those duties and more?
If one understands that the higher the sales price the higher the listing agent's commission will be, why would one think that one is saving money by directly working with the listing agent?
Myth #2. "I have purchased a property before and I know how to negotiate a contract"
You may be a great negotiator. However, knowledge and understanding of the contract and its addenda, its contingencies and its implications are key components of a contract negotiation. I have represented very successful attorneys as buyers and as sellers to learn that they are great at what they do but they benefit from the knowledge and expertise of a real estate agent when it comes to negotiating and understanding a real estate transaction.
If you know the purchase contract you understand what I mean when I say that the price a buyer ends up paying pays is not reflected in the sales price. If you don't, no worries. I will be writing a blog about this.
Myth #3. "In a multiple-offer-situation the seller's agent will pick my offer"
The National Association of Realtors' Code of Ethics states the Realtors should treat all parties to a transaction fairly. A Realtor who does not present all offers to the seller or favors an offer to benefit himself will be in violation of the code of ethics which can result in a revocation of his license.
Myth #4: "I can research a property's information online and find everything I need there"
A buyer can find some information online and will be missing access to some key information about the property. As a buyer's agent:
1. I complete a comparable market analysis and then use the data to estimate if the property will appraise at the sales price. To the date, 99% of my clients' transactions met the appraised value.
2. I conduct research to inform my client if the property is on the flood zone or near it. I recently showed a property that was not on the flood zone but the house next to it was. Without me, my client would have bought a property in an area that has flooded twice in the past 3 years. My client had specifically requested not to be near a flood zone.
3. I review the survey and title commitment educating my clients about encroachments and easements that may interfere with the use of the lot. One of the calls I was referring to at the beginning of this blog was from a buyer who bought a piece of land that had a huge utility easement running in the middle of the property making the lot a non-buildable one.
4. I research the property's history on the MLS (multiple listing service) to inform my client about previous sales, previous attempts to sell and the number of times the property went from pending to active status. A friend of mine recently purchased a property without representation and as a result does not know that the sellers have been trying to sell the property for more than 4 years. Even when a property is not just an investment property, saleability is a key factor. No one wants to buy a property that will take 4 years to sell.
Myth #5: "I don't need a Realtor when buying a newly built property because everything is brand new. On top of that the builder's lender will pay for my closing costs and I will save money"
The expertise and knowledge of a Realtor is key when purchasing new construction. I guide and accompany my clients through the entire building process making the necessary recommendations along the way including inspections. Before my clients go under contract, they have been referred by me to a couple of loan officers I trust so they can get pre-qualified and know the terms of the loan including the monthly payment. I then work closely with the lender to ensure everything goes smoothly for my clients.
The latest call I received from a client was about their escrow account for taxes. Apparently, the builder's lender did not estimate the property taxes for the entire year when giving her the estimated monthly payment. She now owes about $9,000 to the bank because her escrow account did not have sufficient funds to pay the property taxes.
I could write forever on this topic. I hope my blog today has provided you with some additional information so you can make a more informed decision when you decide to purchase your next real estate property. Not only a buyer does not save money by not hiring a real estate professional but they might end up losing money down the road. I believe that it costs buyers money not to be represented by a buyer's agent.
Marcela Alfonsin, Realtor since 2008
Born and raised in Argentina, Marcela is calling Austin "home" since 2004. She is versatile and multifaceted - being fully bilingual (English-Spanish) and possessing extensive experience with national....
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