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ProActive Financial Planning Comprehensive Financial Planning
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Buying/Selling Real Estate Financial Planning Center |
Understanding the Real Estate Game - Buying
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Quick Links Financial Planning Center Savvy Purchasing Buying & Selling Real Estate Understanding the Real Estate Game: Current Practices: Desired Practices: When should you pay lower commissions: When should you consider paying higher commissions: When should you sell your property at a premium: When should you sell your property at a discount: Buying Real Estate: Financial Planning Issues:
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Buying Real Estate: Most prospective buyers will walk into a real estate office and find an agent to show them available properties in the neighborhood. The agent will print out a list of properties for sale on the MLS (Multiple Listing Service) and show the homes to the prospective buyer. If the buyer purchases a property, the agent will usually receive half of the commission being paid to the selling agent. In addition, the agent may try to get the prospective buyer to agree to use them exclusively as an agent and no one else. What the prospective buyer doesn't realize is the agent printed the list of properties from the MLS according to the properties that will pay the agent the highest commission first. The agent will then show the buyer homes from the top of the list down. To check this, once a prospective buyer receives the MLS listing, the buyer should ask to see the commissions that will be paid to the agent on each property. If they are not listed according to the properties that pay the highest commission first, this is a good indication of an agent that is putting the buyer's interest of saving money before their interest of making money. First Rule: Avoid dealing with agents that only represent the buyer. A prospective buyer should drive around the neighborhood to find a property on their own. When a property is found, the prospective buyer should contact the selling agent directly. The prospective buyer should tell the selling agent they are not represented by a selling agent and to bring an MLS listing of other homes for sale in the area that can be compared to the home the agent is selling. The prospective buyer should set the parameters of the list by telling the agent to list homes that are a certain price above and below the price of the home that is for sale. The seller should retain this list to shop for other homes. By dealing directly with a the selling agent, the selling agent will not have to split his or her commission with another agent. This gives the buyer bargaining power to reduce the price of the property. A $500,000 property paying an agent 6% will pay the selling agent a $30,000 commission. If the buyer was represented by an agent, the selling agent would lose $15,000 in commissions. Since the buyer is not represented by an agent, the selling agent can reduce the price of the home by that amount. The buyer should ask to speak to the buyer and agent together to negotiate the best deal. However, this is not common practice. In order to protect their commissions, the agent will not let a prospective buyer talk directly with the seller. Second Rule: If the seller prevents the prospective buyer from speaking directly with the seller, the prospective buyer should always communicate all offers in writing directly to the seller. The prospective buyer should direct the agent representing the seller to give the offer directly to the seller, have the seller accept or reject it, sign the offer, and return it to the prospective buyer. This will help to reduce any self-interest the selling agent may have.
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