Before you begin your home search, you need to have a clear idea of what you want. This will save you and your Realtor a lot of headaches and time. Below is a worksheet that you can use to write down your wish list of features. Make sure to send a copy to your Realtor when you’re done.
HomeSearchWorksheet – Realtor.Com
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The buyer brokerage agreement is a written agreement between the buyer and the buyer’s agent outlining the agency relationship between the two parties and the manner in which the buyer’s agent will be compensated. In some states, a buyer agency relationship evolves automatically without a written agreement.
As a savvy homebuyer, you should make sure that your agent takes the time to explain and sign an exclusive buyer brokerage agreement with you. You need to fully understand the scope of your broker-agent-buyer relationship before your agent starts showing you properties. The ultimate purpose of this agreement is to protect both you and your agent while you, as the buyer, are being represented during the home buying process.
Important Parts Of The Exclusive Buyer Brokerage Agreement:
- The Parties – Even though the buyer’s agent will be executing the buyer brokerage agreement with their buyer, it is important to note that this agreement is actually legally binding between you as the ‘Buyer’ and the ‘Brokerage’ (real estate) company….not the individual agent. Agents are always acting on behalf of the brokerage firm that holds their license.
- Expiration Date – A start and end date should be specified to indicate the time frame for which the buyer’s agent will have the exclusive right to represent and collect compensation from the buyer. Buyers should be aware that the end date will automatically be extended through the closing date in cases where an offer is accepted by the seller before the expiration date but is scheduled to close after the specified term limit.
- Broker Compensation – The listing and selling brokers’ commissions are usually paid by the seller upon closing. This section of the agreement is put in place to ensure that the buyer’s agent is properly compensated for expenses incurred and time spent facilitating the sale. The most important detail that needs to be worked out is either the sales price percentage or flat rate that the buyer is expected to pay their agent’s broker if ANY purchase is completed during the term of the Buyer Brokerage Agreement with ANY and ALL sellers (pursuant to exclusive representation). At closing, the commission paid by the seller will be subtracted from the buyer’s obligated compensation to his/her agent’s broker which usually leaves the buyer owing no commission out of pocket. Secondly, the buyer and buyer’s agent need to negotiate an upfront retainer fee (if any) to partially compensate the agent in the event that no commission is paid. If a retainer is collected, the buyer needs to make sure that it is fully refundable if or when the seller pays the commission amount required from the buyer.
- Dual Agency – A dual agency situation can occur when a single real estate company ends up representing both the seller and the buyer. This can easily happen if a buyer decides to buy a home listed by their agent or their agent’s company. By signing an exclusive buyer brokerage agreement, the buyer becomes an actual client entitled to full representation and confidentiality privileges that may not be extended if the buyer is just a customer. One of those privileges is the right to NOT consent to a dual agency relationship if the buyer feels that his or her interests will be in direct conflict with those of the seller. A special stipulation can be written into the agreement stating the buyer’s wishes. If dual agency is going to be a problem for either the buyer or the seller, the broker can assign two different agents within their company to represent the parties to the purchase transaction with specific instructions concerning privacy and confidentiality.
- Special Stipulations – As a buyer, if you find that you need to negotiate additional terms specific to your situation, those terms can always be added as special stipulations in the Buyer Brokerage Agreement.
Whether you’re looking for your first home or have been through the home buying process before, below are some tips that can help make the process flow more smoothly:
Before You Start Looking
- Decide how serious you are about making the commitment to buy a home.
- Order a copy of your credit report and FICO score. You will need to make sure that your credit is in order if you plan to finance your purchase.
- Think about how much debt you want to take on and how much you can comfortably pay each month for mortgage.
- Start saving NOW so that you will have funds available for your down payment and to apply towards your closing costs.
- Contact a loan officer so that you can get pre-approved for a loan. You should never make an appointment to look at properties without first obtaining a pre-approval letter.
- Find a professional real estate agent to work with.
- Make a checklist of what’s important to you and your family. Do you need a certain number of bedrooms, bathrooms or other specific features in the house and/or neighborhood? You should definitely share this list with your agent.
- When you buy a new home, you should also give serious consideration to how easy it would be to resell in the event that you have to move some time in the future.
Buying Your First Home
- Your trusted agent will send you active listings that match your checklist and price range. Make sure that you fully research any properties that you are interested in. You can check tax records, local school information and monthly utility averages (just to name a few details you may want to verify).
- You should find 2 to 3 comparables in the same neighborhood with similar features as the home in which you’re interested. See how they all stack up. Your agent can help you with the comps.
- When you feel that you’ve done your due diligence, be prepared to make an offer. The offer must include an earnest money check, sales contract with any pertinent addendums, and a copy of your pre-approval letter.
- After you and the seller have finished negotiations and have a contract signed by both parties, this contract must be sent to your loan officer immediately so that you can obtain financing (unless you’re paying cash for your purchase).
- You want to make sure that you schedule a home inspection within the time frame specified in the sales contract. It’s always a great idea to get a home inspection before you close on a home….even if you agree to buy As-Is.
- Get a home warranty coverage plan. This can be negotiated as a seller paid item. A home warranty plan will protect you from having to pay an expensive repair bill if an appliance or mechanical system breaks down.
- Make sure that you are promptly providing your lender with everything that they ask for so that you can be cleared to close on time.
DOs and DON’Ts During The Loan Process
- DON’T apply for new credit of any kind. If you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score.
- DON’T pay off collections or charge-offs. Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan. Generally, paying off old collections causes a drop in the credit score.
- DON’T close credit card accounts. If you do, you will lose your good payment history and it can affect your ratio of debt to available credit. If you really want to close an account, do it after you close your mortgage loan.
- DON’T max out or over charge existing credit cards. Running up your credit cards is the fastest way to bring your score down.
- DON’T consolidate debt to one or two cards. Once again, you don’t want to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.
- DON’T raise red flags to the underwriter. Don’t co-sign on another person’s loan or change your name and address. The less activity that occurs while your loan is in process, the better it is for you.
- DO join a credit watch program. Your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. This can be a safeguard to help you intervene before the underwriter sees a problem.
- DO stay current on existing accounts. Late payments on your existing mortgage, car payment or anything else that can be reported can cost you dearly.
- DO continue to use your credit as you normally would. Red flags can be raised within the scoring system if it appears that you are deviating from your normal spending patterns. Again, make your changes after the loan funds.
- DO call your loan consultant if you receive notification from a collection agency or creditor that could potentially have an adverse affect on your credit score.