During my decade-long career as a real estate agent, I’ve learned that not knowing what to expect can be the most stressful part of a real estate transaction for buyers and sellers. That’s why client education is so important to me! With that said, a recent client became frustrated with the process when an appraiser repeatedly held up the transaction, and I asked myself, “Could I have done anything differently to minimize her frustration?”
I realized that this client wasn’t completely familiar with the key players involved in the transaction, what their roles are, and how they can affect the process. That’s why, today, I want to share the seven key players you must know about (in addition to the buyer and seller) and set your expectations around their roles and responsibilities.
1. THE LISTING AGENT – a seller usually lists their home with a listing agent. A listing agent represents you throughout the home-selling process, looks out for your best interest, and provides the following:
• PRICING GUIDANCE – the agent compares your home to similar homes in the area using a comparative market analysis (CMA. I look at active listings to determine how competitive the marketplace is, offer prices for similar pending homes, and sale prices for homes that sold during the last 3-6 months. Sales prices are usually the best indicator of what your home may sell for.
• A MARKETING PACKAGE – this often includes listing your home on the RMLS so that it is seen by thousands of real estate professionals, professional photos, flyers, a yard sign, and a lockbox. I’m familiar with how a buyer thinks and that helps me provide guidance to my seller.
o What buyer do you want to attract?
o What home features will attract that buyer?
o What might drive that buyer away from our listing?
o How will our buyer finance the home? Are we looking for an FHA buyer, conventional, or either?
• HELP NEGOTIATING PRICE, TERMS, REPAIRS – Agents are extensively trained in the art of negotiation and must take continuing education classes. Also, selling a home is a very stressful life change an agent will negotiate on your behalf without the emotion.
2. THE BUYER’S AGENT – a buyer typically works with a buyer’s agent. The agent will represent you throughout the transaction and look out for your best interest. They are paid for by the seller, so really there is no reason to not use one. A buyer’s agent will help you:
• Determine what type of home you are looking for and can afford
• Make appointments to show you available homes on the market
• Makes a strong offer. Your agent knows the market and how much inventory is available in your price range, and helps you understand how the seller will evaluate your offer. I often ask the listing agent, “How can I write the best offer for your client?” Simply asking the question and discovering what is most important to the seller puts my buyer in a strong position.
• Negotiate price and terms and complete all paperwork. Often a contract is not just about price, but terms. Are we asking for closing costs? Do you want a home warranty? Also, your agent will include contingencies to protect you including inspection, finance and utility contingencies.
• Identify helpful industry professionals. I have worked with many professionals and can recommend quality local experts like lenders and home inspectors.
• Schedule and negotiate repairs
• Arrange final move-in details. It is good practice to do a final walk-through before closing. I also provide you with the information you need for a smooth move, like utility numbers.
3. THE BUYER’S LENDER – Most buyers need a home loan. A lender makes sure that the buyer is qualified and can afford the home. Several times throughout the transaction, they will ask for documents like a W-2 form, checking account statements and pay stubs. The lender also orders the appraisal from the bank and sends the loan package to the underwriter for final approval.
4. THE LENDER’S UNDERWRITER – The underwriter looks at the loan package and makes sure the property and the borrower are a good investment for the bank. They review the appraisal, run ratios, and request additional information as needed.
5. THE APPRAISER – The bank must be sure that the home has the value to cover the loan should something happen, and the buyer can no longer make payments. To do that, the bank will order an appraisal that the buyer must pay for. An appraisal can cost anywhere from $500 to $1000, and unique or rural properties usually cost more. The appraiser will look for similar homes in the area and what they sold for. If the home does not appraise, the buyer and the seller can renegotiate the purchase price or challenge the appraisal. Right now, FHA appraisers are calling out many repairs and appraisals are coming in near purchase price.
6. THE HOME INSPECTOR – The buyer will hire a home inspector to take a quick look at the condition of the house. The inspector knows a little bit about a lot of things, and he can run through the house and quickly let the buyer know if they need to request additional inspections and which items may need attention. I help my buyer use the home inspection to negotiate repairs with the seller.
7. THE TITLE COMPANY – The title company is a third party, which means they do not represent the buyer or the seller. Title will run a report and make sure the property does not have any liens and that the water and sewer are paid for. A lien simply means money is owed to someone by the homeowner. The report also includes easements. At closing, the title officer will make sure all documents are signed and recorded, and that funds