There’s a lot of talk out there these days about changing up the way we buy homes. There’s a renewed sense that the real estate agent is out and buying a home on your own, or with limited help, is the way to go.
Is it really? Isn’t a real estate agent an expert in the field? Is it really enough to rely on an internet-based do-it-yourself company or just a lawyer to buy a home?
The answer is not simple. I think there’s actually a lot of great people out there working in real estate who are trying to help. Yes, they’re trying to make money for themselves too. I think the best way to approach buying a home is to get a good team together and make your choices based on their suggestions along with your own experience and research.
And if you have no experience? Do even more research. Talk to your friends and family who have bought homes over the years. Balance out what your dad says about buying a house 20 years ago in a small town with what your work colleagues tell you about buying in a similar neighbourhood to you five years ago.
Here are some of the players involved in the average real estate transaction and what they can offer you, and what to watch for:
Real estate agent. This person spends their entire professional life devoted to buying and selling homes. He or she will know how to stage and market your house and set up an open house. Most agents work for a larger agency that will advertise your home on a web site and through social media. Agents take a commission of about 5 per cent, and you pay only when you sell. That commission is split evenly between the buying and selling agent. It’s a big chunk of change! But the agent also has to give some of that money to the agency itself to cover overhead costs like the secretary and the web site.
A good agent will have been around the block a few times, literally, and know your neighbourhood, your income bracket and what your family needs. He or she should know who might buy your home in a sale, and when to spot a rip off or a bad reno job when you buy. Look for an agent with relevant experience and not someone who does it “on the side” or doesn’t know your neighbourhood.
Do-it-yourself company. Companies like ForSaleByOwner and PropertyGuys will offer you the information and tools to sell your home on your own. They’ll offer you signs, packages on how to set up an open house and the like so you can save on real estate agent fees.
Look for a company that has had some real success in your area. Talk to another buyer or seller who has relied on such a company and get their story personally. Make sure you have the time and the risk tolerance to deal with doing it on your own (especially when you’re selling).
Real estate lawyer. This trained professional deals with the paperwork and the money when your deal goes down. Most charge a flat fee and do all sorts of confusing things like title searches. You don’t see your lawyer a whole lot during a buy and sell, but you’ll have meetings to sign tons of papers, pick up and drop off cheques and transfer keys. Your lawyer is the one who might discover things like mortgage fraud, problems with land surveys and money glitches.
Look for a lawyer who’s close by, as you’ll have to make a few visits if you’re both buying and selling. Many have relationships with banks and it’s nice when your lawyer knows the people at the branch by name. Make sure your lawyer is easy to get a hold of, has been used by others you know, and will do more than just move papers around, but look for quirks and problems in your deal.
Mortgage broker. If you want to shop around hard core for the best mortgage rates to save the most money, get a broker. This person will walk you through all the different options (floating, fixed, three-year, five-year) and have you sign the paperwork. This person will also help you determine your monthly (or weekly or biweekly) payments. He or she hunts around on your behalf for rates, signs you up with the lender offering the best deal and will help you with all of the paperwork. The broker deals with the bank on our behalf and gets a commission, but the lender pays it, not you.
Make sure you shop around for a good mortgage broker. A broker will offer you about five different suggestions every time you talk, so be prepared for info overload. Make sure this person understands you don’t just want a deal, but a fair monthly payment and a lender that has good customer service for later on.
Banker. The person you deal with at your bank may be able to give you a mortgage, but in all likelihood, he or she will refer you to a mortgage specialist to do the deal. Look for someone who understands your financial situation and neither has you paying too much every month, or gets you on such a minimal mortgage payment plan you’ll never pay the thing off. Be sure you are in touch with several lenders and your rep knows this so you’re sure to get the best deal. If there’s a gap between the time you work out your mortgage details and the deal closes, make sure you get a rate hold, in case the rates rise in the interim, you still want that great deal.
And who should you trust in all this lot? No one entirely, but everyone a little bit. Most people are just like you: trying to make their way in the world and doing the best job they can. Bankers are trying to get your mortgage, which will make a lot of money for the bank itself. But these are also people with homes of their own who don’t want to see you get in over your head. Real estate agents know a juicy commission is coming their way, but they also want to see you in a good home and get a referral to get more clients.
The only way you can stay safe in the real estate market is by educating yourself. Don’t just rely on intuition, but your knowledge of what’s fair in terms of a house price, mortgage rate, payment terms and legal document. Ask a lot of questions of everyone helping you make your sale or purchase. Never sign anything or make a decision without seeking out all sides and all possible scenarios. And trust that the experts and your own good judgment will serve you well.
Writer for RateSupermarket.ca