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Buyers - Real Estate Sales

Real estate agents like to be Buyer Agents, but most don’t consider the legal liability they are assuming.  A Buyer Agent may well need to know more about the house you are considering than the Listing Agent.  People select a Buyer Agent because they are experienced and knowledgeable in the real estate business or a least they think they are.  They also select them because they they answered the phone, they are the best friend of their son or daughter, they were sitting in an Open House watching TV, they look nice, they have a nice car or some other very important criteria.  Whatever, it is important that you request to see the actual License of the Buyer Agent to insure that that agent really is an agent and not just an unlicensed assistant or an agent's secretary.  Relying on the Seller Disclosure forms may just not be enough to protect your interests.  All should recommend a Home Inspection without question.

Determining Where You Want To Live is an individual selection or desire based upon many things including school systems and locations, job locations, shopping center locations, subdivision locations, locations of friends and relatives, etc.

Check out the EPA at www.epa.gov/epahome/comm.htm.  Insert a Zip Code and get a list of the areas of pollution, hazardous waste sites, and other regulatory information for the area.

School System Information can be obtained by calling or visiting individual schools for the desired information or you may contact a real estate consultant for published written reports on specific school systems. 

Crime Watch Information can be obtained by contacting the local police departments either by phone or in person.

Subdivision Amenities are pretty self-explanatory when you make face-to-face contact with persons presently living in subdivisions of interest to you.  The information provided by the BLC/MLS Listing Sheet is often incorrect and often leaves a lot to be desired.  Visit selected home owners in the early evening before dark or on a weekend early afternoon when they are home.  Have a written list of questions to present. Many subdivisions offer pools, clubhouses, tennis courts, playgrounds, walking trails, green spaces, common garden areas and golf course lots.  Many agents don’t take the time to find out what is offered.

Home Owner Associations and Dues are a very important consideration.  Talk to home owners to determine their feelings toward their HOA and the amount of the mandatory dues.  Question what you will get for your money.  Inquire as to how well the association handles the enforcement of the rules and regulations.  Failure to enforce those rules and regulations can result in invalidation in a Court of Law.  Inquire as to how well the association handles and supervises subdivision maintenance.  Keep in mind that some HOA’s are very strict, others are a total waste of everyone’s time … but all collect your money quite handily.  And the fees always tend to grow upwards without much explanation.  Make sure that you know the amount of the fee.  By talking with owners in the subdivision, you can determine what they think of the current fee, when it last increased and any potential increase in the offing.

Selecting properties to view can be easy and can be difficult.  Use the newspaper ads as well as your local Board of Realtors web site to select the properties that may be of interest to you.  Avoid properties advertised without providing addresses or prices or bedrooms unless you have a lot of time on your hands.  Real Estate Agents and Owners who are serious about advertising will provide the price range, address and bedrooms and who to contact.  Make your contacts with the owners or respective real estate companies or select a specific real estate company or real estate consultant to show the properties to you.  Avoid agents will show you only the listings that they want to ‘sell’ to you without showing the other available properties.

Days on the Market is a very important criteria in the minds of many buyers.  This number is often mis-represented.  Ask your agent to check the property's history or archive to see how many times it was listed and re-listed to determine the actual number of days on the market.  Your agent should volunteer this information without asking.  There are two Days On The Market SCAMs  that are practiced by several of the larger real estate companies.  About 5 days before the long term listing contract expires, they change the expiration date to that date, then, just before the listing would have truly expired, they re-list it as a New Listing.  Or, they Release a listing on the expiration date and then re-list it the next day.  These activities reset the Days On The Market calculation, thus scamming you.  The local Board of Realtors attempted to control the previous practice of just withdrawing and re-listing a property to reset the DOM calculation, but scandalous agents always find a way to defraud the public.  Have your agent check out the MLS Archive for the true record.

A Lease-option to Purchase offers some pitfalls and pratfalls and some winners too!  Most real estate agents don't encourage lease-options because often only a part of the commission is paid up-front, with the balance being paid when the option is exercised if it is exercised months or years later.

What is a lease-option anyway?  A lease with option to purchase is a real estate sales and finance method. It is a lease for a fixed term such as 12 or 24 months, sometimes longer, with an option for the tenant to buy the home at an agreed option price.

The lease-option owner-seller is obligated to sell at the option price but the tenant-buyer is not obligated to buy. However, when a lease-purchase is used, the buyer is obligated to purchase at the end of the rental period.

A unique lease-option and lease-purchase feature is the rent credit.  The tenant usually pays top rent for the residence. But a portion is credited toward the purchase price if the buyer decides to exercise the purchase option.

For example, on an example lease-option, the house rents for $1,500 per month with a 33 percent, $500 monthly rent credit when the option is exercised. If the tenant elects not to purchase, the rent credit is lost. Needless to say, the rent credit loss is a very strong Incentive for the tenant to buy.

Few lease-options are advertised. Most real estate agents don't encourage lease-options because only often only a part of the commission is paid up-front, with the balance being paid when the option is exercised. The result is a lease-option shortage, with more buyers than sellers. However, smart real estate agents may realize a lease-option is better than no sale at all.

To create lease-option opportunities, smart home buyers run "house wanted" classified ads such as "Executive needs 3 BR. 2 BA home on two year lease-option. Call Ken at 555-5555." You won't get many phone calls, but all you need is one or two.

Another technique is to check the "houses for rent" classified ads. After inspecting a suitable house, offer to lease it with an option to buy. Most landlords find it hard to resist a tenant's tempting offer of nonrefundable option money instead of a security deposit.

Advantages for buyers include little up-front cash required.  Compared to a home down payment, the lease-option up-front cash required is usually very small and in the 5% range.  For example, one can typically run a newspaper ad headlined "$5,000 MOVES YOU IN." The $5,000 is allocated to the first month's rent plus the nonrefundable option consideration. This is usually far less cash than is required to buy a home.

Rent credit builds a down payment.  The higher the rent credit percentage, the greater the probability the tenant will exercise the purchase option. A low 10 percent rent credit is not much of an incentive to buy. Highly motivated home sellers offer 50 or even 100 percent rent credits to practically assure a sale.

Try before buying. A special benefit is that tenants can try the home before buying. If it isn't a home they want to own, they won't exercise the option and the landlord benefits from the forfeited nonrefundable option money and lost rent credit.

The tenant can control property with little cash. If the property goes up in market value during the rental term, the tenants leverage their investment.

Although lease-option buyers don't enjoy any tax deductions, their monthly rent credit earned toward the purchase price is usually far more beneficial.

Lease-options offer benefits and solve problems for both home buyers and sellers. Lease-options can also be used with other types of properties.  Get more information from your real estate agent or consultant.

Preparing The Offer To Purchase is an extremely important and legally binding function.  It should be handled as such.  Don’t forget to include a pre-closing walk-through in the agreement.  You should use an attorney, a real estate agent or a real estate consultant for this function.  You WILL have problems if you attempt to handle this very important legal step on your own.

Proceeding from the Purchase Agreement through to the Closing can be very smooth or very bumpy.  The Seller usually selects the Title Company.  The Title Company should review and control the transaction through the various stages all the way through the actual Closing.  Your agent or consultant should and you may want to establish a personal contact at the Title Company to talk to the contact frequently to insure that the steps of the transaction are proceeding properly.  Concerns are prompt issuance of the title work and resolving of any problems that may be therein, the survey and identification of any problems that may exist, the Seller’s mortgage company(s) payoffs, your mortgage company processing, and the merging of the necessary data into the final form for the Closing. 

Watch out for a company that assigns this extremely important function to an internal secretary or out sources it to someone else.

A real estate consultant can be of considerable service to you.

Tricks and Traps

Call 1-800-xxx-xxxx for this report on information or this house or whatever and your name and phone number are captured automatically.  No one discloses that you cannot block to an 800, 888, 877 or 867 number.  They ‘gotcha’!

Calling local numbers can also capture and store your number in a real estate, mortgage, insurance or moving company’s computer database for the company’s future use.  This is also not ever disclosed.

Federal Investigators are looking into controversial real estate sale closings after being hit with numerous complaints.  What they are finding should disturb home buyers nationwide.  The big problem is kickback schemes involving real estate brokers, mortgage companies, home builders and title insurance companies.  Apparently the participants set up a shell corporation to handle business referrals from each other ... service fees are then inflated and the parties then split the profits.  To avoid such schemes, one must make sure that all settlement costs are disclosed.  HUD requires that all such costs be disclosed at least one business day before the home buyer closes on the purchase.  Watch for new, undisclosed fees that suddenly appear and low-balled fees that are boosted at the closing table.  Watch for up-charges and markups:  Lenders and agents are prohibited from charging more for appraisals, credit reports and other services unless they can justify higher fees for individual services before the sale is completed.  The only way to avoid being ripped off in these types of swindles is to ask for guaranteed closing fees up front in writing.  When in doubt, talk to a real estate attorney.