Archive for the ‘Real Estate terms’ Category
Agency Relationships in Real Estate
Dual Agency vs. Single Agency
By Elizabeth Weintraub, About.com Guide
You’ll find a lot of disagreement in the industry between single and dual agency agents.
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Agents who represent clients under single agency owe a fiduciary responsibility to the client. They cannot share confidential information with the other party or the other party’s agent. Single agency agents must use care and due diligence to perform duties, disclose all material facts and be honest.
Buyer’s agents and the buyer generally sign a buyer’s broker agreement, which lays out the duties and obligations of the agent. In some states, if buyers do not sign a buyer’s broker agreement with the agent, that agent does not represent the buyer but instead becomes a sub-agent of the seller. Sub-agents owe the same duties to the seller as the listing agent.
Seller’s agents and the seller sign a listing agreement, which also lays out the duties and obligations of the agent. Listing agents and buyer’s agents each owes the client loyalty, confidentiality and accountability.
Many agents work as buyer’s agent with buyers and as a seller’s agent with sellers. However, some agents work solely as exclusive buyer’s agents and never, ever take a listing.
Dual Agency With Two Agents
Because all real estate agents are licensed under a real estate broker, it is possible to work with one agent who is licensed by the same broker as the listing agent. This situation creates a dual agency. The agents could work at separate offices and be strangers to each other, but since they are licensed by the broker, they are still operating under dual agency if one agent represents the buyer and the other represents the seller.
Starting out, an agent may have created an single agency relationship with the buyer, but when the buyer chooses a home listed by that agent’s broker, the agent’s relationship with the buyer changes. Not all single agents note the distinction. In the real world, most of these dual agents talk the talk of dual agency but continue to walk the walk of single-agency representation.
Dual agency must be agreed to in writing between the parties. Laws vary from state to state. In California, for example, exclusive buyer’s broker agreements contain verbiage that allows dual agency, so most buyers don’t realize their buyer’s broker could be subject to dual agency. Only exclusive buyer’s agents are never dual agents.
Dual Agency With Same Agent
A listing agent who also represents the buyer is a dual agent. Dual agents cannot operate in a fiduciary relationship with either party and must treat both sellers and buyers equally. They cannot share confidential information but they cannot give confidential advice.
A dual agent in California was sued by the seller because she told the buyer to ask for a carpet allowance from the seller. It is very difficult to obtain the highest and best price for the seller when the agent also represents the buyer. The dual agent cannot advise on home price nor terms nor negotiate on anyone’s behalf.
Some buyers prefer to work solely with listing agents because they know the agent is receiving both ends of the commission, that is the listing commission and the buyer’s agent commission. They feel the listing agent is motivated when a buyer makes a purchase offer to get that offer accepted. They might also ask the dual agent to further negotiate the real estate commission to increase the seller’s profit on a low-ball offer.
To avoid dual agency, some agents will work as transaction agents. Transaction agents do not represent either party and do not protect the interest of the seller nor the buyer. They simply facilitate the transaction.
A transaction agent helps to fulfill the obligations of the purchase contract and provides the necessary paperwork for each side. It relieves some of the responsibility incurred when agents take on dual agency and further removes the agent from loyalty.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.
7 terms every homebuyer should know
Any homebuyer will encounter a range of new jargon. We demystify it.
By Michele Lerner of HSH.com
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When buying a home, understanding your contract is one of the most important protections you have to ensure you make an informed decision.
As with everything else about real estate, sales contracts or purchase agreements vary from state to state – and even by real-estate company, in some places. Variations in regulations place even greater emphasis on working with professionals who have local knowledge. (Bing: What’s the best way to establish credit?)
While the terms used may change from place to place, seven common terms are particularly important for you to understand.
1. Buyer cost sheet. This sheet is not part of the purchase contract, but it’s still important.
A property purchase agreement can range from a few pages to a dozen or more, depending on your location and the complexity of the transaction. Buyers need to focus closely on the buyer cost sheet, sometimes called “cash to close.”
The buyer cost sheet, typically generated by your lender but sometimes given to you by a real-estate agent, should include everything you will be responsible for paying when you buy a home.
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Items included on a buyer cost sheet may include:
- Inspection fees.
- Appraisal fee.
- Transfer fees.
- Down payment.
- Closing costs.
- Prepaid items such as prorated property taxes, homeowner’s insurance and homeowner association dues.
Steve Yeager, an assistant manager with Weichert Realtors in Upland, Calif., says, “Some of those costs, especially the closing costs, may be paid by the seller after negotiations take place, but buyers need to have the entire cost of the transaction laid out for them to make sure they have the funds to buy the home.”
2. Commission authorization. Commissions for both the listing agent and your buyers agent are negotiable and are generally paid from the proceeds of the sale by the seller.
3. Contingency. A contingency is a clause in a contract that sets the conditions under which the contract can be voided and the deposit returned to the buyer. Morgan Knull, an associate broker with Re/Max Gateway in Washington, D.C., says the most common contingencies are for home financing and a home inspection.
“In the Washington area, contracts also have a contingency based on the review of condominium or homeowner association documents so that buyers can cancel the contract if they are unhappy with the information in the documents,” Knull says.
Tony Geraci, a broker and owner of Century 21 HomeStar in Highland Heights, Ohio, says buyers typically have 30 days after the contract is agreed on to have a signed financing agreement in place from a lender. Home inspections usually must take place within seven business days in Ohio, and any cancellation of the contract or negotiations must take place within three days after the inspection.
Contingencies are negotiable. So if you believe you need more time for an inspection or to obtain financing, you can write that into your offer.
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4. Disclosure/disclaimer. Rules vary from state to state about what homeowners need to disclose to potential buyers, but most states require sellers to complete a form that tells buyers what they know about their property.
“In California, sellers must disclose anything that affects the ‘value and desirability’ of the property,” says Yeager, who adds, “California is known as the ‘nanny state.’”
California sellers must disclose information such as whether they live:
- In an area prone to fires.
- On an earthquake fault zone.
- Within hearing of an airport.
- In an area with a flood hazard.
Geraci says that in Ohio, only sellers who live in the property must disclose anything they know that could affect the buyers’ decision to buy. “Estate sales and investors are not required to disclose what they know,” Geraci says. “But I always tell all sellers they should share everything they know with buyers.”
5. Earnest-money deposit. Buyers usually attach a check for their earnest-money deposit to their offer. The check is put into escrow once the contract has been approved by all parties and is used as part of the down payment at settlement.
“The size of the deposit varies according to the size of the down payment, the price point of the property, the neighborhood and local expectations,” Knull says.
6. Escrow. Escrow is handled by a title company, an escrow company, an attorney or a real-estate broker, depending on local practices. An escrow account includes the buyer’s deposit and all the financial portions of the purchase transaction before, during and after the settlement.
“The escrow company will pay off all the liens on the property after settlement and will record the transaction at the local courthouse or county office,” Geraci says.
The term escrow also refers to prepaid amounts for homeowners insurance and property taxes that you pay with your mortgage bill each month. Your lender will keep these funds in an escrow account until the bills are due.
7. Good-faith estimate. Like the buyer cost sheet, the good-faith estimate is not part of the purchase contract, but is still important.
“The good-faith estimate has a twofold purpose,” Knull says. “It gives buyers a snapshot of their estimated costs for closing services, the down payment and prepaid items like homeowners association dues, homeowners insurance and property taxes. In addition, buyers can use the estimate to hold their lenders to the amount promised in certain categories of costs.”
Geraci stresses the importance of buyers looking at the good-faith estimate as soon as possible so they understand how much they will need at closing. “Some buyers may see that estimate and realize they need to save more before they can buy a home,” Geraci says.