Do You Have a Friend in the Real Estate Business?
By RYAN TAYLOR
Friends are people you can trust. They will come pick you up when your car breaks down. They are there to pick you up when you are down and there to celebrate when something goes right. Friends are the most valuable thing you have.
Friends do not try to hurt, deceive or manipulate you. (Bernie Madoff is not your friend).
If you bought a house in 2008, most likely your Realtor is not your friend. Almost every single person who bought a house in 2008 now owns an asset that is worth less than what they paid.
Did your Realtor at least tell you that you were making a poor short-term financial decision? Probably not, because he or she is not obligated to do so.
Realtors are not motivated to help make you a good financial decision; they are motivated to create a transaction and earn fees. If President Obama is outraged over Wall Street compensation packages then you should be outraged over Realtor commissions.
And while Wall Street may not have much of a choice about their bonuses for the foreseeable future, there is something you can do as a potential home buyer to protect yourself from making a big mistake when making the biggest purchase of your life.
Ask the right questions and demand the right answers.
Here a few questions you should ask your Realtor and the answers that are adequate and answers that are concerning:
With economic conditions continuing to deteriorate, why do you think this is the right time to buy, as opposed to 6 months from now?
Wrong Answer: Interest rates are at historical lows and sales are up, so we are near the bottom of the market.
Right Answer: Property values are not likely to rise in the next six months and in most cases it is not worth the risk to buy a house now as opposed to six months from now. However, if you have been waiting for this particular house to come on the market for a few months because it is in a well-maintained neighborhood with good schools and an abnormally large lot, it may be a good time to make an offer that fits comfortably within your budget.
What is the value trend over the last three months for properties like the one I am looking at?
Wrong Answer: Sales are up more than 100% year over year. With the increased demand, values are going to be on the rise or are already on the rise.
Right Answer: Allow me to find you 3 comparable sales from the last two months that will show you the current market trend. In addition, I will find you three comparable listings that also give you an indication of what others are asking for. Please realize that listings are very negotiable and so do not necessarily represent the value of the homes they are attached to.
When you are prospecting for homes you want to show me, how do you determine what to show me and what not to show me?
Wrong Answer: I only look for properties that have been listed within the last 30 days. Anything that has been on the market for more than 30 days must have some problem that makes it very undesirable. I also do not look for REOs as they have been neglected and are frequently sold “as-is”.
Right Answer: I apply the criteria you provided me and look at everything that is listed in the school district and city you are interested in. Personally, I like to show some homes that have been listed for a while because I know they are not generating as much interest as some of the new properties. This way we can avoid bidding wars and potentially find a truly motivated seller.
In addition, I enjoy showing REOs because I know banks continue to be strapped for cash and they are willing to negotiate over everything from closing cost incentives to repairs. Finally, I do show short sales but I realize that most end up becoming REO properties, and you as a buyer will most likely get a better deal on a home when it is REO rather than a short sale.
Please provide me with a few closings you are most proud of over the last year that you believe were really good deals for the buyers?
Wrong Answer: I got a great deal for a couple in October where they got a $5,000 closing cost credit. I also helped one of my friends get a home that they bought for $35,000 below list.
Right Answer: There are a few deals I am proud of and I will put together a report for you detailing the price the buyer paid, the closing cost incentives granted by the seller and what their home is worth now. Furthermore, I will have an independent valuation firm run values on these homes so you know you can have an unbiased opinion of value.
If you receive the right answer on your questions, you may just have a friend in the real estate business.
February 17th, 2009 at 9:41 am
[...] But before you hit the Saturday open houses with your neighborhood Realtor, ask yourself this very important question: Do You Have a Friend in the Real Estate Business? [...]