See a house you might like to buy? Don't call the listing agent!
Saturday, October 15, 2022
One mistake a home buyer can make – and it’s very common - is to allow the listing agent (the realtor who is SELLING the house) to act as your agent as well. This happens when you call the listing agent to see a home that is for sale. To use a Seinfeldism, this is like “double dipping”, as the listing agent’s true loyalty is to the seller, not to you.
Many listing agents who represent the seller are happy to have you come to open houses or showings without bringing their own buyer’s agent, as this could mean they could receive DOUBLE the commission!
For example, if the listing agent lists a home for $400,000, and the commission is set at 5%, the listing agent will receive half of 5%, or 2.5%, when the home is sold, or $10,000.
But what happens if the listing agent also represents you, the buyer? They will receive a nice check for double that; the full 5%, or $20,000. That’s right, they will earn just as much commission by listing the house as they would finding the buyer.
So what’s wrong with this?
The problem is that in Connecticut, this is legal – it’s called dual agency – and your agent is negotiating a sale price for BOTH the buyer and the seller. This is a huge conflict of interest, and it’s something that happens far too often in Connecticut.
Moral of the story: if you see a home you’d like to view, call a good buyer’s agent (like me!), and don’t call the listing agent.
Should you waive your home inspection?
During this unprecedented upswing in residential real estate value (medium cost of a home in 1982 was $173K, today it is $361K) it’s become much harder to hear the words “they’ve accepted your offer!” to not only first-time home buyers, but experienced cash-heavy buyers as well. While the best advice for home buyers seems to be “try to be an all-cash buyer and bid high” this is impractical for most buyers.
Recently I received a seller’s agent email that exclaimed “we have accepted a cash offer with no inspection or appraisal contingencies”! You might be thinking, man, I can’t compete with offers like that! And you might be right. However, the “no inspection” idea, i.e. agreeing to purchase the house without any inspection for problems, is becoming more prevalent in today’s market. Why?
I normally do not recommend this for most of my buyers, unless the house is impeccable and on the newer side. The reason many other buyer’s agents recommend this is simple though: it gives you a better shot at getting your offer accepted, and ALL of the risk is on the buyer; if skipping the inspection results in repair costs, the headache would be all on them. A safer way to do this is to drop the inspection contingency but still ask for an “informational inspection”, which means you’ll still get to do an inspection but the seller won’t have to worry about you nickel-and-diming you to death with small issues found during the inspection (every house will have these!). You could also specify that only problems that would cost greater than $500 or $1000 would require remediation.
The bottom line is, even without an inspection, finding mold or a crumbling foundation would give you legal cause to back out of the deal anyway.
So this is not something to do casually. If you’re considering making an offer without an inspection, it helps to have a buyer’s agent who experienced in home construction and can spot potential issues, or at the very least a contractor you trust who can walk through the home with you, before an offer is made. Heck, you can bring your contractor, handyman, an experienced remodeler, a partner, etc. It also helps if you are a well-funded buyer, and can easily pay for fixes even if they get expensive. You can also pay for a professional home inspection BEFORE you sign the Purchase and Sales Agreement. That can also get costly, but not as costly as buying a money pit home!
Please call me right away to get started at 860-494-3046 or email me at firstname.lastname@example.org