Should I Hire a Realtor?
I just got off the phone with a guy that I've never met. His name is Mike. Mike called me because he knows one of my other friends from college named Ross. Mike is like many other young professionals in this world in that he is tired of throwing his money away on rent and wants to buy some real estate. He's not entirely sure what he wants to buy, but would like to get a condo in a cool part of downtown Milwaukee that will be a good fit for him and his dog. I think to myself, heck yeah, at 27 years old, who wouldn't want a trendy downtown condo?
Since I'm a Realtor in the Madison area, I don't really service the Milwaukee area. But Ross thought I might be able to at least give Mike some advice as he goes out searching for a new condo to buy. We chatted for a few minutes and I gave him my thoughts.
Mike told me this was his first home purchase and he didn't really know where to start. One of the first things that I suggested is get pre-qualified with a mortgage lender that you trust. A good lender will discuss various monthly payment options and how your costs vary depending on debt/income ratios, credit scores, and down payment. I also told him to be wary of some internet lenders as sometimes they can cause all kinds of mischief, especially if the transaction does not close on time.
"Get a buyers agent", was the other thing that I mentioned. Team up with a really good real estate agent that you feel comfortable with and that you trust. Find an agent that will look out for your best interests through the entire home buying process. In Wisconsin, the default when meeting an agent is that that they are a seller's agent. A good agent will discuss the differences in the agency law.
When buying your first home it's important to find a good agent to help give you useful and relevant information about an area. Even though we live in a global economy, keep in mind that all real estate is local. What happens in one area (currently a stable real estate market in Madison) is not necessarily the same as what is happening in other areas (California market with falling prices and many foreclosures). Even different parts of town can produce homes with drastically different prices for what seems like a similar value.
The other thing to consider in all of this is obviously the cost. Not too many people work for free? So, what does it cost to hire a buyers agent to be your Realtor? Nothing. That's right nothing. Well sort of. Okay, I know it sounds too good to be true. Here's how it works. Most Realtors are paid at closing and their "success fee" (for successfully matching the right person to the right house) comes out of the seller's proceeds. Most real estate firms negotiate in their listing contract to also pay a buyer agent's fee. That fee does vary based on location because (by law) all commissions are negotiable.
Since I was not able to directly assist Mike with his condo purchase I did take down his information and gave it to my "Relocation Department". I have direct contacts throughout many of the leading real estate companies in the country. My goal is to connect him to one of those really good agents. If you would like some help buying a new condo or relocating to a new area, then send me an email and I'll connect you.