Real Estate

How to Select a Realtor

All the tips you need to help you choose a good real estate agent that will work diligently in selling your house if they are your listing agent, or as a buyer’s agent if you are buying a house. We even have tips on how to make your relationship with your real estate agent go as smoothly as possible, and scams to avoid.
• 2
One of the biggest mistakes many home buyers make is assuming that their “buyers agent” is working for them. They could not be more wrong. Also, never let a real estate agent choose your attorney. You must choose your own attorney, not one with a cushy relationship to the salesperson who is trying to sell you a home.
• 3
“Real Estate Agent” Is Just Another Name For “Salesperson”
• 4
Don’t ever lose sight of that fact. Their only mission is to sell, sell, sell to YOU. Don’t ever let on that you are in a desperate situation, or that you need to sell a house fast to pay for emergency bills, or that you are in a desperate crunch to buy this house now, because you are being transferred into town this week. It’s simply none of their business and as far as they are concerned, you are not in a rush to buy a house.
• 5
You cannot guarantee impartiality
• 6
If your real estate agent’s commission is based on the selling price of a house you are about to buy, you cannot guarantee that the agent has your best interest at heart. The only way to guarantee that is to actually pay a large fee to a real buyer’s agent who does not get a percentage of the selling price. But the fee almost removes the benefit of bypassing the commissioned real estate agent in the first place. To play it safe, never tell anyone but yourself how high you are willing to go. By law the seller’s real estate agent has a fiduciary responsibility to the seller, and they WILL tell the seller everything you say, so pretend you are under police interrogation. The first thing the agent will do is ask you how high you are willing to go on the house. Don’t fall for this trick. Just give them the price you want to pay for the house and if they ask how high you are willing to go, tell them that’s it. If the seller does not agree there is no deal and you’re taking your money elsewhere. If you are a home buyer, don’t think your real estate agent is “going in to do battle on your behalf” with the seller’s agent. That’s just like your car salesman “going to get his manager’s approval” on your offer for a new car.
• 7
Choosing A Good Real Estate Agent
• 8
If you are buying a house instead of selling a house, you really don’t need a real estate agent. For many savvy home buyers, the only purpose a real estate agent serves is to get the buyer past the guard at a gated community, or to unlock the key to the seller’s empty house from the lock box on the front door. They also handle the closing and escrow, which can be done instead by your property attorney. But if you know you have a great Real Estate Agent who will tenaciously hunt down houses matching your criteria, it can save you a lot of time. But you do still need a good property attorney, and no matter what you do, don’t let your real estate agent choose your property attorney. You choose your own property attorney on your own.
• 9
Web sites To Help You Find A Real Estate Agent
• 10
Try HomeGain. Their free site with over 1.7 million consumers and 42,000 real estate agents registered, matches informed, confident homeowners and buyers like you and I with the most productive, highly qualified real estate agents in your area. You remain anonymous as agents submit detailed marketing proposals online. You can compare real estate agent qualifications and marketing plans before choosing the agent you want to work with. Other features give you the facts on prospective agents’ backgrounds, experience, local sales, commission rates, and more. You can use these reports to find agents who will list your house at a lower rate. Be sure to use their “What’s My Home Worth?” feature. Whether you are buying or selling your home, everyone should at least start on HomeGain.
• 11
There are good and bad real estate agents, as in other businesses. I’m sure I’ll get a lot of hate emails from paranoid real estate people for this, but I’m going to point out some specific examples that I have come across that testify to the degree of greed there is in the real estate industry. We are not trying to portray all agents as bad.
• 12
A real estate agent we know went to lunch and left a few “real hot leads” on her desk of sellers who were interested in bidding on a property. When she returned she discovered another agent in the office had grabbed the leads, contacted one of the buyers, and closed the deal, stealing the commission.
• 13
A real estate agent we know told us that she knows a few real estate agents that spend all their time looking through the MLS listings for the houses that pay higher overall commissions or higher commissions to the buyer’s agent. These agents then shove these high commissioned homes down the throats of unsuspecting buyers looking for a “good deal”. Greed is good.
• 14
One real estate agent would get really antsy and complain if you did not buy the first house they take you to. It seems they only cared about getting that commissions and everything else was secondary.
• 15
Some real estate agents make home buyers pay a fee up front that does not even guarantee them a real buyer’s agent. The fee is just a guarantee for the agent that the buyer is now committed to buying a house through them.
• 16
There are also some very good real estate agents
• 17
We had an agent who sold a condo and she was a true professional who sold it within 8 weeks of listing, even though the president of the condo homeowners association did everything humanly possible to withhold required paperwork and thwart the sale. This agent on her own initiative brought in a broom and swept up some dead bugs in the house because she knew that would be a turnoff to prospective buyers. She even arranged for a repairman to fix the AC unit before the empty unit was shown to buyers.
• 18
Our neighbor across the street had a real good agent who sold her house in 9 days. Her daughter up the street sold her house in 2 weeks.
• 19
Choose a successful Real Estate Agent
• 20
The better agents have success selling homes in the neighborhood you are looking in. Often you’ll find the same 2 or 3 agents closing deals like crazy in a neighborhood. Real estate agents often have a full page ad in the local home classified magazines listing houses grouped in one area. Successful agents have lots of houses listed. Part timers and unsuccessful agents may have few if any homes listed. I really have a hard time recommending someone who does this as a part time second job. I just do not see how you can get the attention you deserve from a part timer.
• 21
Where to look for Real estate agents
• 22
Probably the best source is people you know. They will tell you if they liked or hated their real estate agent. You want a real estate agent who is professional, aggressive, and maybe wins the monthly sales awards in their office. Certainly the large well funded real estate companies have certain minimum standards for business practices, ethics, and customer satisfaction. You’ll still find bad apples at the larger firms, but maybe not as many as you would in small unaffiliated brokerage offices with no published standards or ethics practices. Ask the real estate agent to show you all the state required disclosure forms so you know ahead of time all your rights. You don’t want any surprises later on. As I mentioned before, make good use of online sites such as HomeGain or AgentConnect to help you locate a real estate agent based on their background, experience, local sales, commission rates, and more.
• 23
Choose a Real Estate Agent that has the right personality
• 24
Your relationship with your Real Estate Agent can turn sour from bad communication. The Real Estate Agent may grow impatient that you are not making any offers on homes that match your list of criteria. They might start to complain that you are not serious about buying and that you are just wasting your time. You might start to complain that all they care about is selling the first house they take you to. These are communications problems that can be avoided if proper communication is disclosed up front. If you know you are an impatient shopper, or that you have to look at a dozen homes before you make your mind up, let the real estate agent know. Some are more patient than others. Make sure they have an accurate list house criteria you are looking for, and don’t spring any surprises on them after you have seen 10 houses. Give them a written list of all your house buying criteria. Make sure your real estate agent knows every last detail of what type of house you are looking for.
• 25
Many Real estate agents will not show you new construction homes
• 26
A lot of builders refuse to deal with real estate agents because they don’t want to pay them a commission. The builder feels their homes will sell themselves and they don’t need to pay any Real Estate Agent commissions. Because of this, many Real estate agents won’t tell you about new construction homes, even if they fit your criteria list and price range.
• 27
Stupid Real Estate Agent Tricks
• 28
I could swear some Real estate agents are the most unimaginable people and use the same useless banter to get you to buy or sell. Here’s some common phrases they’ll pull on you either in the ads, during house shopping, or in negotiations.
• 29
Tacky, real tacky!
• 30
I see too many real estate agent ads with cars in the driveway! I’ll bet half those cars belong to the idiot who took the picture. That’s the best way to cheapen the look of your house, and any decent real estate agent would not allow this.
• 31
Advertisements : “Boca’s Best Kept Secret”
• 32
If it’s such a good secret, why do I know about it? Why has it been in the grocery store real estate listings for 6 months?
• 33
Advertisements :”Hurry, won’t last at this price!”
• 34
Yeah, you mean it won’t sell at this price.
• 35
Other common annoying phrases you’ll see: “Too good to be true!”
• 36
Give us a break. The only houses that are too good to be true are Bill Gates, and Donald Trump’s houses.
• 37
“Now this one’s a steal.”
• 38
If it’s such a steal, why hasn’t anyone “stolen” it yet? They say that about every house you visit. The seller wants $15,000 too much, but gee what a steal.
• 39
“Oh, this house is so beautiful!”
• 40
They usually combine this trick with the one above, and use them on every house. The truth is they see so many houses they are probably numb to it all.
• 41
“Better than new!!!!”
• 42
OK….Whatever that means. Expect it to be used with “Too good to be true”.
• 43
“A buyer looked at this house today and is interested in making an offer”.
• 44
Yeah, right. If they were really interested, the Real Estate Agent would have a deposit check already. This is one of the oldest tricks in the book.
• 45
“You’ll never get that high of an asking price for your house”.
• 46
This is one of the top complaints I hear from sellers about their agent. You would think the agent knows more about property values, but often the appraisal sides with the seller. Agents who pull this trick seem to want you to list your house for less to get a quick sale.
• 47
This looked cool maybe 20 years ago
• 48
Many agents used to pose with a cell phone in their ad for that look of prestige. I always thought it looked stupid. Now everyone has cell phones, even kids walking around in middle schools, so this picture just makes the agent look like a goofball. Everyone we show this picture to just laughs, and I’m sure they are not laughing with him.
• 49
Hey buddy, if you really want to make a statement, you would be much better off posing next to a “For Sale” sign with happy sellers that says “SOLD”. Then people might take you seriously.
• 50
Just an observation on Real Estate Agent ads
• 51
I’ve noticed that some agents are really good about content in their ads, while others need some real coaching. Some ads have the top 30% of the page taken up by the agent’s oversized photo of their whole family and kids and large type contact information. Are they selling themselves or your house? The better ones manage to get it all to fit into a one inch stripe across the top or bottom, including their portrait.
• 52
Common complaints we get about real estate agents
• 53
Hopefully none of these issues will happen to you, but you should be aware that they are common. These are the most common complaints we receive about real estate agents from our visitors:
• 54
The buyer’s real estate agent continuously tries to get them to buy houses for much more than they told the agents that they wanted to pay. One person we know specifically told his agents $160k was the top limit. But the agents kept dragging them to homes priced at $180k. The agent might tell you “Come on, just take a look anyway, it will give you ideas for other houses”. Translation: Once I get you into this house to look around, I can get you to buy and I’ll get a bigger commission. Any agent that rushes you is just looking for a quick commission. Unfortunately, selling real estate takes a lot of patience, and if they don’t have patience, they need to choose another profession, and let the Real estate agents who do have patience take over.
• 55
The real estate agent tells the buyer there are no houses in the area in their price range. But gee, there some for only $15,000 more. The savvy buyer then fires the agent and finds plenty of houses in the area in his price range by searching for homes on the Internet real estate classifieds.
• 56
If you’re selling the house yourself, real estate agents start calling you stating they have a client waiting to buy the house, the agent just needs to come take a quick look before they bring them over. This is a scam, there is no buyer. The agent shows up and tries to get you to sign an exclusive contract naming them as your listing agent. For more details on this scam, read How To Sell You House.
• 57
The buyer calls a Real Estate Agent to hire them for buying a house. But the agent never calls back after several calls. Ever since the recession of the early 1990’s I have been repeating my brilliant observation that businesses might sell something once in a while if they would just return a phone call. I could swear that the reason we have recessions is because people don’t return phone calls.
• 58
A potential buyer emails an agent about hiring them, but the agent never responds back, even after several emails.
• 59
The listing Real Estate Agent used too much poetic license and embellished the description of the house. In one case one of our visitors reported the listing described “hardwood floors”, but it was cheap plastic imitation wood, only in one room.
• 60
Agents didn’t show disclosure forms buyers stating who they were working for.
• 61
The buyer’s real estate agent starts to grow impatient and complains if the buyer has not made an offer by the 3rd house. Most experts recommend that you visit at least 10 houses before you make a decision.
• 62
Questions to ask a prospective real estate agent
• 63
Ask if they are licensed and if it’s up to date. I actually thought this one up on my own! A no-brainer.
• 64
First of all, ask if they are part time or full time, because you want a full time agent to assure you get the most attention. Look at it this way: if they only work part time, your house is only marketed part time.
• 65
Ask them what type of training they take to stay current, and ask them how good are they at using the Internet, and what type of training they have for marketing homes on the web. Since many consumers now use the Internet to locate homes, you better have an Internet savvy real estate agent. In many cases, people reported back to us that they were more savvy at finding homes to look at than their agent. There are several highly trafficked home classifieds web sites. They better know how to get your house listed on them.
• 66
Ask them if they’ll take a lower commission. If you’re selling a $150,000 home, every percent point less that you can negotiate down on their commission saves you $1500. Not bad for a few minutes worth of work.
• 67
Ask them if they are a broker or an agent. Brokers are more experienced, and it’s more difficult to become a broker, so they are more resourceful.
• 68
Home buyers and home sellers should both ask their agent if they will get them a printout of all the recent selling prices AND the original listing prices of homes in their area, showing what the owners paid for them, how much they sold for, and full details on the homes. Selling price is useful, but knowing what they listed for and how much the sellers dropped in price is a great gauge of the real estate market in your area.
• 69
For sellers, ask the agent how they plan to market and sell your house. Get it all in writing, absolutely no verbal promises. You want them to blitz the market and get your house into the premium listings and the free listings, and all the online web sites. You want your house to be found. You want no surprises or excuses later on. Pin them down and get their battle plan in writing now. This is a major source of miscommunication and resentment when the seller is expecting several things to be done, and all the agent does is list it in the MLS.
• 70
Ask if they are willing to offer more commission to the buyer’s agent. There are many savvy buyers agents just looking for houses whose selling agent pays that extra 1/2% or more. This incentive can help sell the house quickly if needed.
• 71
Ask if they will accept a contract for 90 days or less. Many agents will force you into exclusive contracts for 6 months to a year or more. But what if your agent sucks? Then your house sits there for a year not being marketed, while you keep paying mortgage payments. A lease is a contract, if you get a bad car, you’re stuck. The same strategy applies to real estate agents. A 60 day contract is the max that you want, and ask for all their disclosure forms to study first, BEFORE YOU SIGN! Just tell the agent that they won’t need more than 60-90 days if they are really as good as their flapping gums are making them appear.
• 72
Watch out for the exclusivity clause time limit!
• 73
Many real estate agents will hand you a contract to sign that has their 6 months or longer exclusivity clause permanently printed on the contract. Many people foolishly sign this, not knowing the potential for pain that they are signing up to. Because the contract was permanently printed, many people also incorrectly think that the terms are not negotiable. Everything is negotiable in life! You can add addendum’s to it, or cross it out. Negotiate out long term clauses, or any other undesirables.
• 74
Do NOT sign a long term contract, and DO NOT pay money up front.
• 75
Real estate agents get paid by commission when they sell the house. If they do not sell the house, they don’t deserve any commission, so there’s no need whatsoever to pay in advance or any other time for a job not done. No commission when there is a deposit, only when there is a closing, no exceptions! No Excuses!
• 76
Read off my common complaint list about real estate agents mentioned earlier on this page, and ask the agent if any of that applies to them.
• 77
Make sure s/he is familiar with the neighborhood.
• 78
Find out how successful s/he has been in the past.
• 79
Ask for references from the realtor’s past few transactions.
• 80
Gauge the agent’s honesty. Is s/he willing to tell you the value of your home compared to others in the neighborhood, or is s/he just trying to “buy” the listing?
• 81
Consider the size of the brokerage. What kind of networking can you expect? Is it a one-man show or many colleagues to draw upon?
• 82
Find out if the agent has a marketing plan, and what it is.
• 83
Specifically, ask the following questions about the Realtor’s marketing plan to help you identify the top-quality realtors: “Who do you think is the right target audience to buy my home?” “How do you plan on reaching that target market?” (Note: the average newspaper reader is 55 years old and over 75% of home buyers start their search online – if your realtor doesn’t have an online marketing plan, consider a different realtor). “What are the steps in your marketing plan.” “When Do you think that we’ll be able to get a) calls of interest, b) showings, c) offers?”
• 84
Think about communication. What is the agent’s preferred method? Email? Phone Calls? And how often — Weekly? Daily?
• 85
Ensure that the agent specializes in your type of home, i.e. condo, waterfront property, land.
• 86
Is the agent internet savvy?
• 87
Does the agent have an active real estate license in good standing?
• 88
Ask for references and look at the successes of their past listings.
• 89
Ask “will you represent me exclusively or will you represent both the buyer and the seller in the transaction?”
• 90
Find a way to choose a good Realtor that will work diligently in selling or buying a home for you. Avoid scams done by those unlicensed Realtor. In short, be sure to hire a trusted and licensed real estate agent.
• 91
Take a peek on their websites and check out their listings, real estate articles, homes for sale and other stuff related to real estate industry. A trusted real estate agent would always make sure to update his or her blog and website to generate good feedback from potential clients.
• 92
Before you hire an agent to help you out sell or buy any real estate properties, make sure you know ahead of time your rights as a buyer or seller to avoid headaches later on. You may ask an expert regarding this matter, it can be your friends or a trusted person who knows so well about the industry.

Advertisements

How to Buy a House

For many people, it’s the biggest financial transaction they’ll ever make. That’s why doing it right the first time is so important. Sometimes, buying a house can feel like a dizzying set of rules and regulations. Luckily, armed with the right knowledge and know-how, you can start realizing your homeowner dreams — the fast, easy, effective way.

Part 1 of 4: Getting Your Financials in Order

  1. 10852 1.jpg
    1

    Strengthen your credit. The higher your FICO score, which ranges from 300 to 850, the better interest rate you’ll qualify for. This is extremely important. The difference between a 4.5% interest mortgage and a 5% interest mortgage can mean tens of thousands of dollars over the life of the loan.

    Ad
  2. 10852 2.jpg
    1. Get pre-approved to get the actual amount you can pay. Apply to several lenders within a two week period so that the inquiries do not damage your credit report. Do this before contacting a real estate agent so you have a firm idea of what you can afford, and you don’t accidentally fall in love with a house that you cannot afford.
      • Seller love buyers who get pre-approved. Pre-approved buyers are almost always given the green light by lenders, meaning there’s less risk for the deal to get scuttled in the end.
      • Don’t accidentally get pre-qualified instead of pre-approved. There’s a difference. Pre-approval means that the lender is usually prepared to give you a loan after seeing your financial vitals. Pre-qualified only means that the lender is estimating what you could borrow. It doesn’t mean you’ll get a loan.[1]
    2. 10852 3.jpg
      3

      Shop for your mortgage. Wait — why would I shop for a mortgage before deciding on a house? Isn’t that totally backward?[2] Not necessarily. Shopping for a mortgage before you decide on a house can be beneficial for one overriding reason:

      • You’ll know exactly how much you can borrow before you buy your home. Too many people fall in love with a home that they — well — can’t afford. They struggle finding a mortgage that covers the cost of the home. Finding a mortgage first and a home second is decidedly less sexy, but it’s twice as smart. You’ll immediately be able to tell whether a home is in your price range or out of it.
      • Think about the sort of down-payment you’ll be able to afford. This should be part of your mortgage calculations, although you don’t need to know for sure when shopping for a mortgage. Have a general idea in mind. More on this later in the article.
      • Find out what ratios lenders are using to determine if you qualify for a loan. “28 and 36” is a commonly used ratio.[3] It means that 28% of your gross income (before you pay taxes) must cover your intended housing expenses (including principal and interest on the mortgage, as well as real estate taxes and insurance). Monthly payments on your outstanding debts, when combined with your housing expenses, must not exceed 36% of your gross income. Find each percentage for your monthly gross income (28% and 36% of $3750 = $1050 and $1350, respectively). Your monthly payments on outstanding debts cannot exceed the difference between the ($300) or else you will not be approved.
    3. 10852 4.jpg
      4

      If you qualify, check out first-time buyers’ programs. These often have much lower down payment requirements. These are offered by various states and local governments. You may also be able to access up to $10,000 from your 401(k) or Roth IRA without penalty. Ask your broker or employer’s human resources department for specifics regarding borrowing against those assets.

    4. 10852 5.jpg
      5

      Talk to and retain a lawyer (optional). If you expect the buying of the house to be a simple, straightforward affair, then you’ll probably only need a realtor, the escrow company, and perhaps a mortgage broker. But then again, when do things ever go as expected. Hire an honest, reputable, (relatively) cheap lawyer if:

      • The cost of the lawyer is a drop in the bucket compared to the total you are likely to spend for the home.
      • The home you are buying is either in foreclosure or in probate, which means that the home is being distributed as part of a deceased person’s estate.
      • You suspect the seller might try to quickly back out of the deal or you don’t trust them.
      • Your state requires a lawyer at closing. Six states currently require a lawyer present.[4] Talk to your state commission of real estate to find out if it’s common practice in your state.

    Part 2 of 4: Shopping for a Home

    1. 10852 6.jpg
      1

      Find a good real estate agent to represent you in the search and negotiation process. The real estate agent should be: amiable, open, interested, relaxed, confident, and qualified. Learn the agent’s rates, methods, experience, and training. Look for a realtor who lives local, works full time, closes at least several properties per year, and has a reputation for being busy. Read more in How to Select a Realtor.

      • Realtors generally work for sellers, but that’s not necessarily a bad thing. A realtor’s job is to connect people who want to buy and sell a particular home. For this reason, a realtor has an interest in selling homes. A very good realtor will use her experience to sell the right home to the right buyer — you.
      • When you do find your realtor, go into exhaustive detail when describing what you want in a home — number of bathrooms and bedrooms, attached garage, land and anything else that may be important, such good lighting or yard space for the kids.
    2. 10852 7.jpg
      2

      Sign up for an MLS alert service to search on properties in your area. A Multiple Listing Service will give you a feeling for what is on the market in your price range. Your agent can do this for you.

      • If you sign up through a real estate agent, it is poor form to call the listing agent directly to see a house. Don’t ask an agent to do things for you unless you’re planning to have them represent you — they don’t get paid until a client buys a house and it’s not fair to ask them to work for free, knowing that you’re not going to use them to buy your home!
    3. 10852 8.jpg
      3

      Start looking for houses within your range. Allow your realtor to start working for you, but know what’s within your budget and what’s not. The general rule of thumb here is that you can afford a house that’s 2.5 times your yearly household salary.[5] For example, if your annual combined salary is $85k, you should be able to afford at least a $210k mortgage and very possibly more.

      • Make use of online mortgage calculators to start crunching numbers, and remember the mortgage shopping you did earlier on. Keep these numbers in mind as you prepare to find your new dream home.
    4. 10852 9.jpg
      4

      Start to think about what you’re really looking for in a home. You probably already have a vague idea, but the angel’s in the details. There are a couple things in particular that you and your family should give good thought to:

      • What will you and your family need in several years?[6] Maybe you’re just a couple right now, but are there are plans for kids in the future? A home that snugly fit two people could be torturous for three or four.
      • What tradeoffs are you willing to make? In other words, what are your priorities? Although we like to believe that buying a house can be straightforward, it’s often a complex ordeal in which we’re forced to compromise. Do you care more about a safe neighborhood and good schools over a big backyard? Do you need a big, workable kitchen more than a big luxurious bedroom? What are you willing to sacrifice when it’s crunch time?
      • Do you expect your income to increase over the next couple years? If your income has increased by 3% for several years in a row and you hold a secure job in a safe industry, you can probably rest assured that buying an expensive but still reasonable mortgage is possible. Many homebuyers buy relatively expensive and then grow into their mortgage after a year or two.
    5. 10852 10.jpg
      5

      Define the area you’d like to live in. Scout out what’s available in the vicinity. Look at prices, home design, proximity to shopping, schools and other amenities. Read the town paper, if there is one, and chat with the locals. Look beyond the home to the neighborhood and the condition of nearby homes to make sure you aren’t buying the only gem in sight.

      • The area in which your home is located is sometimes a bigger consideration than the home itself, since it has a major impact on your home’s resale value. Buying a fixer-upper in the right neighborhood can be a great investment, and being able to identify up-and-coming communities — where more people want to live — can lead you to a bargain property that will only appreciate in value.
    6. 10852 11.jpg
      6

      Visit a few open houses to gauge what’s on the market and see firsthand what you want. Pay attention to overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage. Visit properties you’re seriously interested in at various times of the day to check traffic and congestion, available parking, noise levels and general activities. What may seem like a peaceful neighborhood at lunch can become a loud shortcut during rush hour, and you’d never know it if you drove by only once.

    7. 10852 12.jpg
      7

      Look at comparable houses in the neighborhood. If you are unsure about the price, have the home appraised by a local appraiser, who also look at comparables. When appraising a home, appraisers will look for comparables or “comps”, homes in the area which have similar features, size, etc. If your home is more expensive than the comps, or the appraiser has to find comps in a different subdivision or more than 1/2 mile away, beware! Never buy the most expensive house in the neighborhood. Your bank may balk at financing the home, and you probably won’t see your home appreciate in value very much. If you can, buy the least expensive home in a neighborhood — as homes around you sell for more money than you paid, your home’s value increases.

    Part 3 of 4: Making an Offer

    1. 1

      If possible, tailor your bid to the seller’s circumstances. This is not easy, and often impossible, but it doesn’t hurt to try when making one of the biggest purchases in your life. Here are some things to keep in mind as you think about your offer:

      • What is the seller’s financial prospects? Are they in desperate need of money or are they sitting on a pile of cash? Cash-strapped sellers will be more likely to take an offer that undercuts their asking price.
      • How long has the home been on the market? Homes that have been on the market for longer periods of time can usually be bid down.
      • Have they already bought another house? If the sellers aren’t currently living in the house they’re trying to sell, it may be easier to bid less than you otherwise might.
    2. 10852 14.jpg
      2

      Look at comparables when you make your bid. What did other homes in the neighborhood start off as (“asking price”), and what did they sell at? If homes in the area routinely sold for 5% below asking price, think about making an offer that’s anywhere from 8% to 10% lower than the asking price.[7]

    3. 10852 15.jpg
      3

      Calculate your expected housing expenses. Estimate the annual real estate taxes and insurance costs in your area and add that to the average price of the home you’re trying to buy. Also add how much you can expect to pay in closing costs. (These take in various charges that generally run between 3 to 6 percent of the money you’re borrowing. Credit unions often offer lower closing costs to their members.) Put the total into a mortgage calculator (you can find them online or make your own in a spreadsheet. If the figure is above 28% of your gross income (or whatever the lower percentage used by lenders in your situation) then you will have a hard time getting a mortgage.

      • Determine whether you need to sell your current home in order to afford a new one. If so, any offer to buy that you make will be contingent on that sale. Contingent offers are more risky and less desirable for the seller, since the sale can’t be completed until the buyer’s house is sold. You may want to put your current house on the market first.
    4. 10852 16.jpg
      4

      If you absolutely fall in love with a home, be prepared to make an offer that’s above the asking price. Economics of supply and demand will sometimes force your hand. If many people are competing for few homes, be prepared to lead with your highest possible offer. Some homebuyers don’t believe that you should lead with your highest offer, but you could easily find yourself being outbid and never get the chance to bid on your house. If you want to give yourself the best shot on a home that you really, really like, lead with a high bid.

    5. 10852 17.jpg
      5

      Talk to your realtor when you’re ready to formally present your offer. Although the guidelines for submitting offers may differ from state to state, this is usually how it goes: You submit your offer to your realtor, who then forwards it to the seller’s representative. The seller then decides to accept, reject, or make a counter-offer.

      • Include earnest money with your offer. Once you sign an offer, you are officially in escrow, which means you are committed to buy the house or lose your deposit, unless you do not get final mortgage approval. During escrow (typically 30 to 90 days), your lender arranges for purchase financing and finalizes your mortgage.

    Part 4 of 4: Finalizing the Deal

    1. 10852 18.jpg
      1

      Determine how much of a down payment you’ll need to offer up front. A down payment establishes equity, or ownership, in a home. That’s also money that you don’t have to pay interest on. The more of a down payment you’re able to make on your home, the less money you’ll ultimately pay on your home.

      • You will be expected to put down 10-20% of the appraised value of a home.[8]Note that the appraised value may be higher or lower than the selling price of the house. If you have $30,000 saved for a down payment, for example, you can use it as a down payment for a home between $300k (10% down payment) or $150k (20% down payment). Putting less down often, but not always, requires you to pay private mortgage insurance (PMI), which increases your monthly housing cost but is tax deductible.
      • If you can’t afford a 10%-20% down payment on your home, but have good credit and steady income, a mortgage broker may assist you with a combination or FHA mortgage. In that, you’re taking out a first mortgage up to 80% of the value of the home, and a second mortgage for the remaining amount. While the rate on the second mortgage will be slightly higher, the interest on it is tax-deductible and combined payments should still be lower than a first mortgage with PMI. If you’re buying new, consider the Nehemiah Program to get assistance with your down-payment.
    2. 10852 19.jpg
      2

      Make sure final acceptance is predicated on a suitable home inspection. Request the following surveys and reports: inspection, pests, dry rot, radon, hazardous materials, landslides, flood plains, earthquake faults and crime statistics. (You will generally have 7-10 days to complete inspections — be sure that your agent explains this fully to you when signing the purchase and sales contract.)

      • A home inspection costs between $150 and $500, depending on the area, but it can prevent a $100,000 mistake. This is especially true with older homes, as you want to avoid financial landmines such as lead-paint, asbestos insulation and mold.
      • If you use the inspection results to negotiate down the price of your purchase, do not refer to the inspection or bids for work in your contract. The lending institution may request to see a copy of your inspection, which will supersede their appraiser’s evaluation.
    3. 10852 20.jpg
      3

      Have a home energy audit completed on the house and ensure that the contract is contingent on the outcome. Getting a home energy audit is an essential part of the home buying experience. Not knowing what it really costs to heat and cool a home is a potential financial disaster waiting to happen. Home buyers make “guesstimates” when figuring out a new home budget. These estimates can be significantly incorrect and place families into dire financial circumstances.

    4. 10852 21.jpg
      4

      Close escrow. This is usually conducted in an escrow office and involves signing documents related to the property and your mortgage arrangements. The packet of papers includes the deed, proving you now own the house, and the title, which shows that no one else has any claim to it or lien against it. If any issues remain, money may be set aside in escrow until they are resolved, which acts as an incentive for the seller to quickly remedy any problem areas in order to receive all that is owed.

      • Consider using your real-estate lawyer to review closing documents and represent you at closing. Again, realtors are unable to give you legal advice. Lawyers may charge $200-$400 for the few minutes they’re actually there, but they’re paid to look out for you.

    Tips

    • Make sure you have money saved up before you start looking to buy!
    • Try not to fall in love with one particular property. It’s great to find exactly what you need, but if you get your heart set on one home, you may end up paying more than it’s worth because you’re emotionally invested. The deal may also fall apart. Be willing to walk away from any home; no home is so perfect that the seller can charge what he or she desires.

    Warnings

    • A seller who won’t allow a home-inspection has something to hide — walk away!
    • The economy is in quite a bad shape right now, some people say this is a good time to buy a house (prices are low) but others say it’s a bad time to enter the housing market. It’s recommended to discuss and take into account all advice before buying at this time.
    • Be wary of a real estate agent who is on a rush to sell a property. They might know of an ominous event like a market crash. Try to look for any unusual offers agents provide.

     

Buying costs are very low in Malaysia How high are realtors’ and lawyers’ fees in Malaysia? What about other property purchase costs?

Transaction Costs

Who Pays?
Stamp Duty 1% – 3% buyer
Lawyer/Solicitor´s Fees 0.4% – 1% buyer
Other Fees MYR180 (US$55) buyer
Real Estate Agent´s Fees 2% – 2.75% seller
Costs paid by buyer 1.40% – 4.00%
Costs paid by seller 2.00% – 2.75%
ROUNDTRIP TRANSACTION COSTS 3.40% – 6.75%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in Malaysia?

Foreigners can purchase any kind of property with a minimum value of MYR250,000 (US$76,453). They are allowed to purchase up to two residential properties – two condominiums (max. 50% foreign ownership within a block) OR one condominium and one of the following:

  • Terrace or linked houses above two storeys, but limited to 10% of the total number of units built of this type
  • Lands/bungalows and semi-detached houses, but limited to 10% of units built of these types

Malaysia luxury townhousesThe first step to purchasing property in Malaysia is to hire a real estate lawyer to assist in the transaction. Once property is selected, a Letter of Offer/Acceptance is signed, and a 3% deposit is expected from the buyer.

Within 14 days, the Sale and Purchase Agreement is signed. The buyer must pay another 7% deposit. From the date of the signing, the buyer has a maximum of three months to accomplish full payment.

The Sale and Purchase Agreement must be stamped at the Stamp Office. After the examination on the property of the valuation department, Stamp Duty is paid to the Stamp Office. The transfer must be registered at the Land Office Registry.

Be cautious when buying new property in unfinished condominium projects. Buyers may not be fully protected against default, an issue vigorously raised by the Malaysian House Buyers’ Association, which has pointed to flaws in The Housing Development (Control & Licensing) Act 2002, and the Strata Titles Act. Those buying unfinished property from developers should ensure that the developer has a valid Developer’s License and a valid Sales & Advertising permit.

 


Footnotes to Transaction Costs Table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Currency:
Malaysia uses Malaysian Ringgit. Exchange rate is at US$1=MYR3.6777 as of 26th October 2006.

Stamp Duty:

STAMP DUTY

PROPERRTY VALUE, MYR (US$) RATE
Up to 100,000 (US$30,581) 1%
100,000 – 500,000 (US$152,905) 2%
Over 500,000 (US$152,905) 3%

Legal Fee
Legal fee is based on the property value.

LEGAL FEE

VALUE OF PROPERTY, MYR RATE
Up to 150,000 (US$45,872) 1%
150,000 – 1 million (US$305,810) 0.70%
1 million – 3 million (US$917,431) 0.60%
3 million – 5 million (US$1,529,052) 0.50%
5 million – 7,500,000 (US$2,293,578) 0.40%
Over 7,500,000 (US$2,293,578) negotiable on property value exceeding threshold but shall not exceed 0.40%

Other Fees:

OTHER FEES

FEES MYR
Stamping fee (per document) 10
Adjudication fee 10
Search fee 60
Registration fee 100
Total 180

Other Fees
Other fees are around MYR180 (US$58). Other fees include stamping fee (MYR10 or US$3per document), adjudication fee (MYR10 or US$3), search fee (MYR60 or US$18), and registration fee (MYR100 or US$31).

Real Estate Agent´s Fee:
Real estate agent’s fees are regulated by the Board of Valuers, Appraisers and Estate Agents Malaysia (LLPEH). Commission is paid either by buyer or seller, subject to a maximum discount of 30% but a minimum fee of MYR1,000(US$306) per case. The scale is not applicable to sale of foreign properties in Malaysia.

AGENT´S FEE

VALUE OF PROPERTY, MYR RATE
Up to 500,000 (US$152,905) 2.75%
Over 500,000 (US$152,905) 2%