#252 in a series of true experiences in real estate
July 1998, Hills Newspapers
It happened again this week: someone who reads this column regularly was surprised to learn that we do “regular real estate”. This is not the first time. Others over the years have believed that because we act as real estate consultants, that must be all that we do.
Here’s the deal: There are times when, for an hourly fee, we consult. By “consult” we mean “educate”. Say that you are thinking of buying from your landlord the house that you have been renting. The landlord says you can buy for less if there are no agents involved.
You come to us and we explain that we will not act as your agent. We won’t write your contract, tell you what the house is worth or negotiate on your behalf. But we will talk with you about the details of the buying process. We’ll first ask how you are feeling about buying: should you buy this house, another house, or no house at all.
We’ll discuss getting a loan, typical timing for making the house yours, closing costs and who usually pays which ones. Also inspections you’ll probably want to have and why and disclosures the seller is required to provide to you. We’ll talk about insurance, appraisals, what is covered by a termite report and so forth.
We like consulting, have met and enjoyed a number of fine people, helped them in their private sales. A private sale means that neither buyer nor seller is represented by an agent. We’ll help you but you will be acting on your own behalf.
Consulting is, however, a small sideline to our business. We spend the majority of our time acting as agents for clients who wish to buy or sell. We are “regular agents”. A seller calls. He would like to meet us, have us look at and give him an estimate of value for his property, tell him how we would go about selling it. We go, look, talk, think, do some research. Then we tell him what we believe is true for his house.
If all goes well, he hires us to do the marketing and to act as his agents. We document information on the house (reports, receipts for new roof, retrofit, etc.), prepare a flyer, enter the listing in Multiple Listing and the Internet, place ads, hold open houses, give information to buyers’ agents.
We help the seller evaluate offers from would-be buyers and closely follow the escrow (the period of time from the signing of the contract until title changes hands) to be sure everything is done properly until the sale is completed. For these services, we are paid a commission, a percentage of the selling price when the buyer takes title to the house.
Or, a buyer comes to us because he’s looking for a house to buy. We talk to him about loans and neighborhoods, why he wants to buy, what he will feel comfortable paying for housing. Then, like other agents representing buyers, we look for the right house. When we find it, we write the offer (contract) and negotiate with the seller on behalf of our buyer.
During the escrow period, we go over seller disclosures with our client, are with him during his inspections, providing him perspective, helping him know if his purchase is a wise one. If it is, we’re there to make the sale smooth and as free of stress a possible. We take care of the paperwork, track the loan, see that accurate papers are drawn for the signatures of both parties.
One thing we do not do: We never represent both the buyer and the seller in the same sale. Either the seller is our client or the buyer is — not both. While some agents feel comfortable acting on behalf of “both sides”, we think each client deserves his own agent, someone looking after his own interests. For this reason, if we are holding a house open for our client, the seller, and someone comes in and says he’d like to make an offer, we tell him we can’t write it for him. We’re happy to give him names of good agents in the area but he will need his own representation.
Buyers do not usually pay their own agents. Most of the time, even when there are two agents, one for the buyer and another for the seller, the seller pays them both. The company that the buyer’s agent works for receives half of the commission; the company where the seller’s agent works receives the other half. The agent himself gets a portion of this money. How much he receives depends on his agreement with his company.
Private sales — without agents — can and do work. When the seller and buyer are cooperative, there is good will between them, and they both take the time to learn what to do and how to do it, they can successfully complete a sale. Often people who come to us for consulting find that there are parts of the sale they don’t want to handle themselves. They don’t know how to write a contract, for instance, and aren’t sure if they should hire an attorney.
Also in almost all private sales, no one wants to do the negotiating; they hate discussing money or they are good friends with the other party and are worried about putting their friendship in jeopardy. Buying or selling directly means just that: There is no middle man. As they realize this, they understand, often for the first time, why agents exist. They “get” what it is that an agent does, and we hear from them, “I always thought what agents do is find houses for buyers. In this case the house has been found, so I thought the rest was easy. I see better now and I sure do wish I weren’t on my own.”
The process of buying or selling a house isn’t magical or mysterious but learning how to do it, then doing it right takes time, knowledge, and ability. Just like do-it-yourself divorce, you can educate yourself and represent yourself. Or you can hire an expert to handle things for you.
