Monday, February 23, 2009
The Real Estate Transaction: How It Works, Part 1, “The Search” (NW Oregon & SW Washington)
I’m increasingly finding myself explaining to potential buyers how the typical real estate transaction progresses. This is a summary to help those of you who may be unfamiliar with the process. We’ll start with the initial meeting between Realtor and buyer, and the search for suitable real property.
When contact is initiated between the buyer and Realtor, it’s the Realtor’s obligation to make the buyer aware of the Law of Agency, whether in Oregon or Washington. Briefly, the Law of Agency states that the buyer’s agent represents the interests of the buyer, and the buyer alone. The seller’s agent represents the seller, and the seller alone. An agent may lawfully represent the interests of both buyer and seller, provided that the representation of both parties is disclosed and acknowledged by both parties. In my opinion, it is practically impossible for a single agent to represent the interests of both parties simultaneously, but some agents do work as dual agents to collect both sides of the commission (listing commission and Buyer’s Agent Commission, or BAC). When a buyer and seller are represented by their respective agents who work under a common brokerage, the buyer and seller are technically in a dual agent representation situation, but the brokerage is the disclosed, limited, dual agent rather than a single agent.
The buyer’s agent is paid by the listing agent when the transaction concludes successfully. The listing agent is paid by the seller. Generally speaking, the buyer pays nothing to receive representation within the purchase of real estate, though additional services may come at expense over and above the buyer’s agent commission (BAC) offered by the listing agent.
After the Law of Agency has been disclosed and acknowledged by the buyer, it’s the Realtor’s responsibility to determine the purchasing power of the buyer. If the buyer comes pre-approved for a mortgage by a lender with whom the Realtor does not have a relationship, the Realtor should consult with the lender to discuss the buyer’s qualifications and which loan product the buyer will utilize to purchase real property. It’s important to note that an existing relationship between the Realtor and lender can help the transaction conclude favorably without undue stress. For this reason, the Realtor will likely refer the client to a lender familiar to the Realtor. It’s illegal for the Realtor to realize compensation from the lender in exchange for the referral.
The buyer’s Realtor will attend to all details associated with the search and subsequent purchase of real property, while the buyer’s lender will attend to all details related to financing. A good Realtor/lender team will respect each other’s responsibilities without crossing boundaries. The Realtor and lender will be in constant contact throughout the transaction in an effort to protect the client’s interests. This is usually carried out behind the scenes, and is why an existing Realtor/lender relationship is so important. A breakdown in communication between the Realtor and lender can be detrimental to the success of the transaction and satisfaction of the buyer.
Remember: the buyer’s agent represents the buyer’s best interests. A good buyer’s agent doesn’t sell anything. THE BUYER’S AGENT REPRESENTS THE BUYER’S INTERESTS. Think of your Realtor as your trusted ally. Negotiations between buyer and seller are carried out by the buyer’s agent and the seller’s agent if one exists. It’s not the Realtor’s job to make decisions within negotiations; rather it is the Realtor’s job to communicate the negotiations with the client so that the client may make informed decisions.
At this point, the buyer should work exclusively with the buyer’s agent to locate and purchase property, and allow the agent to perform all tasks associated with these goals. The buyer should inform the agent of all parameters of the property search, as well as the terms upon which the buyer will purchase. The buyer’s agent will get to work in an effort to locate properties which best match the search criteria, and then send the listings to the buyer via email. If the buyer discovers a listing that piques interest, the buyer’s agent may suggest that the buyer perform a drive-by assessment of the property and neighborhood before arranging for a showing. I’ve shown as many as (16) homes in one day, but it’s probably best to stick to an absolute maximum of (10) showings per day. The drive-by assessment will help the buyer to eliminate unsuitable listings from consideration so that a property tour can proceed with efficiency. Just as the buyer’s time is important, it should be expected that the Realtor is working with several buyers at any one time, so efficiency is an important consideration.
When the buyer has decided which properties are suitable for further consideration, the Realtor should be provided with a list of ML (Multiple Listing) numbers so that the Realtor can determine how the properties are to be shown. In many cases, the property is occupied by the sellers or tenants, so the Realtor must coordinate the showing with each party. Imagine scheduling a tour of more than (10) listings and then sticking to the schedule! Once the buyer has expressed a timeframe in which to view listings, don’t expect that a request to modify the timeframe will be viewed favorably. Remember that the Realtor has coordinated showings with several parties.
The buyer’s agent should provide property assessment forms for the buyer’s use if more than (5) properties are to be viewed at a time. This will help the buyer recollect the attributes of the first property as the tour winds down in the afternoon or evening. It makes sense to grade each property with an “A” through ”F” so that only the most suitable properties are continue to receive interest. Get ruthless! If a listing fails to generate interest, eliminate it from further consideration.
Once the perfect property is located, the Realtor should perform a detailed Comparative Market Analysis (CMA) in an effort to determine value. Besides a property’s unique characteristics, real estate is valued relative to recent, local sales of comparable property. The Realtor can suggest terms of an offer that may earn serious consideration from the seller.
Look for Part 2 in coming days. This will describe the transaction itself, and how the buyer’s agent protects the buyer’s interests (including earnest money) by observing attention to contingencies and timelines. If you don’t want to wait… just give me a call for a personalized explanation. It’s always my sincere pleasure to assist my clients’ efforts to realize their real estate goals in Oregon and Washington.
Ask me about FREE BUYER REPRESENTATION and how Prudential Northwest Properties' BUYER'S ADVANTAGE program can help your offer compete, while providing benefits such as a free American Home Shield home warranty!
Need to sell your current home to finance your next? Want to know what's going on in your neighborhood; who's selling, and for what price? Quickly discover the current market value of your home, and receive your monthly Property Investment Profile! Stay current on local conditions with my real market data. It acts just like the statements you receive for your other investments, and IT'S FREE! Simply click the button to get started.
When contact is initiated between the buyer and Realtor, it’s the Realtor’s obligation to make the buyer aware of the Law of Agency, whether in Oregon or Washington. Briefly, the Law of Agency states that the buyer’s agent represents the interests of the buyer, and the buyer alone. The seller’s agent represents the seller, and the seller alone. An agent may lawfully represent the interests of both buyer and seller, provided that the representation of both parties is disclosed and acknowledged by both parties. In my opinion, it is practically impossible for a single agent to represent the interests of both parties simultaneously, but some agents do work as dual agents to collect both sides of the commission (listing commission and Buyer’s Agent Commission, or BAC). When a buyer and seller are represented by their respective agents who work under a common brokerage, the buyer and seller are technically in a dual agent representation situation, but the brokerage is the disclosed, limited, dual agent rather than a single agent.
The buyer’s agent is paid by the listing agent when the transaction concludes successfully. The listing agent is paid by the seller. Generally speaking, the buyer pays nothing to receive representation within the purchase of real estate, though additional services may come at expense over and above the buyer’s agent commission (BAC) offered by the listing agent.
After the Law of Agency has been disclosed and acknowledged by the buyer, it’s the Realtor’s responsibility to determine the purchasing power of the buyer. If the buyer comes pre-approved for a mortgage by a lender with whom the Realtor does not have a relationship, the Realtor should consult with the lender to discuss the buyer’s qualifications and which loan product the buyer will utilize to purchase real property. It’s important to note that an existing relationship between the Realtor and lender can help the transaction conclude favorably without undue stress. For this reason, the Realtor will likely refer the client to a lender familiar to the Realtor. It’s illegal for the Realtor to realize compensation from the lender in exchange for the referral.
The buyer’s Realtor will attend to all details associated with the search and subsequent purchase of real property, while the buyer’s lender will attend to all details related to financing. A good Realtor/lender team will respect each other’s responsibilities without crossing boundaries. The Realtor and lender will be in constant contact throughout the transaction in an effort to protect the client’s interests. This is usually carried out behind the scenes, and is why an existing Realtor/lender relationship is so important. A breakdown in communication between the Realtor and lender can be detrimental to the success of the transaction and satisfaction of the buyer.
Remember: the buyer’s agent represents the buyer’s best interests. A good buyer’s agent doesn’t sell anything. THE BUYER’S AGENT REPRESENTS THE BUYER’S INTERESTS. Think of your Realtor as your trusted ally. Negotiations between buyer and seller are carried out by the buyer’s agent and the seller’s agent if one exists. It’s not the Realtor’s job to make decisions within negotiations; rather it is the Realtor’s job to communicate the negotiations with the client so that the client may make informed decisions.
At this point, the buyer should work exclusively with the buyer’s agent to locate and purchase property, and allow the agent to perform all tasks associated with these goals. The buyer should inform the agent of all parameters of the property search, as well as the terms upon which the buyer will purchase. The buyer’s agent will get to work in an effort to locate properties which best match the search criteria, and then send the listings to the buyer via email. If the buyer discovers a listing that piques interest, the buyer’s agent may suggest that the buyer perform a drive-by assessment of the property and neighborhood before arranging for a showing. I’ve shown as many as (16) homes in one day, but it’s probably best to stick to an absolute maximum of (10) showings per day. The drive-by assessment will help the buyer to eliminate unsuitable listings from consideration so that a property tour can proceed with efficiency. Just as the buyer’s time is important, it should be expected that the Realtor is working with several buyers at any one time, so efficiency is an important consideration.
When the buyer has decided which properties are suitable for further consideration, the Realtor should be provided with a list of ML (Multiple Listing) numbers so that the Realtor can determine how the properties are to be shown. In many cases, the property is occupied by the sellers or tenants, so the Realtor must coordinate the showing with each party. Imagine scheduling a tour of more than (10) listings and then sticking to the schedule! Once the buyer has expressed a timeframe in which to view listings, don’t expect that a request to modify the timeframe will be viewed favorably. Remember that the Realtor has coordinated showings with several parties.
The buyer’s agent should provide property assessment forms for the buyer’s use if more than (5) properties are to be viewed at a time. This will help the buyer recollect the attributes of the first property as the tour winds down in the afternoon or evening. It makes sense to grade each property with an “A” through ”F” so that only the most suitable properties are continue to receive interest. Get ruthless! If a listing fails to generate interest, eliminate it from further consideration.
Once the perfect property is located, the Realtor should perform a detailed Comparative Market Analysis (CMA) in an effort to determine value. Besides a property’s unique characteristics, real estate is valued relative to recent, local sales of comparable property. The Realtor can suggest terms of an offer that may earn serious consideration from the seller.
Look for Part 2 in coming days. This will describe the transaction itself, and how the buyer’s agent protects the buyer’s interests (including earnest money) by observing attention to contingencies and timelines. If you don’t want to wait… just give me a call for a personalized explanation. It’s always my sincere pleasure to assist my clients’ efforts to realize their real estate goals in Oregon and Washington.
Ask me about FREE BUYER REPRESENTATION and how Prudential Northwest Properties' BUYER'S ADVANTAGE program can help your offer compete, while providing benefits such as a free American Home Shield home warranty!
Need to sell your current home to finance your next? Want to know what's going on in your neighborhood; who's selling, and for what price? Quickly discover the current market value of your home, and receive your monthly Property Investment Profile! Stay current on local conditions with my real market data. It acts just like the statements you receive for your other investments, and IT'S FREE! Simply click the button to get started.
David Smith
WA~~Realtor~EcoBroker~~OR
10002 NE 13th AVE, Suite 110
VANCOUVER, WA 97222
office: 360.574.1381
CELL: 503.515.1268
www.NWRealProperty.com
info@NWRealProperty.com
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