Shopping for a home can be fun, exciting, and stressful. Choosing a qualified real estate agent can make the process go much smoother. A real estate agent isn’t required when buying a home, but it’s generally in the buyer’s best interest to be well represented by a professional who will watch out for common pitfalls and mistakes.
There are literally thousands of real estate agents, so how do you choose a good one. Generally, you are looking for someone with deep experience in their field, and more particularly one who is an expert in the community that your are shopping in. Does your agent know the community, the schools, the commute, the state of the local market, and do you know others who have had a successful experience with them?
Interview several agents to find the one that is the best fit for you and your situation.
Buyer’s Agent – Seller’s Agent – Dual Agency
Something to understand when choosing an agent is who is working for whom. An “agent” is someone who works on behalf of someone else, and knowing that your real estate agent has your best interest at heart is critical to protect your interests.
There are standard 3 types of agent representation. A Buyer’s Agent represents the buyer, and only the buyer, in the transaction. Similarly, the Seller’s Agent represents the best interest of the seller, and only the seller, in the transaction. The third representation type is where who’s interest is represented best comes into question, and that is in the Dual Agency type. Dual Agency is where a single agent represents both the buyer and the seller. This usually happens when an agent has listed a home for a seller, and then the buyer gets in contact with the Seller’s Agent.
If the buyer chooses to have the Seller’s Agent represent them in the transaction, as well as the seller then the agent would have Dual Agency in the transaction. The difficulty comes when the buyer wants to negotiate a better price, seller paid closing costs, or any other terms that negatively impact the seller. Who’s interest does the agent press – the seller who wants the best price for their property or the buyer who wants better terms? Due to the inherent conflict of interests many buyers choose to have their own Buyer’s Agent and not participate in a Dual Agency type of transaction.
Buyer’s Agents usually ask home buyers who choose to work with them for a contract called a buyer-broker agreement. You can see an example of one here from the Utah Association of Realtors. These agreements usually detail the buyer’s and agent’s obligations, a disclosure of the representation, the length of the agreement, the brokerage fee, and many other important details. Take your time and understand the obligations of any contract that you enter into. Seek professional legal counsel when needed.
The Purchase Agreement
When you’ve found the perfect property and are ready to make an offer your agent will help craft that offer, any contingencies, and present the offer to the seller or seller’s agent.
In the State of Utah all licensed real estate agents are required to use a standard form for writing an offer called the REAL ESTATE PURCHASE CONTRACT (REPC) which is provided by the state. Buyers and sellers who are not represented by Utah licensed real estate agents may use the REPC contract, modify it, or use a different form.
If you are seeking VA guaranteed home loan financing then the VA suggests on their website the following VA Option Clause or something that voids the contract if you are unable to secure the VA loan financing. This would be added to the contract by your agent before the contract is presented to the seller or seller’s agent. Here is the clause from their website:
“It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs.”
Additional contingencies frequently added to the purchase contract are the appraisal value and the home inspection. Lenders generally won’t lend more than the value of the home, and buyers usually don’t want to spend more than the home is valued at either. Additionally, a proper home inspection can bring to light unforeseen problems, deferred maintenance, or structural issues that a buyer is not likely to discover on their own when walking a property.
All of these many details and many others not discussed here are why there is great value in having professional representation by a qualified real estate agent in the purchase of your home.