There’s a right and wrong way to do almost everything. Buying real estate is not difficult but it can be very costly if you don’t take the right steps. I would like to share this simple process in a way that you can understand it and hopefully realize the importance of each step.
Step one is to hire a Realtor® to represent your best financial interest.
Don’t let the word “hire” scare you. Hiring someone to represent you will seldom cost you anything because the seller pays a commission to the Realtor® to professionally market their property for them. This commission is generally divided between the listing agency and the selling agency unless both sides of the transaction are performed within the same agency. Therefore let’s eliminate the thought of you having to pay to have someone represent you.
Buyer’s need to be cautious
Alabama is a Caveat Emptor state which means it is the responsibility of the buyer to do their due diligence of inspecting every aspect of a property before closing on the sale. Neglecting or refusing to do so can leave the buyer with no legal recourse, should some serious issue arise after the sale is closed. It is not a common occurrence but occasionally a hidden structural defect may show up after closing. We often take pleasure in knowing that we have the law on our side if we feel we have been wronged; either innocently or deliberately. There are lemon laws that provide some protection when buying personal property but real estate falls under Caveat Emptor. New homes, those never before occupied, are exempt from Caveat Emptor and are warranted by the builder to be free of hidden structural defects. On the other hand, a house that has been occupied for as little as one day is considered a used or second owner home and falls under Caveat Emptor.
Real estate agents have been educated and trained in all aspects of the real estate industry. This is not to say that they know everything there is to know about buying or selling real estate, but they know so much more than the average consumer. If nothing else, they where to find the correct answer for you. They are licensed by the State of Alabama to advise and consult the consumer about which inspections need to be performed to protect the buyer’s best financial interest; especially important in a Caveat Emptor state.
Qualifying a Realtor® to represent you.
Everybody knows someone or may even have a relative that is in real estate. I caution people about using a relative, close friend or someone you go to church with to represent you when buying real estate. I say this because many time your best friends is the ones that will take advantage of the friendship. You want someone that will be objective and protect you regardless the cost. Close friends seldom communicate as well as acquaintances. Whoever you decide to interview for this job, you need to be very open and ask many questions. Get them to explain state and federal laws regarding the sale of real estate. Get them to explain the entire process step by step and if they aren’t convincing that they are knowledgeable, interview someone else. After interviewing a few different agents, choose the one that seems to be most knowledgeable. Better yet, ask for references and then call the people that have dealt with them in the past. An ounce of prevention is worth a pound of cure. After all, most of the time, buying real estate is the largest investment a person makes during their lifetime. You want someone that is qualified to provide you the service you deserve because one bad decision cost you for years to come or maybe even a lifetime.
Alabama law specifies certain requirements of the Realtor®
Alabama law requires every real estate agent to disclose the agency relationships they can provide the consumer as soon as reasonably possible and before any confidential information is shared. This is where most buyers bristle up and try to distance themselves from the agent. The consumer isn’t aware of our state laws and they don’t want to tie themselves to only one agent. They want the freedom to work with anyone they choose to, at any time. Most of the time they want to talk to the person who listed the property. They think they will get a better deal from them but in reality, the listing agent is representing the seller’s best interest. The buyer needs someone to represent their best interest. Signing a buyer’s agency agreement is the best way to completely be represented and protect you.
Get credit pre-approved .
Many buyers get the cart before the horse when looking for the right property to buy. The first step should be for your agent to assist you with getting a credit approval in advance. Why look at something that you can’t afford to buy? It’s like test driving a car that can’t afford and then driving one that you can afford. There is no comparison in the two, except you can afford one of them and the other is only a dream. Getting credit pre-approved will make the property search much less difficult.
Making a good decision on price.
A couple has finally made a mental purchase. They have found the home they both want and they can afford it, but they want to buy it a cheap as possible. Everyone fits into this category. Low-ball offers will work in a buyer’s market; when property is selling extremely slowly. During decent market conditions, a low-ball offer will only offend the seller and cause them to turn a low offer down. The best way to establish a decent price to offer is to ask your agent to provide you a list of all closed comparables to the home you want to purchase. You will seldom get hurt financially by paying at current market value; not market price. Value is based on current sales and price is an acceptable asking price. Current market value is the dollar amount appraisers use to determine the appraised amount which is used by the lender to determine if they will make the loan.
Realtors® supply facts….not make decisions for you.
You need a real estate agent to provide you factual data and information that will put you in a position to make the best financial decision possible, for you. The Realtor® is not there to sell you but to provide you valuable information. Listen to what they tell you and make your own decisions based solely on facts.
Make sure when you’re buying real estate that you thoroughly read and completely understand every document you sign. Don’t be afraid to ask the agent to explain what certain things in the contract means. It’s OK to admit that you don’t understand everything in the buying process. If you did you would probably have your real estate license. Real estate agents are not licensed to practice law but they have been educated on all the contractual obligations and should be able to explain them to your satisfaction. Should you have questions the agent can’t answer to your satisfaction, by all means, contact your attorney for legal advice. I would also advise you to talk to your CPA concerning investment and tax advantages.
Don’t be scared…..be aware.
I’m not sharing this information to scare anyone. My intent is to make you aware that buying real estate is a very legalistic purchase. You need to be cautious but remain aware that a professional real estate agent can provide answers to almost every situation that may arise. Be receptive to listening to what they have to say because it might be of utmost importance to you. A real estate agent can help protect you but they can’t help you unless you communicate with them.
Speaking on your behalf
Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to www.AlabamaRealEstateInstitute.com and view previous articles.