A Mini Seminar For Buyers
Whether you are a first time buyer, or a veteran, we hope you will find these topics a valuable asset.
We will start with four common Buyer Mistakes that buyers make as a result of trying to be their "own Buyer Broker". Following that are three Significant Points every Buyer should fully understand before signing any contract to purchase a home.
Some of this material is intermediate to advanced and touches on a bit of legalese, but that is exactly the point - real estate transactions are far more complex and involved than simply choosing which home you like!
BUYER MISTAKE #1 Taking a slow casual approach. Many buyers are very unsure about the nature of available homes and home prices, and/or they may be very unsure about where they want to live. A professional buyer broker can be invaluable in helping them have a much easier time here. However, once a buyer already knows where they generally want to live, for example Alpharetta/Crabapple in North Fulton, or the Walton High District in Cobb, this is the worst possible approach to finding a home. Successfully buying a great home and getting a good deal does not come from taking a slow, casual approach and spending weeks and even months on end seeing homes. Buyers who use these inefficient approaches fail to realize that while there are many homes available, the truly exceptional homes and real deals are always in a very finite supply at any given time. While the casual buyer tours the universe, other buyers are buying up the great homes out from under them before they even realize the homes existed. As with most things, the early bird gets the worm.
BUYER MISTAKE #2 Winging it with purchase offers. Buyers who "wing it with low ball offers that can't be justified and backed up with hard evidence", not only lose their bid, but sometimes insult the seller/builder so badly they lose the chance to buy the home altogether. Every year I help buyers who have irreparably "teed off" a certain builder/seller, and shut themselves out of a great home or neighborhood after trying to negotiate for themselves - and I don't mean unsophisticated first timers, I am talking upscale buyers in the half million dollar plus range.
BUYER MISTAKE # 3 Conducting your own home search. Buyers who "believe they can do an equal or better job finding available homes for themselves" often completely miss out on many far better properties just because they never located them at all, or located them too late. Every month I hear from buyers who have been trying to conduct their own home search, and in nearly every case they have completely missed great homes and even entire new developments in their exact price range and desired area.
BUYER MISTAKE #4 Believing you can save money or get a better deal on your home by "being your own buyer broker". Buyers who work alone believing they're saving the buyer agent fee don't understand how commission fees factored into the price of homes work. (See # 3 below) The reality is that (despite what a listing agent, FSBO seller, or builder may tell them) self represented buyers often pay too much for a particular home. To make matters worse, they are needlessly exposing themselves to legal action from several parties, and constantly risk violating vague contract clauses by not having expert knowledge of real estate contracts and laws. It would shock most people to know how many ways a deal can fall apart if you don't really know what you are doing.
Three Significant Points Every Buyer Should Understand
1.
Recent Changes In Georgia Laws Make It More Important Than Ever For Buyers To Obtain Professional Representation...
Buyers Now Bear New Responsibilities...
As a buyer it is important to know how changes in Georgia laws can affect you:
Recent laws in Georgia effective 7-1-2000, place much of the primary burden and obligation on Buyers (not the Seller, Broker, Listing Agent, or Builder) to do their own discovery and diligent research about all aspects affecting a property, both onsite and off! Previously, the agent and broker were liable for much of this discovery and disclosure. Further, state law O.C.G.A. 10-6A-1 et. Seq. states that if you as a Buyer do not enter into a written Buyer Brokerage Agreement with an agent, you are not represented as a client, and are therefore only a customer to any agent you may be working with during the purchase of a home. "Customers" must be treated honestly and fairly, but have no representation of their best interests by any agent they might be working with, are given no important guidance or advice, receive only the minimal disclosures required by law, and take the greatest risks when buying a home.
This makes it more important than ever for you as a Buyer to obtain top quality Client representation by partnering with the best specialist you can find - an Experienced Buyer Broker!
2.
A Quick Overview Of Agency Relationships...
Who represents who? In any real estate transaction you will either be a Client, or a Customer.
The best position by far is that of being a Client because clients have representation of their interests. All real estate professionals owe their Clients important duties, including: exercising reasonable care, accountability, protection of the Clients best interests at all times, loyalty, fairness, and honesty. Customers have no representation, they are just what the term implies - a customer. Customers are only owed fairness and honesty. Agents are not allowed to provide a Customers with advice, guidance, or anything that even hints at helping to aid, represent, or protect a customers vested interests - that would be practicing Undisclosed Dual Agency which is an illegal act for which an agent can be sued by all parties, and probably would loose their license as well!
Listing Agents work under Seller Agency and legally must fully represent their best interests of their client, the Seller. Listing agents are charged with attempting to do all in their power to get the best terms and price possible for the Seller. If a Buyer who is not represented by a Buyers Agent wishes to make an offer on this agents listing, they are at a disadvantage. Why? In addition to a contract and addendums that will be riddled with esoteric legal clauses drafted highly in favor of the Seller, buyer's simply are no match for a professional agent when it comes to protecting their own interests during the many steps of a purchase transaction. Buyers are also at a great disadvantage compared to a professional agent on issues such as land and agency laws, accurate comparable home pricing, real estate contract laws and how to legally comply with and follow correct contract procedures and time limit requirements! Making a mistake on one of life's largest purchases can result in a costly lawsuit, voided contract, even lost earnest money.
Site Agents usually work in a model home converted into a "sales center" at new home subdivisions, and work under Seller Agency to represent builders. Just like the Listing Agent above, site agents must fully represent their client, the Builder/Developer, not the home buyer. If a new home buyer is "self represented" the Site Agent is allowed to assist them in filling out the contract form, but can give them no professional guidance - for instance: advise the buyer of some nasty contract clauses in favor of the builder and that there may be a way to minimize their impact. An unrepresented "new home" buyer can be at a real disadvantage when things don't go according to plans because some builders use new home contracts that are some of the most one sided contracts in the industry in favor of the seller/builder. I have encountered new home contracts so adverse to buyers that my client wisely choose to look elsewhere when the builder would not accept changes that merely leveled the playing field! Site agents will be happy to sell an unrepresented buyer their Builders house, but they will not be looking out for the buyers welfare at all! And rightly so, because remember, unrepresented buyers are only customers - not clients.
Buyers Agents as the name implies, are agents who have agreed to work under a written Buyer Agency Agreement to represent and assist a buyer as their Buyers Agent. Under a Buyer Agency Agreement the Buyers Agent is legally charged with treating the buyer as a Client and representing that which is in the best interests of the buyer at all times - as long as it is legal. This is far better than transacting to purchase a home on your own, or having dealings with any agent with whom you do not have a written Buyer Agency Agreement to protect your interests.
Beware - all Buyers Agents are NOT the same! Buyers would be wise to shop around for their buyers agent and carefully compare the type of experience and qualifications, as well as look for any specialized abilities that may distinguish their prospective buyers agent and set them apart from the crowd. Why? Anyone, even an agent who has primarily been a listing agent can execute the written Buyer Agency Agreement which requires them to "act" as your buyers agent, and act on your behalf. However, because the agent you choose can only act to the capacity of their acquired skills, it would be far wiser to choose an experienced buyer specialist instead of a generalist when entrusting someone to assist with your largest financial transaction. Look for someone who has worked with buyers the greater part of their career, and who has been active in real estate at least 3-5 years.
Can you put your trust in a brokerage firm just because of their size or name recognition?
Absolutely not! Real Estate is a person to person business. Contrary to popular belief, the name recognition or size an agents brokerage firm has very little to do with the quality of service or real results you will receive, or how competently your transaction will ultimately be handled. Large national franchises don't want it widely known, but they continually seek and hire brand new totally inexperienced agents with few skills, and after only a few weeks of classroom training these new agents with zero track record are free to market themselves with the firms glitzy and often impressive advertising materials and offer to "serve your best interests"...with your largest financial transaction!
Large franchise firms often fund big advertising campaigns to promote themselves as having some kind of industry edge - the reality is any small independent brokerage firm has access to the same technologies, national networking and relocation affiliations, MLS home databases, and can provide every client service equally well! In fact, some local independent brokerage firms are highly specialized or have peerless knowledge of a certain market segment and can actually provide clients far superior services to any national franchise firm - Advantage Home Buyer Representatives, Inc. is an excellent example, and there are other local specialist firms as well.
Bottom line real estate is truly a person to person business - every firm is comprised of agents who are all independent contractors and you deal solely with them as individuals - it is they, not their corporation that will be directly representing and assisting you. This is why it is important to choose your agent based on their individual qualifications - irrespective of how well known their firm may be. You will likely never meet the broker/owner of a large firm unless something has gone very wrong and he/she is required to step in and help your agent - or take over the transaction! So always select your real estate professional based on their individual abilities and qualifications!
In summary, the ONLY way to be in a CLIENT relationship, and insure that your interests as the Buyer are looked after, is to have a Buyers Agent or Broker represent you under a written Buyer Agency Agreement.
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3.
A Common Misunderstanding
Many Buyers Have About Home Prices
And Real Estate Commissions!
Many buyers mistakenly assume they might get a "better deal" if they elect not to use a buyers agent, because they think that any commission their buyers agent would have received will be deducted from the price of their home - as if listing fees were a negotiating point available to buyers! Believing this, and with very limited knowledge of the market and true comparable sales, and worse, little to no knowledge about Real Estate Contract Law, Laws Of Agency, or Georgia Real Property Laws and their impact on real estate transactions, these misinformed buyers then go about trying to handle their own purchase as if buying a home were no more complicated than buying a car. The result...thousands of dollars of their own money is wasted because no listing fees are deducted from their homes price, and worse, they are unnecessarily exposed to a host of unknown risks, and often end up paying too much for a home by not having the support and representation of a skilled buyers agent!
The FACTS About Real Estate Commissions:
Full real estate listing commission fees of typically 6% to7% are built into the purchase price of every home listed by a real estate firm (over 85% of all homes for sale) and including all new homes. Everyone who buys one of these homes pays these fees as one of the components of the homes total purchase price. These listing fees are not negotiable by the purchaser at all. Barring a specific written stipulation for a partial commission reduction in the private listing contract between the seller and listing agent, and executed at the time the home was listed, no part of the listing fees are ever deducted from the price of the home...even if the buyer doesn't have a buyers agent to represent them! And few listing agents will agree to partial commission reductions, because unrepresented buyers usually require a lot of handholding and extra follow-up - making their job twice as hard as when a buyer comes to the table with assistance from a knowledgeable and experienced buyers agent!
When a buyer has no agent, and is "self represented", the listing broker who is representing the seller/builder simply receives the entire 6% to 7% listing commission fee factored into the price of the home. In essence, the Buyer has paid for representation, but did not take advantage of it! When a buyer does have their own agent or broker, the 6% to 7% commission fee built into the purchase price of their home is split, usually 50/50, between the listing and selling brokers. (Buyers Agents and Buyers Brokers are known as the selling broker and receive a selling side commission) in order to pay for the buyer to have their own buyers agent! This takes place under a "cooperative commission split agreement" which is actually mandated for all member brokers by the local Multiple Listing Services for every new and existing home listed in either the MLS or FMLS coverage area - the full 20 county metro Atlanta area.
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Since you are in essence paying to be represented anyway, you not only deserve to be represented...you deserve to have the best buyer specialist available to you...an Experienced Professional Buyers Broker!
Robert Whitfield...Atlanta's Most Qualified Home Buying Expert!
Advantage Home Buyer Representatives, Inc. Local: 678-585-9691 Toll Free: 877-787-7167
Specialists in Prime In Town and Greater North Atlanta Properties