My Blog - Joseph Frady, Realtor - Real Estate Q&A/knowledge/Laws/Formalities
When is the right time to buy property?
When is the right time to buy property?
This is a question that agents try and answer day in and day out, 99% of the time the agent will tell their client "TODAY is the best day!" Well of course, real estate agents are salespeople. You don't see a commercial trying to get you to come buy products next year do you, sales is a "sense of urgency" business. We want you to buy now, not next week, not tomorrow but now. There's a saying in sales, "there ain't no pity, in be back city" which pretty much means when a buyer says "I'll be back" you can go ahead and expect to never see them again. I'll regress and now focus on the question at hand...
When is the best time to buy? Well ladies and gentlemen there is no best time to buy property and it's always the best time to buy property. What I mean by that is there is never a perfect time for anything in life, you have to make it. People spend so much time waiting on the perfect time and miss so much in life, from buying properties to taking chances they are scared to take. Lets be honest, as much as we would like we aren't all out here buying property once every couple months and are completely comfortable purchasing such a large product. With that being said, fear I believe is the #1 reason people are always falling back on that "I'm waiting on the right time" spill. Yes, there are better times to buy than others; prices are up or down, interest rates are high or low, the money in the bank is too low or needs to stay there and endless amounts of other reasons. There are always so many reasons not to do something, so my advice is you have to make the "right time".
The right time to buy a piece of property is when you have your finances in order and are able to purchase. You are never going to get the perfect interest rate, you're never going to find the perfect price, or neighborhood and home together. To be clear, there is no perfect home for you, let's say you have a blank check and are going to build a home. Guess what, something will still go wrong and it won't be 100% perfect. Now you may think you have found the perfect home, but 9 times out of 10, it's out of your budget. We all want what we can't have, even if you take that same home and put it in your price range you would find things wrong with it you didn't realize where there until you could afford it. Funny how that works.
My point is this, you have to take a leap of faith to a certain extent when buying property at anytime. That's real estate. Now yes, there are better times to buy than others but if you wait around on interest rates you may lose a good home. Maybe you wait on prices to go back up to sell your home for a higher price, well guess what, the house you will buy has also gone up in price. Very seldom does everything line up just perfect in a purchase of property and waiting around only adds to the anxiety and stress that goes along with buying real property.
“At the end of the day, let there be no excuses, no explanations, no regrets.” ― Steve Maraboli, Life, the Truth, and Being Free
Real Estate Agents and For sale by Owner (FSBO) properties.
Real Estate Agents and "For sale by Owner" (FSBO) properties.
You've hired an agent to find you a property and you haven't been shown any "For Sale by Owner" properties; is this a coincidence, or are there are no properties that meet your search criteria? Or are they avoiding you buying a home directly through a buyer in fear of losing a commission check?
This is somewhat of a complicated question, because there are a few things at play that affect the answer. Though just to answer the above question simply; yes, most agents will avoid showing a FSBO to a buyer in fear of losing out on a commission. When approached with this touchy question, many dance around the answer, but from an inside perspective and when it comes down to brass tacks, most agents will intentionally avoid FSBOs. Not to be too hard on anyone here, imagine how hard it is to show a buyer numerous properties over weeks or even months, only to have them purchase from a seller, and you get left out to dry with a lot of wasted time, gas and resources.
To give a comprehensive answer, we have to understand the difference in resources from a FSBO property and a property listed by an agent. When it comes to a FSBO listing you have a few web-sites at your disposal to advertise your property, along with word of mouth, which I must say is not to be underestimated in certain circumstances. With an agent listed property, you have numerous websites and resources at your disposal. Most importantly you have the mother of all listing websites, MLS (Multiple Listing Service), which is the NAR's (National Association of Realtors) exclusive database, which means your property is visible to every other realtor that uses the MLS. That is more than huge. The NAR is one of the most influential organizations today, with more members than any other on the planet.
All that is to say, sometimes it can be difficult to explore FSBO databases, when the MLS puts so many at our fingertips. (helpful hint - Realtor.com feeds directly from the NARs MLS database and is the most accurate for consumers!) We aren't going to look on FSBO.com or Zillow or Trulia because we have our own systems that are updated daily and are in real time, unlike other listing sites. So in defense of agents, they may not know about the FSBO. Not all of us are marketing experts, which can lead to issues with the property's visibility.
Another reason some agents say they don't work with FBSOs is because of liability. You have a seller who may or may not know the formalities for selling property in their state, and while the internet can be a great resource, people neglect to tread carefully and often overlook important details that are legally significant. As a professional, once I step into a transaction I must step up and make sure both parties are performing legally, rather than just one. One of my biggest roles is to protect my client from legal liability, and that in itself can be a challenge, not to mention covering the behind of an additional party who lacks legal guidance.
As I said earlier, agents generally dance around this question because it is a preference that is often criticized, and in my opinion, for good reason.
My two cents are, as an agent of a buyer and a Realtor under the umbrella of the Nation Association of Realtors, while also adhering to the code of ethics put in place by NAR; yes, an agent should show a FSBO property, you are there to find a buyer the property they are looking for, and the commission is a byproduct. The best thing to do is stay open with your clients and let them know the liability of working with a FSBO and see where it goes from there. On the commission side, I would say that 80% of the time a seller is willing to work with a buying agent on the 3% commission. You have some that won't budge and tough negotiation is just part of being an agent. Besides, selling a FSBO can lead to endless referrals through word of mouth. The better you treat someone, the better they will treat you. If you work for someone for free and still show them the same attention and respect you do for everyone else, they will refer everyone they know to you. Thats how you build a business for life.
Career Real Estate Agent vs. Part Time Real Estate Agent
Career Real Estate Agent vs. Part Time Real Estate Agent
Always ask your real estate agent whether they are a full time agent or working as a part time agent. A lot of people don't think this is an issue or even a question worth asking. Though if you think about it, it's kind of a no brainer. Why would you hire someone who is only half way engulfed in the services they are providing you. You wouldn't want your doctor to be a part time doctor, that sounds silly to even think about. Consumers need someone who is a full time agent that spends their work hours conducting real estate and honing their craft as a career agent. Real estate is usually the largest investment a person or family will make, making up a large part of their net worth. One mistake due to negligence or incompetence can change a persons life completely.
Now this doesn't mean that there aren't part time agents out there representing clients accurately and effectively and full time agents that are representing people poorly. Though usually a part time agent got into real estate because it is lucrative and they felt it would be easy.
Real estate is a constantly changing business, literally by the day. Your local market changes constantly with homes being sold, the economy, the amount of homes for sale, the demand for the homes in that area and a variety of other things that happen on a daily basis. An agent can never know everything about a market, it's close to impossible to learn every single thing that goes on in an area. Your agent needs to constantly be learning and reading on what is going on locally and nationally that will affect property values and the demand. They have to be proud to be in the business of real estate and want to become better in their craft every single day. I am a firm believer that a person can never do their best and this is especially true in real estate.
A part time agent usually has other things going on and another primary income source that takes much other their attention and dedication. I am not writing this to talk negatively about part time agents, their are some that are very successful and know their market and the real estate laws within. Though they are usually agents that have had some success in real estate and aren't required to work as much. Let's face it, if there is a real estate agent out there working part time that is successful, they wouldn't be doing it part time. Why have two careers when real estate is one of the most lucrative businesses some one can be in.
The moral of the story is when purchasing something as expensive as real estate you want someone who is taking their career seriously and gives it their full attention. Nothing in life is worth doing half-way.
Joseph Frady, Realtor
Orange Beach, AL 36535
Transaction Broker vs. Agency Agreement
Transaction Broker vs. Agency Agreement
The question is often ask in real estate, "Should I work with a Transaction broker or work with an agent under an Agency Agreement?" Agents themselves, very often, ask the question as well, "Should I work with someone as a Transaction Broker or under an Agency Agreement. In 1996 the Real Estate Consumer Agency Disclosure (RECAD) was put into place and it spells it out if you take the time to understand it and the relationships that are available to a consumer. Below are the definitions of what a Transaction Broker and a Single Agency Agreement are spelled out by the Alabama Real Estate Commission.
Transaction Brokerage Transaction brokerage describes a brokerage arrangement whereby the real estate licensee assists one or more parties, who are customers, in a contemplated real estate transaction, without being the agent, fiduciary, or advocate of that party to the transaction. This means that real estate brokers and salespeople can act as intermediaries between buyers and sellers. With this type of brokerage arrangement, home buyers and sellers are customers and not clients of the licensees with whom they are working.The basic function of the licensee is to bring buyers and sellers together so that a real estate sale can be completed. Sellers will employ the licensee to help market their real estate by identifying qualified buyers and showing their properties to prospective purchasers. This will usually also involve advertising properties for sale in newspapers and other media. Sellers will commonly also rely on the expertise, experience, and advice of the real estate licensee to help make their property ready for sale and determine an appropriate asking price. Buyers, in turn, rely on the services of brokers to find and show them suitable real estate that they can afford and have the desired characteristics. Real estate professionals may also help consumers obtain mortgage financing as well as assist them with finalizing the real estate sale and recording the deed and other documents associated with the sale.
Transaction brokerage arrangements are usually best suited for consumers who are primarily interested in the marketing services and expertise that can be provided by real estate professionals, but who do not need an agent to represent them in the negotiations for the sale or purchase of real estate. Under transaction brokerage, the licensee must provide brokerage services to all parties honestly and in good faith and avoid showing favoritism to either buyer or seller. Alabama law also requires all licensees exercise reasonable care and skill when providing brokerage services, answer all questions completely and accurately, and present all written purchase offers to sellers promptly and in a truthful manner.Licensees must also keep confidential any information given to them in confidence, unless disclosure of this information is required by law. For sellers, this means that licensees must answer a buyer's questions about the condition of the property completely and honestly. In addition, the buyer must be told about any hidden defects known to the licensee that could affect the health or safety of occupants.
Single Agency A single agency arrangement describes a relationship whereby the real estate licensee represents only one party in a real estate sales transaction.In the case of a single agency brokerage arrangement, the real estate licensee represents either the buyer or the seller, but not both parties to the real estate transaction. This type of brokerage arrangement is most appropriate for consumers who need the advice and negotiating skills of real estate professionals in addition to their marketing services. If a seller enters into a single agency agreement with a real estate broker, the broker is referred to as a seller's agent. Under this arrangement the broker must represent only the seller in the negotiations with buyers. Here the broker will seek the highest possible price and best possible sale terms for the seller. This type of brokerage arrangement can involve the use of subagents, especially in situations where properties are marketed through a multiple listing service.
Subagents are empowered to act for another broker in performing real estate services for that broker. The subagent owes the same duties to the broker's client as the broker. If a broker is an agent of the seller, then the subagent is also the seller's agent. When examining properties advertised through a multiple listing service it is important for buyers to determine whether the licensee that is showing them properties is acting in the capacity of a transaction broker, seller's agent or as a subagent of the seller. Buyers should exercise care with respect to the information they reveal to licensees working as seller agents. For example, if you are the customer it would not be wise to tell a licensee the maximum price you would be willing to pay for a particular property when considering making a formal purchase offer. If you are the customer, the broker's primary responsibility is to the seller. In this case, the licensee, as the seller's agent, must convey such information to the seller.
A buyer's agent describes a real estate licensee who is employed by and represents only the buyer in a real estate transaction. This relationship is created by a written contract. This contract should clearly state the service the agent will perform for the buyer as well as specify how the licensee is paid for services rendered in connection with the real estate sale. In this case, the buyer is the client or principal and the real estate broker is the agent of and represents the buyer in dealings with sellers.
This type of real estate brokerage agreement should be used when the buyer needs guidance and representation when negotiating with sellers to purchase real estate. Buyers moving to a new location and who are unfamiliar with local market conditions would be those consumers most likely to benefit from this type of agency arrangement. It is becoming increasingly common in multiple listing situations for the selling broker (a licensee working with and showing properties to the buyer) to be an agent of the buyer and the listing broker to represent the owner-seller. Here, both the buyer and seller, working through their respective agents, could negotiate at arm's length with the benefit of professional help.
There are a lot of agents in real estate that choose to only work as a transaction broker believing they are eliminating risk by not becoming liable under an agency agreement. These agents feel that, by not taking on a fiduciary responsibility, they are eliminating risk by working with someone as a customer and not a client. A consumer is not represented at this point, only assisted under a few guidelines. Well, in theory these agents are correct, the agent takes on minimal liability and are just there to unlock doors and push paperwork. Though in all reality how many sales-people do you know that can keep their mouth shut and not release personal information through casual conversation or not give any advice while trying to gain a sale. I personally cannot work as a transaction broker because I will say something that will exceed my obligations in that role. Ask yourself this, why does anyone need an agent if they are only going to work as a transaction broker?
The conclusion is this, a transaction brokerage is a duty set in place by law to give guidelines to an initial contact between consumer and real estate agent. Yes there are instances where a transaction brokerage would be best, but not when buying and selling real estate in my opinion.
Pre-Qualified vs. Pre-Approved
Pre-Qualified vs. Pre-Approved
People often get a pre-qualification and a pre-approval confused, though they are similar in theory they are quite different in reality.
Being pre-qualified simply means you have spoken to a lender and have disclosed to them your financial situation and they have given you an estimate as to what you can afford to purchase.
A pre-approval is taking it a step further and verifying what you have disclosed about your financial situation to be true through documentation, bank statements, and credit report.
To sum it up, when you get a pre-qualification, you have informally disclosed who you are and where you stand financially and the loan officer then gives you an estimate of what they think you can purchase by what you have told them. As to where a pre-approval is you actually proving what you said about your finances to be true.
Problems with Pre-Qualifications and Pre-Approvals
From time to time you will have a buyer that will go get a pre-qualification or a pre-approval and go make a large purchase. This can hinder the buyer from being able to purchase at the price given by the loan officer because the purchaser has now taken on more debt or depleted their financial reserves. I see this a lot in real estate, someone will go out and get pre-qualified and then find a home and put an offer in on the home. Well, being excited and wanting to move forward they go buy furniture. This will cause huge problems for a purchaser, 1) they just took on more debt or 2) they just took a large amount of money out of the bank for the purchase. This completely changes their financial situation and causes the pre-qualification or pre-approval to be null and void because it was based on their financial situation before the large purchase.
For any questions or for a more thorough explanation you can contact me at anytime.
Joseph Frady, Realtor
Orange Beach, AL 36561
Cell: (251) 978-3339
Duties supersede duties based on common law - Joseph Frady Orange Beach Realtor - RE/MAX Paradise
Section 34-27-87. Duties supersede duties based on common law
The duties of licensees as specified in this article or in rules promulgated by the Alabama Real Estate Commission shall supersede any duties of a licensee to a party to a real estate transaction which are based upon common law principles of agency to the extent that those common law duties are inconsistent with the duties of licensees as specified in this article.
(Acts 1995, No. 95-211, p. 341, §8.)
Cross references: See Rule See RULE 790-X-3.13, RULE 790-X-3.14
Misrepresentation or false information given by licensee - Joseph Frady - Realtor Orange Beach, AL
Section 34-27-86. Misrepresentation or false information given by licensee
(a) A client is not liable for a misrepresentation made by a broker in connection with the broker providing brokerage services unless the client knows or should have known of the misrepresentation or the broker is repeating a misrepresentation made by the client to the broker.
(b) A licensee shall not be liable for providing false information to a party in a real estate transaction if the false information was provided to the licensee by a client of the licensee or by a customer or by another licensee unless the licensee knows or should have known that the information was false.
(Acts 1995, No. 95-211, p. 341, §7.)
Services Licensees required to provide - Joseph Frady - Real Estate Agent - Orange Beach, AL
Section 34-27-85. Services licensees required to provide
(a) In addition to the duties enumerated in Section 34-27-84, a licensee shall provide all of the following services to clients:
(1) Loyally represent the best interests of the client by placing the interests of the client ahead of the interests of any other party, unless loyalty to a client violates the duties of the licensee to other parties under Section 34-27-84, or is otherwise prohibited by law.
(2) Disclose to the client all information known by the licensee that is material to the transaction and not discoverable by the client through reasonable investigation and observation, except for confidential information as provided in subdivision (3) of subsection (a) of Section 34-27-84. A licensee shall have no affirmative duty to discover the information.
(3) Fulfill any obligation required by the agency agreement, and any lawful instructions of the client that are within the scope of the agency agreement, that are not inconsistent with other duties as enumerated in this article.
(b) A broker who represents more than one client in a real estate transaction owes the duties as specified in subsection (a) to each client, except where the duties to one client will violate the fiduciary duties of the licensee to other clients.
(c) A broker may provide brokerage services as a limited consensual dual agent only with the prior written, informed consent of all clients of the broker in the transaction.
(Acts 1995, No. 95-211, p. 341, §6.)
Obligations of Licensees - Joseph Frady - Realtor - Orange Beach, AL
Section 34-27-84. Obligations of licensees
(a) Licensees shall have all of the following obligations to all parties in a real estate transaction:
(1) To provide brokerage services to all parties to the transaction honestly and in good faith.
(2) To exercise reasonable skill and care in providing brokerage services to all parties.
(3) To keep confidential any information given to the licensee in confidence, or any information obtained by the licensee that the licensee knows a reasonable individual would want to keep confidential, unless disclosure of this information is required by law, violates a fiduciary duty to a client, becomes public knowledge, or is authorized by the party in writing.
(4) To account for all property coming into the possession of the licensee that belongs to any party to the real estate transaction.
(5) When assisting a party in the negotiation of a real estate transaction, to present all written offers in a timely and truthful manner.
(6) To act on behalf of the licensee or his or her immediate family, or on behalf of any other individual, organization, or business entity in which the licensee has a personal interest only with prior timely written disclosure of this interest to all parties to the transaction.
(b) A licensee may provide requested information which affects a transaction to any party who requests the information, unless disclosure of the information is prohibited by law or in this article.
(c) When accepting an agreement to list an owner's property for sale, the broker or his or her licensee shall, at a minimum, accept delivery of and present to the consumer all offers, counteroffers, and addenda to assist the consumer in negotiating offers, counteroffers, and addenda, and to answer the consumer's questions relating to the transaction.
(Acts 1995, No. 95-211, p. 341, §5; Act 2005-314, 1st Sp. Sess., p. 646, §1.)
RECAD - Real Estate Consumer Agency Disclosure - Joseph Frady Realtor - Orange Beach, AL
RECAD - Real Estate Consumer Agency Disclosure - Joseph Frady Realtor - Orange Beach, AL
THIS IS FOR INFORMATION PURPOSES
THIS IS NOT A CONTRACT
REAL ESTATE BROKERAGE SERVICES DISCLOSURE
*Alabama law requires you, the consumer, to be informed about the types of services which real estate licensees may perform. The purpose of this disclosure is to give you a summary of these services.
A SINGLE AGENT is a licensee who represents only one party in a sale.That is, a single agent represents his or her client. The client may be either the seller or the buyer. A single agent must be completely loyal and faithful to the client.
A SUB AGENT is another agent/licensee who also represents only one party in a sale. A sub agent helps the agent represent the same client. The client may be either the seller or the buyer. A sub agent must also be completely loyal and faithful to the client.
A LIMITED CONSENSUAL DUAL AGENT is a licensee for both the buyer and the seller. This may only be done with the written, informed consent of all parties. This type of agent must also be loyal and faithful to the client,except where the duties owed to the clients conflict with one another.
A TRANSACTION BROKER assists one or more parties, who are customers,in a sale. A transaction broker is not an agent and does not perform the same services as an agent.
*Alabama law imposes the following obligations on all real estate licensees to all parties, no matter their relationship:
To provide services honestly and in good faith;
To exercise reasonable care and skill;
To keep confidential any information gained in confidence, unless disclosure is required by law or duty to a client, the information becomes public knowledge, or disclosure is authorized in writing;
Present all written offers promptly to the seller;
Answer your questions completely and accurately.
Further, even if you are working with a licensee who is not your agent, there are many things the licensee may do to assist you. Some examples are:
Provide information about properties;
Assist in making a written offer;
Provide information on financing.
You should choose which type of service you want from a licensee, and sign a brokerage service agreement. If you do not sign an agreement, by law the licensee working with you is a transaction broker.
The licensee's broker is required by law to have on file an office policy describing the company's brokerage services. You should feel free to ask any questions you have.
The Alabama Real Estate Commission requires the real estate licensee to sign,date, and provide you a copy of this form. Your signature is not required bylaw or rule, but would be appreciated.
************************************************************************ Name of licensee ________________________________________________. Signature ______________________________________________________. Date __________________________________________________________. Consumer name _________________________________________________. Signature _______________________________________________________. (Acknowledgment for Receipt Purposes, Only) Date ___________________________________________________________.
Author: Alabama Real Estate Commission
Statutory Authority: Code of Ala. 1975, §§ 34-27-8, 34-27-82, 34-27-87.
History: New Rule: Filed January 25, 1996; effective February 29, 1996. Amended: Filed August 3, 1998; effective September 7, 1998. Amended: Filed February 27, 2002; effective April 3, 2002. Amended: Filed November 26, 2002; effective December 31, 2002.