Buying a Home: It’s a Big Deal
Whether you’re shopping for appliances or automobiles, groceries or gadgets, travel services or tax preparers, the Internet has changed the way most people gather information about products and services. For people who are thinking about buying a home, the change is apparent, as well. The Internet now is the source of information that traditionally came from real estate Brokers, with online listings of homes for sale featuring panoramic pictures, prices, information on neighborhoods and schools, comparable sales, taxes, financing options, and more. Indeed, potential buyers who choose to use the Internet to access new listings and narrow their search may be the best informed and most efficient that real estate professionals have ever dealt with. And interestingly enough, research has determined that even with all of the information available on line, more and more people are turning to Realtors to act on their behalf to guide them through the maze of buying or selling their home.
Before you contact any real estate professional, it’s important to understand the legal definition of a Broker Relationship. Before confidential information is shared with a Broker, we must disclose whether we represent the Seller, the Buyer or that we are acting as a Transaction Broker. If we represent the Seller, we have the best interest of the Seller in mind and will negotiate to their benefit. If we represent the Buyer, then our negotiations will represent the best interest of the Buyer. Acting as a Transaction Broker means we essentially represent the transaction. A Transaction Broker doesn’t negotiate for either side but presents the offer or counter offer of either party, prepares contracts and handles the inner working of the transaction. A fee less than the full commission can sometimes be negotiated for this service.
Employing Brokers are licensed professionals who help sellers and prospective buyers of homes, and often operate as part of a brokerage firm or franchise. Broker Associates are licensed professionals who work under the supervision of an Employing Broker. Both are fully licensed by the State of Colorado. The Employing Broker is responsible for the office, the actions of Broker Associates, training, Ethics and compliance with the Guidelines of The Colorado Real Estate Commission.
In a typical home sale, there are two real estate pros: one who works with the seller — called the listing Broker — and one who works with the buyer — called the selling Broker. The listing Broker generally shares the sales commission with the selling Broker who finds the buyer for the home. But the seller pays both Brokers, usually from the proceeds of the sale. The Colorado Real Estate Commission requires that a written agreement, a Contract, be in place before a Broker can represent you to Buy/Sell a property. The Contract requires that all information, of a confidential nature, be kept confidential. A Broker is allowed to share information with their team and with the Employing Broker. Your contract with your Broker will determine what type of relationship you have with them; Exclusive Seller / Exclusive Buyer / Transaction Broker.
We are required to disclose the type of relationship we have with you, and then, it’s up to you to decide how you want to be represented. Whether you meet a Broker at an open house or get in touch with one on your own, be aware that they need to disclose important information about their business relationship with you. Be sure you ask… It’s important.
The most common type of real estate commission is a percentage of the home’s sales price, an arrangement that benefits both the seller and the Broker. As the buyer, you may not pay your agent directly, but the services of your Broker are not “free.” Sellers may increase the sales price of their home to offset the cost of the commission, a situation that makes buyers responsible for bearing some of that cost.
The sales commission is spelled out in the listing agreement with the seller. Sales commissions are how Brokers are paid. By law, they are not permitted to accept any form of compensation except what is negotiated in the contract with their Client, and all commissions are paid directly to their Firm. The commission is usually paid by the Seller but, the Contract with the Buyer will also spell out what percentage the Broker will earn representing them. It may be necessary for the Buyer to pay any difference between what the Seller pays and what the Contract calls for. Asking the right questions up front will help you and your Broker understand each other.
Choosing Real Estate-Related Services
Buying a home is a big financial commitment — very likely, the biggest financial investment most people make. When you choose to work with a real estate professional, find someone who understands what you are looking for and how much you can afford to spend. Be honest with your financial information and your desires. Ask friends, family members, neighbors, or co-workers who have bought or sold recently for recommendations. If you so choose, interview several Brokers about their experience, style, and market knowledge. Find a Broker you’re comfortable with; this is a huge transaction. Look for a Realtor and expect that Broker to be professional: to return your phone calls promptly, to be organized, to listen to your preferences, and to communicate clearly.
Once you sign your purchase agreement, your Broker may recommend companies for financing, inspections, moving, insurance, and other related services. It may be convenient for you to use these providers, but it isn’t required. If the Broker owns more than 1% of any of those companies, disclosure is required. Shopping for these services is just like shopping for any services: Compare prices and ask for references before you make your choices.
Go to www.ftc.gov/realestate for more information about buying a home and a glossary of real estate terms.