The Real Estate Buyer's Awareness Plan
The Ten Basic Steps to Find and Buy That "Just Right" PropertyBy Joseph J. PacelliiUniverse, Inc.
Copyright © 2011 JNJ REALTY LLC
All right reserved.ISBN: 978-1-4620-0040-1Contents
Chapter One
NOW LET'S GET STARTED!
Step One
Learn the language of real estate and the Law of Agency. The Plain English Language of Real Estate Terms
In order to feel confident throughout the process of locating and purchasing real estate, you must become familiar with the words and phrases used by most of the professionals in the business.
Don't be intimidated, it's not that difficult!
Real Estate Broker- an individual licensed by the State to represent the public in real estate transactions and who can legally accept payment for those services rendered.
Serious Buyer- that special someone who is ready, willing and able to make a real estate purchase.
Uncle Louie- usually a respected family member who has an opinion on everything and is not reluctant to make it known.
Seller- a person or entity having legal authority to transfer ownership of a property to another person or entity.
Listing Agreement- a contract between a seller and a licensed real estate broker by which the seller appoints the broker as its authorized agent to offer a property for sale to the public.
Co-brokerage- in effect when the commissions earned from the sale of a property is shared among participating brokers.
Buyer's Agent- the real estate broker who has the contract with a buyer to assist in locating a suitable property for purchase and who has agreed to represent the buyer throughout the entire transaction.
Exclusive Buyer's Agent- a buyer's agent working exclusively for the buyer/client, and only the buyer/client, throughout the entire transaction.
Seller's Agent- a real estate broker who has contracted with a seller to list and market a particular property for sale and who represents only the seller throughout the entire transaction.
Agency Disclosure- the customer must be made aware of the agency relationship with the broker before becoming a client.
Open House- an open invitation to the public to inspect a property. It's usually offered by the listing agent. However, in some instances, the invitation will be made by the FSBO seller.
For Sale By Owner (FSBO)- the seller is attempting to market the property without using the services of a licensed real estate professional.
Single Agency- the real estate broker must work for only one client throughout the entire transaction.
Dual Agency- a broker can work for both the seller and the buyer in the same transaction, after a full disclosure is made to all parties.
Designated Agency- (allowed in some states) occurs when the real estate broker appoints and designates a specific agent to represent either the seller or the buyer in the same transaction.
REALTOR®- active member of an association of professionals who is dedicated to the highest standards of conduct in serving the needs of the real estate community and is guided by a strict Code of Ethics.
Multiple Listing Services (MLS)- organizations that distribute listings information to its participating broker members.
Mortgage Broker- a person licensed by the State who acts as an agent for both the lender and the borrower in the same transaction.
Mortgage Loan- has two parts: 1) the note, which is the promise to repay a debt; and 2) the agreement, which is the document that creates the lien with the pledge of real estate as the security.
Adjustable Rate Mortgage (ARM)- whereby the interest rate on the loan amount will be adjusted in accordance with the terms and conditions of the mortgage agreement.
Points- each point is equal to one percent of the loan amount.
Veterans Administration (VA)- the Federal Government agency that guarantees loans issued to qualified veterans.
Federal Housing Administration (FHA)- the Federal Government agency that insures loans issued by approved lenders to qualified borrowers.
Appraisal- the written evaluation, prepared by a recognized licensed entity or individual, for a specific property.
Interest Rate- the charge for borrowing money usually expressed as an annual percentage rate and/or as a percentage of the loan amount.
Commissions- payments to brokers for services rendered, usually based on a percentage of the sales price. Commissions are always negotiable.
Fees- payments to professionals for services rendered, usually a fixed amount which is not based on the sales price.
Escrow- the funds are held in a trust account by a recognized agent, usually to pay taxes and insurance, or may be held as a deposit toward the purchase price of real estate.
Earnest Money- the deposit, made by a potential buyer, offered as evidence of good faith that accompanies a written offer to purchase real estate.
Equity- the value that remains in a property after all the deductions have been made for any current and /or future indebtedness.
Due Diligence- the thorough research of all relevant issues affecting the subject property, performed in a timely manner.
Fico Score (Fair Isaac and Co)- the numerical value, indicating current credit strength, assigned to a credit report.
Attorney Review Period- the time allocated for the review of the terms and conditions of a contract offer to purchase.
Comparative Market Analysis (CMA)- provides very useful information on similar properties in a given area currently on the market, recently removed, under contract, or sold.
Good Faith Estimate- a reliable estimate of the anticipated loan costs and charges due to be paid at closing.
Vicarious Liabilities- the actions or statements made by an agent that could become the responsibility of the client.
Pre-qualification- determines the Buyer's purchasing power.
Pre-approved- the confirmation by a lender of the mortgage loan amount available to a borrower on a specific loan application.
Adult Communities- housing units established and designed for a specific adult lifestyle.
Condominium Ownership- a multi-unit complex in which the apartments are individually owned, however, the common areas exist as a shared ownership.
Agency Relationships
Single Agency- in effect, when the real estate agent works for only one client in the transaction, the seller or the buyer, but not for both.
Dual Agency- in effect when the broker works for both the seller and the buyer, in the same transaction. Be aware that the broker must fully disclose this fact to each party and receive the informed written consent from both parties.
The Dual Agency Broker accepts the risk and the responsibility of walking a very fine line when attempting to "fairly and honestly" represent both parties in the same transaction. This comment is by no means a veiled attempt to suggest it can't happen. It can, it has, and it most likely will continue to happen.
In most cases the transactions were completed successfully and all parties are still very satisfied with the outcome. However, there have been some situations that did not turn out as expected. One or both of the participants feel as if they have been taken advantage of and the law suits start. In those cases no one wins. That is not entirely accurate. Let's say, the lawyers win.
In the event you are Internet literate, look up the information available on the Law of Agency. Become better informed before you become a victim.
Designated Agency- occurs when a broker takes a listing and appoints the listing agent as the designated agent of the seller and excludes all other agents in the office from that relationship. When an agent works with a buyer on that listing, the broker appoints the agent as the designated agent of the buyer for the transaction and excludes all other agents from that relationship. This form of agency is not recognized or permitted in all states. Be sure to check the laws in your particular state.
Non-agency Relationships- practiced in some states, when licensees work with buyers and sellers in a non-agency capacity. In this circumstance, the agent acts in a neutral position for both parties in a given transaction. Non-agency relationships vary from state to state. The broker is required to disclose the relationship in a timely fashion.
The National Association of Realtors (NAR)- whose members are known as REALTORS. It is one of the largest trade associations in North America representing over 1.2 million members who are involved in the many aspects of the residential and commercial real estate industries. The (NAR) also functions as a self-regulatory organization for the real estate brokerage business. The organization is headquartered in Chicago. Take the time to learn more and get familiar with this organization by looking at their site: www.REALTOR.org.
Real Estate Buyer's Agent Council (REBAC)- a subsidiary of (NAR).
(REBAC) is the world's largest organization of real estate professionals. With a focus on buyer representation and by promoting specialized training and ongoing skill development, REBAC helps its members, and the home buyers who work with them, to experience more successful real estate transactions.
I urge you to research REBAC at www.REBAC.net. You will recognize the importance of a Buyer's Representative and better understand the benefits and protections you receive when working with an Exclusive Buyer's Agent.
INFORMED BUYER'S ARE BETTER BUYERS
REALTOR®
The Realtors Code of Ethics and Standards of Practice, establishes certain obligations that may be higher than those mandated by law. In any instance where the Realtors Code of Ethics is more restrictive than the real estate laws, Realtors must comply with the standards set out by the NAR Code of Ethics. Realtors are devoted to maintain these standards and will always conduct themselves accordingly. Realtors pledge to protect and promote the interests of their clients. Visit the website at www.PCBOR.com.
CHOOSE A REALTOR
USE A REALTOR
Step Two
Do you know who is on your side and looking out for you?
It's A Jungle Out There
The old doctrine of "caveat emptor" which used to have the meaning, "LET THE BUYER BEWARE", is outdated and no longer has a place in this modern day real estate market.
Now-a-day's, the sophisticated BUYER IS AWARE—and usually well informed of the issues that affect a real estate purchase. Being aware of all the facts and conditions of a property long before the purchase is the buyer's best protection from horrible results. Knowledge is the only safe defense against prejudicial information or just plain terrible advice.
AWARENESS*THE BUYER'S EDGE*ADVANTAGE BUYER
The Casual Shopper
In the real estate marketplace, there exists a certain group of people whom I shall label the casual shopper. These people have accepted almost all of the open house invitations, have visited a large number of homes, are familiar with many of the available properties, and actually enjoy the experience, but they will never ever become buyers. They are always "just looking". The activity is similar to the "window shopper" at the mall.
There are some who are only curious. They want to know more about the house down the street that's for sale. How much are they asking for it? What condition is it in? Is it larger or smaller than theirs? If they decide they want to sell theirs, can they get the same price, or maybe a little more?
There are others who will look at areas in which the homes are way out of their price range. They select a local agent, one who doesn't know them yet, to set up appointments to visit a few homes. Most agents will spend a lot of time working with this "potential buyer" until they realize this "customer" will never become a serious buyer. They are also "just looking."
This casual shopper unjustly takes up a lot of valuable time from these very accommodating real estate agents and reduces the time these professionals have available to service and assist the serious buyer. This conduct, by this shopper, is inconsiderate and just not right. But it does continue to happen.
For this casual shopper the following friendly advice is offered.
Go forth into that "casual shoppers" paradise of real estate and spend all your leisure time driving through different neighborhoods looking at properties you shall never buy, because
you just don't like the area;
the house is too large or just a little too small;
the asking price is absolutely outrageous;
you would never buy it ... just because
However, leave the rest of us alone to concentrate on assisting the serious buyer through the exciting challenge of locating and purchasing that "just right property."
The Serious Buyer (SB)
In a real estate transaction, the serious buyer (SB) is that special someone who has made the decision to locate and purchase a home or property and is prepared to make a sincere commitment to pursue and accomplish that goal. They understand the challenges, realize the effort needed and are ready to go.
This (SB) may have started out as the casual shopper, more curious of the current housing market than actually interested in making a very serious commitment to actively locate and purchase a property.
However, sometimes something kicks in. Perhaps a certain property catches their attention and gets the juices flowing. Or maybe a change occurs in their lifestyle that has an effect on their housing needs.
In any event, they become curious or motivated enough to begin looking at a few properties. Their adventure is underway. Now is the time when this (SB) should start to follow the searching process described in this Buyer's Guide.
This Real Estate Buyer's Awareness Plan is directed to that person.
When the (SB) makes the decision to engage the services of a real estate professional, a Buyer's Agent, the (SB) becomes the client. Instantly the (SB) is now the most important party in the transaction. The (SB) takes full control of all present and future real estate decisions.
NO BUYER*NO SALE
That's it and, because buyers are that important, they should be the most knowledgeable people in the transaction. The fact is too many buyers are not adequately informed, nor do they spend enough time or effort to learn and understand all the facts about a property before they commit to buy the property. Even though this is probably the largest single purchase they will ever make, they go about the process in a very casual manner.
A CASUAL EFFORT WILL NOT PRODUCE GOOD RESULTS!
YOU NEED AN ORGANIZED PLAN TO REACH YOUR GOAL!
Okay, Let's Go Shopping
The process of shopping for a home or property to purchase can be a pleasant adventure or a terrifying experience. A disciplined effort, along with the dedication of a lot of time can be the controlling factors to the final outcome.
The actual ownership of a home or property may be the happy reward for the time and effort well spent, or it can be an albatross, the result of poor decisions that were made based upon limited information or bad advice. Don't accept whatever you are told as a fact. Find out for yourself. Do the research. It's called DUE DILIGENCE.
Many potential buyers begin this adventure by reading through the real estate section of the newspapers and home sales magazines. They may also drive through random areas looking for properties with "for sale" signs and "open house" invitations displayed.
When a certain property seems to have some potential, they try to make contact directly with a seller or through the listing real estate agent to arrange for a closer inspection of the property.
Computer savvy buyers may attempt to find the right property using the Internet as their source for information. Although this method has some value, it is also limited. Only on very rare occasions will these methods prove to be successful.
More often than not, these procedures will be frustrating experiences and a constant source of aggravation, because appointments will be canceled without prior notice, the properties are not suitable to their needs, or the asking price is absolutely outrageous. These are only a few reasons.
(Continues...)
Excerpted from The Real Estate Buyer's Awareness Planby Joseph J. Pacelli Copyright © 2011 by JNJ REALTY LLC. Excerpted by permission of iUniverse, Inc.. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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