Consumer Information From The National Association Of REALTORS®
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When you're ready to think about buying or selling your property, you need to ask yourself the following questions: Do you have the time, energy, sources of information, and contracts to do the job yourself? If you are one of the do-it-yourself buyer or seller, will the results be as good or better than they would have been if you had professional assistance? Would it go smoother? Would it give you more personal time? Would you have purchased for less. Or sold for more, if a real estate agent was involved? Read the following information and learn how a real estate agent can help you understand everything you need to know about a real estate transaction. This is the time to choose a real estate licensee. When picking a real estate agent, look for one who is also a REALTOR. A REALTOR is a member of the NATIONAL ASSOCIATION OF REALTORS, a real estate trade association, and all members agree to abide by a 17 article Code of Ethics. A REALTOR has many resources to assist you in that search.
Agency Relationship
Determine the type of relationship you will have with your agent.
The Buying Process
The process of buying a home or investment generally starts with determining your buying power; that is, your financial reserves plus your borrowing capacity. If you give a real estate agent some basic information about your available savings, income and current debt, they can refer you to lenders best qualified to help you. Most lenders--banks and mortgage companies--offer limited choices. Agents work with many lenders and are knowledgeable about the various financing options available to meet your needs. Most agents will recommend that you get pre-approved for your loan.
Finding
Once you know how much you can and want to invest, the next step is to find the properties available that most closely fit your needs. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available products. Your agent will probably suggest that you make a list of "Most Important Features," and features that you can live without. This will help your agent focus on what's most important to you.
Selecting
Your job is to make the final selection of the right property for you. This is when excitement and emotion run high. Your real estate agent can assist you in the selection process by providing objective information about each property. Agents who are REALTORS have access to a variety of informational resources. REALTORS can provide local community information on utilities, zoning, schools, taxes, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
Negotiating
There are a myriad of negotiating factors, including, but not limited to price, financing, terms, date of possession, and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should also provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
Due Diligence
With a negotiated agreement in hand, it is time to complete the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your agent can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your agent, title company or attorney can help you resolve issues that might cause problems at a later date.
Financing
Once you have the house you want "under contract," you'll have a specified time frame in which you must obtain the proper financing to purchase the home. If you have not already done so, your agent will refer you to various lenders that can help you secure proper financing.
Selling Real Estate
Pricing
This process generally begins with a determination of a reasonable asking price. Your real estate agent can give you up-to-date information on what is happening in the marketplace and the price, financing terms, and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.
The next step is a marketing plan. Often, your agent can recommend repairs or cosmetic work that will significantly enhance the stability of the property. Marketing includes the exposure of your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your agent acts as the marketing coordinator, disbursing information about your property to other real estate agents, etc. The REALTOR Code of Ethics requires REALTORS to utilize these cooperative relationships when they benefit their clients.
Advertising is part of marketing. The choice of media and frequency of advertising depends a lot on the property and specific market. For example, in dome areas, newspaper advertising generates phone calls to the real estate office, but statistically has minimum effectiveness in selling a specific property. Overexposure of a property in any media may give a buyer the impression the property is distressed or the seller is desperate. Your real estate agent will know when, where and how to advertise your property to obtain the best results.
There is a misconception that advertising alone sells real estate. The National Association of REALTORS studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends and family, and personal contacts.
Security
When the property is marketed with the agent's help, you do not have to allow strangers into your home. Agents will generally pre-screen and accompany qualified prospects through your property.
Negotiating
The negotiation process deals with much the same issues for both buyers and sellers, as noted above under the buying process. Your agent can help you objectively evaluate every buyer's proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections, and financing--a lot of possible pitfalls. Your agent can help you write a legally binding, win-win agreement that will be more likely to make it through the process.
Monitoring, Renegotiating and Closing
Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your agent is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).
How Do Real Estate Agents Get Paid?
Real estate agents or brokers are generally paid through the sales commission paid by the seller when a transaction closes. Agents have expenses and financial obligations just like you, so it will be to your mutual benefit if you choose a real estate agent and stick with that person. The agent will respect your loyalty and respond with a sincere commitment to you.
Why a REALTOR?
All real estate licensees are not the same. Only real estate licensees who are members of the National Association of REALTORS are properly called REALTORS. They proudly display the REALTOR "R" logo on their business cards or other marketing and sales literature. REALTORS are committed to treat all parties to a transaction honestly. REALTORS subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR again.
Using a REALTOR - You Be the Judge!
Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? considering the small upside cost and the large downside risk, it would be foolish to consider a transaction in real estate without the professional assistance of a REALTOR!
Consumer Satisfaction
With Realtors
Nearly eight out of ten consumers believe real estate brokers and sales associates can show buyers a better selection of homes than they can find on their own, according to an independent survey of the general public released by the NATIONAL ASSOCIATION OF REALTORSr. Seventy-eight percent of the general public believe real estate professionals offer them a broader selection of housing alternatives than they would otherwise find. Seventy-four percent agree that using a real estate broker saves time, and 70 percent agree that real estate professionals make buying or selling a home much easier.
In another independent survey of more than 1,000 buyers and sellers, most respondents (82 percent) were very satisfied with their real estate brokers/sales associates, and a majority (77 percent) of the sellers felt that the commission they paid their broker was "money well spent." The survey also found that the majority of buyers and sellers (64 percent) were satisfied with the amount of time the process took, and most sellers (87 percent) will use a real estate professional again next time they sell their home.
Clearly, these surveys point to the value of using the services of a real estate professional in the home buying and selling process. In a transaction that has become increasingly complex with the evolution of new financing twists and sales contract intricacies, the real estate professional is often the glue in holding all parties and details together. While technology has brought a wealth of real estate information-including property listings-closer to the consumer, buyers continue to find value in having a real estate professional help them through one of the biggest investments they will ever make-the purchase of a home. And sellers, for the most part, find the money they spend to have a professional handle their home sale, well worth every penny. Buyers and sellers responding to NAR surveys point to real estate professionals' knowledge of the housing market and real estate practices as major factors influencing their decisions in selecting agents.
While there are plenty of real estate professionals to choose from, the best bet in terms of ethical, efficient and reliable service, is a REALTOR.. Nearly 730,000 of the 1.2 million active real estate licensees nation-wide belong to NAR, entitling them to use our registered mark, REALTOR. after their name. Unlike many real estate practitioners who are simply licensed by their state to do business, REALTORSe have taken additional steps to become members of the local board of REALTORSe and have agreed to act under and adhere to a strict Code of Ethics. This membership obligates them to be honest with all parties involved in a transaction, be it buyer, seller or cooperating agent.
Source: National Association Of Realtors Talking Points.
The NATIONAL ASSOCIATION OF REALTORS recognizes seller agency, buyer agency and disclosed dual agency with informed consent, as appropriate forms of consumer representation in real estate transactions. The association respects the need for all REALTORS to be able to make individual business decisions about their companies' agency practices. NAR endorses freedom of choice and informed consent for consumers of real estate services when creating agency relationships with real estate licensees.
In November, NAR purchased the Real Estate Buyers Agent Council (REBAC) from North American Consulting Group of St. Louis, formally adding a buyer brokerage element to the REALTOR organization. The acquisition reflects NAR's policy recognizing buyer agency as a viable option for purchasers of all real estate types who desire representation in property transactions.
We support legislative measures to clarify agency law as applied to real estate brokerage. NAR has recommended nine elements for a legislative framework to accomplish this. Key elements include clearly defining the duties for each type of brokerage relationship and guidance on disclosed dual agency. Under this suggestedframework, brokers in an in-company transaction can designate an individual licensee to represent the seller and another to represent the buyer without creating a dual agency relationship. The recommendations also encourage states to adopt laws mandating agency disclosure forms and rules to provide meaningful and timely written disclosure; specify how brokerage relationships end; describe licensees' duties upon termination of a client relationship; eliminate or modify the consumer's vicarious liability for the acts of the licensee; describe the disclosure duties of licensees with respect to property condition; and, once a statutory framework is in place, abrogate common law as applied to brokerage relationships.
NAR policy is to not further develop or promote the pure non-agency facilitator concept. A facilitator is a person who assists the parties to a real estate transaction to reach agreement between them without being an advocate for the interest of either party.
The association's multiple listing service (MLS) policy permits offers of subagency to be optional, rather than mandatory. Participants submitting listings to the MLS must offer cooperation to other MLS participants in the form of subagency or cooperation with buyers agents. They may offer both. All offers of subagency or cooperation made through an MLS must include an offer of compensation.
Our policy emphasizes the importance of education and training on the topic of agency, and encourages state regulatory bodies that require pre-licensing courses and core continuing education programs to implement agency programs to accomplish this goal.
We encourage real estate firms to have a written company policy that addresses and outlines agency relationships. A clear office policy provides brokers and sales associates with guidelines as to their duties and obligations under the firm's selected agency structure.
Source: National Association Of Realtors Talking Points
Buyer brokerage involves an agent representing the buyer in a real estate transaction for a fee.
Historically, in the U.S., residential real estate business, real estate licensees frequently represented sellers as a matter of custom. However, there is no legal or ethical barrier that prevents licensees from representing the interests of buyers. Just as a seller's agent is hired to obtain the price and sale terms sought by the seller, a buyer's agent is hired to get the best possible price and terms for the buyer. The buyer's agent and the buyer negotiate the fee for the service.
A buyer broker might negotiate for a smaller deposit, for all closing costs to be paid by the seller, or for other contract terms most favorable to the buyer. Buyer brokerage assistance also may include helping the buyer obtain legal assistance to review proposed contracts or structural inspectors to examine the property. The types of services buyer brokers offer typically are not different from those provided by seller's brokers.
In November 1996, NAR purchased the Real Estate Buyers Agent Council (REBAC) from North American Consulting Group of St. Louis, formally adding a buyer brokerage element to the organization and reflecting NAR's recognition of buyer agency as a viable opffon for purchasers of commercial and residential real estate. Founded in 1988, REBAC's 6,200 members are all REALTORS.. The council provides education and an accreditation program for real estate practitioners who devote all or part of their business to the practice of buyer brokerage. REALTORS. who fulfill REBAC's education and experience requirements receive the Accredited Buyer Representative (ABR) designation.
In the past, an agent representing the buyer was far more common in commercial, industrial, or landreal estate transactions, which generally involve a buyer seeking a property for a specific use. However, interest in buyer brokerage has increased substantially in the residential sector. Our research shows that buyers' agents are more likely to be found in larger firms than in smaller ones. They are more frequently found in the West and less in the Northeast. According to an NAR 1995 survey of home buyers and sellers, 41 percent of all home buyers used a buyer broker.
NAR research shows that home buyer compensation to the buyer broker is assuming greater impor-tance. A 1995 survey of home buyers and sellers found that 18 percent of buyers are now paying for the services of a real estate broker/sales associate. Current estimates show that buyer brokerage representation maybe involved in more than 20 percent of all transactions.
We support legislative measures to clarify agency laws as applied to real estate brokerage. NAR has legislative framework to assist states in clarifying their agency laws. The recommendations encourage states to legislatively adopt mandatory agency disclosure forms and rules to provide meaningful and timely written disclosure; specify how brokerage relations end; describe licensees' duties upon termination of a client relationship; and address the disclosure duties of brokers with respect to property condition.
Source: National Association Of Realtors Talking Points
Choosing between a discount real estate agency or a full-service agency is a matter of deciding the degree of service the seller would like the listing broker or agent to perform, and the extent of services the seller would like to perform himself.
Sellers may be able to save commission costs by selling on their own or using discount firms. However, people who try to sell their own homes deny themselves the benefit of a real estate professional who is trained to sell real estate on the terms most advantageous to the party he represents. An efficient broker or sales associate is well worth his compensation. A seasoned, experienced broker or sales associate can also provide up-to-date reports, and has a clear understanding of the present housing market and financing options. Brokers can provide more exposure, via multiple listing services, than most homeowners can obtain by their own doing. Additionally, the buyer-location services that full-service brokers provide generally are more wide-ranging than those of discount brokers.
Selling your own home requires time and patience. Often times, people who try to sell on their own run the risk of wasting time being tour guides for people who can't afford to buy their homes, or who aren't seriously interested in buying. A broker or agent, however, typically prequalifies a prospective buyer, to make sure the buyer can afford the home, before he ever shows a property. This type of experience and service, assures the seller that any offers received are viable. A broker or sales associate also can show a home with a more objective view than the homeowner. A seller who is emotionally attached to the home will likely be unnerved by prospective buyers' critical comments.
According to a 1995 survey of home buyers and sellers by the NATIONAL ASSOCIATION OF REALTORS, 81 percent of the respondents sold their homes through a real estate professional. Of that percentage, 8 percent tried unsuccessfully to sell on their own. Fifteen percent of the respondents sold their own homes. It should be noted that the share of people who sold their own homes has remained relatively small-lower than 90 percent-over the past decade. This proportion of people selling their own home has been steadily declining since 1991. Among the major problems cited were arranging for appraisals and inspections, understanding and performing paperwork, and having the time to devote to the many steps to selling a home that a real estate professional specializes in.
A real estate professional who is hired by a seller-either full-service or discount-is compensated for getting the sales price and terms the seller wants. Each real estate company decides unilaterally what it will charge-and that is predicated, largely, on the marketplace and the need to cover overhead and services provided.
Source: National Association Of Realtors Talking Points
Despite low mortgage rates, some potential home buyers remain shut out of the market. Overcoming obstacles to housing affordability can require using alternatives to standard home financing methods.
A lease-purchase option is also known as a rent-with-option-to-buy agreement. Under this arrangement, part of the tenant's rent, usually 10 percent to 20 percent, is applied toward a down payment on the home. When the down payment savings reaches a certain amount, the tenant obtains financing for the remaining amount of the purchase price and title is conveyed. This arrangement generally works best for buyers who need an extended period to raise the funds, and for sellers who do not need the equity from the sale of their home to purchase another home.
Other options include seller financing and equity sharing. Seller financing involves an agreement from the seller to take back part of the mortgage amount as a promissory note. A buyer might make monthly payments directly to the seller, rather than to a commercial lender. Buyers do not have to pay points and, thus, are able to cut closing costs. Equity sharing involves a negotiated co-ownership of real estate by two or more parties, with one party occupying the property as his principal residence. With equity sharing, the down payment and/or closing costs may be made by one party, and the monthly mortgage payments made by the other. Or, both the down payment and the monthly payments can be shared, in equal or unequal amounts. Upon the sale, or the buyout of one party from the other, the property's appreciation is shared, according to the percentage of ownership each has in the property.
Seller concessions also are an option. A concession is anything of value added to the transaction by the seller, builder, developer? salesperson or any interested party. It may also include any closing costs that would normally be paid by the buyer or cash given to the buyer to lower non-housing debts. From the seller's perspective, there may be little difference in offering a monetary concession or lowering the property price. However, to a buyer, a concession may be preferable, because it is money that can be applied directly to the purchase.
In some expensive markets, employers are offering housing assistance as an employee benefit. Mortgages for employer-assisted housing are likely to be more widely available in the future. Fannie Mae has a program to purchase mortgages obtained by borrowers using employer-assisted housing programs. With this acceptance in the secondary mortgage market, lenders are apt to be much more willing to make loans for employer-assisted purchases.
The mortgage lending industry is taking the first-time buyer market very seriously. Within the past year, lenders have started offering a wide variety of low- or no-down payment programs to get people into homes of their own. Many of these programs go hand in hand with programs offered by Fannie Mae and the Federal Home Loan Mortgage Corp. (Freddie Mac) to reduce down payment and closing costs.
Source: National Association Of Realtors Talking Points
Lead poisoning is a serious public issue, particularly affecting the lives of our nation's children. The NATIONAL ASSOCIATION OF REALTORS. is committed to supporting efforts to identify and reduce this potential health threat, while at the same time protecting the value of homes. We support lead poisoning education efforts to benefit all home owners. Increased awareness about the issue can motivate home owners to test for potential health hazards. Also, those home owners planning the sale of their property should recognize the irresponsibility to disclose known lead hazards to real estate professionals as well as potential purchasers.
Although the use of lead-based paint in residences ended in 1977, older homes may contain lead paint, especially homes built prior to 1960. Section 1018 of Title X of the Residential Lead-Based Paint Hazard Reduction Act, the applicable provision of the law passed in 1992, requires disclosure of lead-based paint information in sales and lease transactions of residential properties built before 1978. The EPA/HUD regulations mandated by Title X were issued in March of 1996. While the requirements of the regulations are imposed on sellers and lessors of pre-1978 housing, Section 1018 also makes real estate agents who are marketing those properties responsible for compliance with those regulations.
The basic requirements of the Section 1018 regulations are:
