How To Build Your Real Estate Team
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The People You’ll Need on the Path to Home Ownership
Buying a home from a seller is not a one-on-one experience. Both buyer and seller will need to convene a team of professionals and experts to inform, aid, and guide them through the home buying process. As a buyer, who are the people who will be on your team, and what are their roles? Here is a breakdown of the most common and most important people on your side.
Even if you’re a seasoned home buyer, working with experienced professionals can be to your advantage. Your agent and lender are key to the process—from searching and negotiating to financing and filing paperwork. Finding the right people to help you takes time, but can potentially save you thousands of dollars down the road.
In most cases, buyers rely on the help of a real estate agent throughout the entire homebuying journey. When you first meet with your agent, you’ll discuss your goals and priorities in home buying, and the agent weighs these desires against current trends in the market. A good agent is knowledgeable in market prices, neighborhood qualities, and real estate law and will help you strategize the experience. Your agent should meet up with you as you shop for homes, and use their experienced eye to point out features and flaws in the home that you might otherwise miss. Agents get involved in the final negotiations for a home and can be an advocate during closing. Often, agents are the ones who hand you the keys when it’s all said and done.
Your lender is the one who allows you to borrow the funds to purchase your home, typically in the form of a mortgage. Aside from your agent, the lender is the only one who is with you during the home buying process, and likely for years after the home is purchased. At the beginning of the home buying process, the buyer will apply for pre-approval from multiple mortgage companies, usually three. After pre-approval, some buyers choose to switch their mortgage to another company, but most often, buyers borrow their mortgage from the company that pre-approved them. From then on, the mortgage company works with the buyer and the agent to hire the appraiser, orchestrate the escrow, and finalize the closing costs. After the sale, your lender will handle things like property taxes and insurance payments (in an account also called an escrow account, but separate from escrow that was set up during the sale), until the mortgage is paid off.
However similar they may seem, a home inspector is different than an appraiser. The home inspector enters the home buying process after an initial offer has been accepted but before a final price is negotiated. The inspector takes a deep dive into the home’s condition and estimates the cost of repairs. Armed with this information, the buyer can ask the seller to complete some of these repairs themselves, lower the total purchase price, or terminate the sale altogether. The importance of a home inspector cannot be overstated, and this person should be involved in pretty much every kind of home sale.
The title company legitimizes the title of the property and issues insurance for the title. This protects the buyer from any outstanding claims over the ownership of the property. The title company can also be the one that handles the escrow account, the trust that holds the money and important documents until the purchase agreement is closed.
The appraiser determines the value of the property for sale. Standing between what the seller thinks the property is worth, and what you want to pay for it, is the appraiser. An appraiser does an on-site walk-through of the home, interior and exterior conditions, and documents its compliance with property standards in addition to comparing other similar home sales in the area to determine the home’s value. In most cases, the lender will have their own appraiser and is paid through the lender as a part of the loan agreement.
The insurance agent comes in after the home inspection. Many lenders will not close the sale until the buyer has purchased insurance on the home. There are two main types of homeowner’s insurance: a replacement-cost policy, and a cash-value policy. A replacement-cost policy is more expensive than a cash-value policy but is a good idea for older homes where the cost to replace is probably higher than the value of the property itself. A cash-value policy protects the home from depreciation in the market and ensures the home is insured for the amount you purchased it for.
Frequently Asked Questions
Do I need a real estate agent to buy a home?
Typically, as a buyer, the real estate agent is the person who is by your side throughout the home buying process. Many homebuyers stop at the agent’s office first, even before they’ve worked out their finances or applied for pre-approval. But what does the real estate agent do? Who pays them? And what, if any, are the advantages of going without one?
What do real estate agents do?
Real estate agents are professionals that understand real estate law, local and current market trends, and the attributes of different neighborhoods. They see a lot of homes and meet a lot of homebuyers so they can offer advice and examples about what to do on a myriad of specific issues that crop up during the complex process of buying a home.
Agents are there as you’re shopping for your home, doing the walk-throughs, and setting your priorities. The agent can be involved in the negotiation of the sale price, and work with you to close the sale. At best, the buyer’s agent is a personal advocate, who works hard to help you achieve your goals.
Who pays a real estate agent?
In most instances, there is a seller’s agent and a buyer’s agent, and the seller pays both commissions. On average, the commission is around 6%, which is split evenly between the two agents. Many argue that since the seller is paying for both agents anyway, there’s no reason NOT to hire an agent.
Another note: buyer’s agents and seller’s agents are also referred to as selling agents and listing agents, respectively. If you hear those second two terms used, just remember: the selling agent represents the buyer, and the listing agent represents the seller. It can be confusing phrasing, but in the seller/listing agent dichotomy, the selling agent represents the buyer, NOT the seller.