Advice for first-time homebuyer?

[Gaspar]

You got me. 

I just felt sorry for him with the economy and all.  Didn't want the bank to come take away his Audi.

[cannon_fodder]

Sorry in advance for contributing to the thread hijack, but I looked into this a couple years ago out of curiosity and have to chip in my 2 cents:

IMHO, realtors make sense for people moving to a new area, selling a house after they move away, or if they have a job/life that doesn't allow them to really be involved in a buy or sale.   But if you can get away from work a few times there is no reason you can't sell your own home.  You're paying someone to deal with the pain in the donkey for you.  You are also paying someone to advertise for you.  If you are willing to pay for the service, then by all means.

But I'm too frugal for that.  On the sellers side I just see 6% taken out of my gross. On the buyers side I just see 6% added to the price which I know is will be near the top edge of what the market will allow to begin with.    On a typical $150,000 Tulsa home that's $9,000.  Or about the first 4 years of equity generated by your Mortgage payments.

Unfortunately, every study that I am aware of, other than by the Realtor Association of America, has concluded that the 6% paid to realtors is an economic loss for the seller. While the house typically sells a couple weeks sooner, the sale prices are statistically equal before taking out the 6%.  The National Association of Realtor's study found a 16% premium for hiring a realtor (2005) , but admitted 40% of FSBO sales they studied were to friends or family and that may have effected the price.  An earlier study by the association found a 26% boost when you hire a realtor (2003).

As an initial matter, I flatly disregard such a numbers from the Association.  Why does private research never verify their claims to any significant level,  let alone to the amazing high degree that they are claiming?  And if their numbers are correct, why, IN THE HELL, would you ever buy from a realtor?

If a typical realtor listed home sells for 26% more, I'm never going to bother even looking at one.  26%?  So I could have the $150,000 Realtor listed house in a cookie cutter subdivision OR save $39,000 and buy the identical non-realtor listed one for $111,000 next door.  Hmmm, which way to go, which way to go.  If that statistic is true, a buyer would have to be an utter fool to consider buying property listed by a realtor.  

And finally, if the 85% listing rate of realtors began to wane the self fulfilling prophecy of a realtor being a requirement would collapse.  The more FSBO transactions that occur the more comfortable and smooth such transactions would be and the more choices there would be available.  The National Association of Realtor's is in the business of making money for realtors - anything they can do to make it look like they are required will help (not faulting them for looking after their industry).

Which goes along with what the government found.  That the National Association of Realtors was "fundamentally anti-competitive and harmful to consumers."  Mostly for trying to shut down any operation that tried to change the rules, lobbying for effective bans on e-realtor or self-posting websites, and "encouraging" members to maintain fees at certain rates.   The big fish in the suit was forbidding people they didn't like from participating in listing services.   Under the business friendly Bush DOJ, it was determined that the action of realtors was to benefit Realtors to the detriment of consumers and an illegal restraint of trade.  In what the Realtors Association declared a stunning victory in educating the Justice Department, they were ordered by a Federal Judge to allow equal access to all realtors including discount firms, firms with rebates to consumers, and online realtors.

It's a $100,000,000,000.00 industry.  They get to make a few of the rules, they have some influence, and they know the game.  But they exist primarily because they provide a service.  Realtors provide a service.  

They know how to navigate the complex buying and selling of real estate, they know the market, they know buyers and they know sellers.   If you are moving to a new location and need a guide, if you are not willing or able to put forth the effort to sell your home, or you just don't want to bother with it - hire a realtor.  All the realtors I know are honest people who work hard to make a good living.  But that doesn't mean everyone needs or will benefit from their services.

- - -
As always, I welcome data and opinions to the contrary.  But the studies I found indicate that the seller ends up paying 6% to sell his home a couple weeks sooner.  The industry brags that they make buyers pay up to 26% more.

To purchase my first home I spent several evenings looking online for listings, drove around a few neighborhoods, pulled fliers, and made some calls.  When I got serious I met a few owners on a Saturday and went through the properties.  Pulled transaction histories from the Courthouse (assessment value, previous mortgages).  Made an offer, hired an inspector, got a loan and closed.  I missed 1/2 day of work for the closing and one long lunch to meet with the mortgage broker.  Total time spent:  12 hours.  Sold it by posting fliers on campus and an ad in the newspaper (it was near campus).  Showed it 4 times and it was sold for $1,500 below asking price.

My first house in Tulsa I drove around with a guy I knew from Tulsa in neighborhoods he said would be good to move to with a digital camera.   Took pictures of houses I was interested in, pulled fliers, looked online.  Asked people at TU about the various neighborhoods.  Went home to Iowa and made a few calls and set up a couple of visits for 2 weeks later when I would be in Tulsa.  Looked at the houses with my wife one day when I was in town for orientation, made the seller show me assessed value and what his last mortgage note was for, offered, countered, the bank recommended an inspector, and closed.  Again 10 or 12 hours.

Frankly, I don't see how you avoid spending 10 hours even with a realtor.  You are going to want to visit the homes, will probably look online at some, you will have to be present for closing etc.  For me, it would have represented spending about $600 an hour.  I might just be lucky, but our purchases and worked out very well.

/thread hijack?  

[OpenYourEyesTulsa]

When you buy a house you don't have to pay the realtor so it is not so bad.  I recommend it if you are a newbie or if you are really busy and want the help.  You can also view houses more easily because your realtor has the lockbox key and you don't have to wait for the selling realtor to come by.  When I was looking at new neighborhoods I came to see one house but would wind up seeing all of them on that street because of my realtor being able to show me.  I recommend seeing as many houses as you can before you buy.  

As far as selling, I do not always recommend using a realtor because you have to pay the full 6%.  If you sell yourself on FSBO sites they can put it on MLS for about $300.  You do have to pay the buyer's realtor if they have one.  I put in the listing that I only paid realtors 2% commision and they always accepted it but I think it turns some realtors off of promoting it.  I did get a lot of people without realtors that were not pre-qualified for a loan so they wasted my time.  I got to the point when I told people they had to be pre-qualified before I would show it.  You also have to provide your own yard sign and mine was stolen right out of the yard once probably by a realtor.  LOL.

The moral of the story is you should have a set amount you want to get out of the house when you sell.  Tell your realtor up front and sometimes they will take a lower commision to make you happy.  Otherwise they may say they cannot do it and you just sell it yourself.  Never sign a 6 month contract with a realtor.  I recommend month to month if you can get it.

[brianh]

In order for the thing about not having an agent to save money to work, you would have to buy a house that was specifically FSBO right?  Because if the house you wanted was for sale by agent, then your agent would just take part of their commission.  That is the way I understood it.

I got like 4-5 pre approvals before I started looking like the OP is suggesting.  You will have to pick one and stick with it early on because the lender has to work with insurance and escrow/title people.  That was one thing my agent got angry at me about.  I was trying to keep all of them on board in case a deal with one fell through.  I think it also works best if your agent seems to be buddy buddy with your lender.  I think mine fast tracked me through BOK's system because of that.

[Conan71]

Cannon- your data that houses listed by realtors sell for 26% more than FSBO's would justify using a realtor as a seller and paying a 6% commission, yes?  If I can net a 20% gain on my sales price just by paying someone else 6% that's a great investment.  I'm highly suspect of those numbers, but that's what's given in your data.

Not such a great deal if you are a buyer, no. 

I've honestly not run into situations where FSBO list prices are significantly less than those of homes listed with realtors in the same neighborhood.  Some FSBO sellers have it priced up so that they can pay a broker commission (I believe it's usually 3% if the broker brings a buyer).  Everyone is trying to get the max they can for their house, I don't really find much to support that houses sold by realtors are consistently 6% higher (much less 26%) than FSBO's. 

It's not an area most people feel competent in.  Let me put it another way, would you advocate someone with no knowledge of the law taking on a tort action pro se to avoid paying a 30% "commission" to an attorney? 

[BierGarten]

Let me put it another way, would you advocate someone with no knowledge of the law taking on a tort action pro se to avoid paying a 30% "commission" to an attorney? 

You just compared the expertise required to buy or sell a home with the expertise required to run a successful tort case.  ?

[ARGUS]

R= hardest working letter in the alphabet. Capitalize it when using in refernce to Realtor.
Feel free to remind me to not do biz w/ atty's. Bleh...

[cannon_fodder]

<sub>Why would I capitalize realtor?  I understand that Firefox and Word want me to, but it isn't a proper noun.  It's a job title.  If refering to THE President, the Pope or another title serving as a proper noun, capitalize it.  Otherwise, it's just a title.  I was not using it to reference members of the NAR.

My father is an accountant, my mom an administrative assistant, my sister is a hydrologist, I am an attorney, I go before a judge, the laws I argue are passed by legislators, my secretary makes appointments, my plumber works on my pipes, I used to work for a crane company and our operating engineers ran our equipment.

The explanation I've been given is that people who want to join the NAR have to take a test and often study for over a month.  I studied for 5 years to take the CPA (requires 150 hours), but am still just an accountant.  I studied an additional 3.5 years to take the bar, but remain a lowly attorney.  A journeyman plumber studies for 3 years, an operating engineer has to be an apprentice for 3, a judge often has 7+ years of college, took a test, a lifetime of experience, and is an official but the word judge isn't a capitalized title.

Yes, I understand the NAR holds a trademark on the term REALTOR.  So does Xerox, Kleenex, Frisbee, Velcro,  and Coke.  Hell, most words associated with the internet (Internet) have been trademarked by someone.  If you want to be technical, you should know that the NAR insists you follow the word Realtor with the registered trademark symbol. But it is real annoying to do so whenever you reference Realtors® so no one but the National Association of Realtors® does it.  They are deathly afraid of losing their trademark. 

Furthermore, I wasn't referring to only members of the NAR.  I was using it as a generic, NON-REGISTERED term to refer to people who charge fees to facilitate transactions in real estate.  The term the NAR demands I use is "real estate practitioners."  Luckily, since I am not using the term for profit or in a commercial application I won't be sued for my infringement.  Ask 80% of the people and they will give you a generic definition for the term realtor as a reference to someone who acts as a real estate practitioner.

Can you imagine the CPA's trademarking the word "accountant?"  Or attorneys trademarking "lawyer."   

I'll capitalize Realtor on a general basis when you call me Dr. Cannon_Fodder, as I hold a terminal degree in my field and have been granted a Doctorate.   I understand their desire to differentiate members of their club, but to demand I capitalize their title is pretentious.</sub>


Conan:

Yes, if you use the 26% figure you come out way ahead.  That figure was given in a publication byt the National Association of Realtors®, not supported and replaced by their next release.  I gave the number out of courtesy to present the other side of the argument. Their more recent figure (16%?) still has serious flaws in it's underlying data, as they readily admit.  And if the figure is true, the argument from the buyers perspective is irrefutable.  Just like you wouldn't want to defend a lawsuit from an attorney who brags about inflating rewards 26%, I wouldn't want to buy from a Realtor® who makes the same claim.

And yes.  If you have a simple tort case, a no contest & no child divorce, traffic ticket, small claims, eviction, or other simple legal matter you can handle it yourself.   I readily tell clients that. In some instances clients will do no better than a break even by contacting an attorney and it only serves to pass on the pain in the donkey and as a piece of mind.  I don't pretend my involvement is needed for every legal transaction and I don't believe things should be so complex that my help should be required.

You have a wrongful death claim, medical malpractice, a divorce involving dispute child custody, a felony criminal charge or other areas that require an expert to navigate . . . then I would highly suggest hiring an attorney (or is that Attorney®?).  Simple legal transactions don't require an attorney.  Simple real estate transactions don't require a Realtor®.  I'm not sure why that is threatening.

Sorry, but I don't see data to support the notion that hiring a Realtor® improves my position as a seller and I haven't heard a coherent argument that it is beneficial to the buyer (particularly given the aforementioned and oft mentioned arguments of increases costs to the buyer as a reason for the seller to use a Realtor®).  Though I realize that's what seems like is happening, I'm not setting out to bash Realtors®.  Just giving my opinion.

Please, if I am missing something (other than improperly capitalizing a noun), state your case.  I'm not pretending to be a definitive source here.  Just stating my opinion.  Clearly Realtors® on this board have a different opinion and while I respect their work, I personally fail to see value in it for me in local transactions (just lack my firms expertise in divorce lacked value for you).

/goodbye Karma.   

Really, I know I sound like a [penis].   Just stating my opinion.[/sub]

[edit]  Sorry for a massive thread hijack.  I got distracted! [/edit]

[Conan71]

Penis. 

My point was nothing more or less that it's worth paying someone else to do your footwork for you if you are unfamiliar with how something works, or if you have limited time resources to accomplish a task.  I've bought and sold property enough times now, both in-state and out of state that I've found using a realtor is worth my time.  It might not be for others.  Not every transaction goes as smoothly as the last.  Selling my farm in Nebraska without the use of a realtor would have been incredibly time-consuming and foolish on my part, considering I was living in Tulsa at the time. 

When someone finds a house they really like, market time will be crucial on their existing property.  If a realtor can make it happen on average 2 weeks quicker, it might be worth paying that premium to someone.

It's just like renovating my house- there are things I'm proficient at, things I'm not so proficient at.  I also have time constraints to get moved in, so there are some things I'm willing to pay to have done just so that I can continue to earn a living during the daytime instead of taking multiple days off to re-finish drywall or install flooring.

IOW- don't poo-poo a whole industry that serves a good purpose for millions of people just because it doesn't necessarily serve your personal needs.  If it wasn't a good value, the real estate brokerage industry would not exist.

[pmcalk]

Haven't seen this mentioned yet, but it is very important.  Check out the surrounding zoning of the the house.  Make sure you understand what it means.  Know what the lot size restrictions are--your next door neighbor may decide to split their lot & replace that one house with two.  You may not mind, but it is something you should know.  If something near you is zoned as a PUD, call INCOG and make sure you know what that means.  Is it zoned HP?  (I love my HP neighborhood, but it is definitely something you should know ahead of time).  If you use a realtor, don't rely on them to explain the zoning--many don't understand it.

Also, if you use a realtor, remember that you still decide who you want to do the inspections and the closing.  I've had realtors try to push closing companies, as though they get to decide.  If you have a good realtor, and trust them, that's fine.  But call around before you decide whom to use.

If you are going to be short of cash after the closing, buy a warranty.  They aren't that expensive, and chances are something will break right after closing.

[nathanm]

Sorry, but I don't see data to support the notion that hiring a Realtor® improves my position as a seller and I haven't heard a coherent argument that it is beneficial to the buyer (particularly given the aforementioned and oft mentioned arguments of increases costs to the buyer as a reason for the seller to use a Realtor®).  Though I realize that's what seems like is happening, I'm not setting out to bash Realtors®.  Just giving my opinion.

Most people are incredibly poor negotiators. A Realtor® is usually better, since it's their job to be better at it.

Attorneys are usually better at resolving traffic tickets in a way that keeps them off your record, too.

Whether those skills are worth the price charged is up to a given individual to decide.

I wouldn't attempt to negotiate a home purchase myself. There's too much money at stake and I'm not a great negotiator, and it's worth it to me to have someone else deal with scheduling inspections and all that. I do deal with my traffic tickets myself. What I'd be paying hundreds of dollars for in that case would be not having to attend the arraignment in person and maybe a hundred dollars in savings on the fine.

And who pays "list" on a house? That's like paying MSRP on a car.

[bbriscoe]

And who pays "list" on a house? That's like paying MSRP on a car.

Not entirely.  There is only one house just like mine so if several people like it, they might get into a bidding war and end up paying even higher than list price.  When buying a car there is usually an entire lot of virtually the same car to choose from and I only need one.  The auto market is over-supplied virtually all the time.

[bbriscoe]

To the OP - I have a real nice 3 bedroom in midtown that I am just about to put on the market.  Pretty much everything has been redone - new roof, new floors, new counters, new thermal windows.  Send me a PM if you are interested before someone else gets it.

[BierGarten]

And who pays "list" on a house? That's like paying MSRP on a car.

Not true.  Sold my last house for "list."  Was able to do so because I was realistic with my asking price.  Sellers are all different.  Some have an unjustified inflated opinion of their home's value and don't get their "list" because of that.  Some sellers price their home higher than what they would take for it because they think it is beneficial to have wiggle room.  Other sellers list their house for its actual marketplace value.  All that to say, paying "list" for a house is often justified if the seller has listed it for the appropriate market value.

[Conan71]

Or people offer list price with specific items they want done, like new windows, a fence, or a roof so they can get improvements financed. 

There have been points in really hot real estate markets that people will offer well over list because there's such a high demand.  I don't know that you'd see an over-list offer in the Tulsa market right now.  No, houses aren't as generic as a new car, but houses for sale in mid-town with a new roof, windows, countertops, etc. isn't exactly unusual.  Unless it's a really rare one-off for a neighborhood or something iconic like a Bruce Goff design, chances are people won't be lining up to pay over list.