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Phoenix Homebuyer Representation Frequently Asked Questions:
Hire a professional buyer's advocate guide and advise you. In almost all cases you receive this service at not cost. The seller of the home you buy pays for this service. This takes your relationship from one of being a customer who is being sold a home to one of being a client working closely with your trusted real estate advisor who presents and helps you evaluate the pros and cons of all available homes in your price range with all of your required features and many of the desired additional features you always wanted in a home.
Homes are not a commodity that are all alike. They are individual and unique. You need a trusted advisory who has evaluated thousands of homes to apply that expertise to helping you select your new home! Your home may be your biggest investment. Don't you want to make sure you are making the right decision on many different levels?
What is a buyer’s representative?
Defined most simply, a buyer’s representative (also known as a buyer’s rep or buyer’s agent or buyer's broker) is an advocate for the buyer—not the seller—in a real estate transaction. Real estate laws and regulations vary from state to state, but Arizona buyer’s representatives owe full fiduciary (legal) duties, including loyalty and confidentiality, to their buyer-clients and work in their clients’ best interests throughout the entire transaction.
How does an Accredited Buyer’s Representative (ABR®) differ from other buyer’s representatives?
Sam Elam, an ABR®, is an experienced professional buyer’s representative who has completed advanced training and who has proven experience in serving the special needs of his buyer-clients. In addition to knowing the dynamics of the local market, an ABR®-designated buyer’s Rep can help you make informed decisions throughout the entire home buying process. An ABR® is also a REALTOR® (a member of NAR) and must abide by the strict NAR Code of Ethics, as well as Arizona statutes and Arizona Department of Real Estate Commissioner rules and regulations.
What is the standard compensation structure for real estate professionals?
For the most part, real estate professionals are compensated by commission, based on a home’s selling price. Commission rates are not standardized, but vary, as does how the sales commission will be divided between the agents on the selling and buying side of the transaction. There is consistency, however, in how commissions are paid. When a seller signs a listing agreement, their contract is with a listing brokerage firm. All fees must pass through that brokerage firm. Typically, the seller’s representative - and your buyer broker per MLS cooperative rules - will be paid by the listing broker after the transaction successfully closes.
When a buyer hires a buyer broker, the buyer agrees to pay the buyer broker fee for services rendered that is typically a percentage of the sales price. Often the amount paid to the buyer broker equals the typical buyer broker compensation offered through the MLS and there is no additional fee paid by buyer. In the event the buyer broker finds a home that meets all buyer needs that is being sold by owner directly and not listed in the MLS, the buyer broker will negotiate buyer broker compensation with the owner in advance of the property being shown to the buyer. This additional step ensures the owner will pay the fee negotiated between the buyer and buyer broker. If the owner will not pay all of the buyer broker compensation, the buyer broker will negotiate the sales price down to match or exceed the buyer cost of the buyer broker fee.
What services can I expect to receive?
This depends on what level of service you have established as a home buyer. If you have not formed an agency relationship, you are probably considered a customer, rather than a client, and you will likely receive a lower level of service. The terms vary from state to state, and each buyer’s representative can set their own guidelines within their state parameters and their brokerage practices. So you should clarify, preferably in writing, the services you are entitled to receive before you start viewing properties.
It’s also important to understand that if you do buy a home, your buyer’s rep will probably receive compensation (through the listing broker), regardless of whether you are a customer or a client. So more times than not, it’s in your best interest to formalize an agency/representation relationship, so you’ll receive the highest level of service possible.
Will I pay more to be represented as a buyer?
In the vast majority of cases, the answer is no. When a house is listed for sale, the seller’s contract spells out the commission rate that will be awarded to a buyer’s representative. This is known up front and typically covers all, or at least most, of your representative’s compensation.
If it doesn’t, the choice is yours. You can scratch this house off your list, or decide to view it, knowing that any remaining compensation will need to be addressed. But even if the seller’s listing contract doesn’t entirely cover your buyer’s representative’s compensation, and you must pay the difference, it’s quite possible that these relatively small differences will be more than offset by other purchasing terms negotiated with the seller.
Can I avoid real estate commissions altogether and buy directly from a seller?
Yes, this is an option that some buyers explore. However, it’s important to understand that nothing is truly free and this approach still carries a price. Unrepresented sellers (for-sale-by-owner properties) frequently lack adequate information about how to price their home, or attempt to inflate the price in lieu of paying a real estate commission.
As an unrepresented buyer, it will be much harder for you to know if you’re overpaying. Real estate professionals have developed keen pricing insights that go well beyond simply evaluating data through the Multiple Listing Service (MLS). And if you are overpaying, it will create further complications in securing financing.
For these, and many other reasons, a high majority of consumer-to-consumer housing transactions never reach closing. Real estate professionals play a valuable role in keeping your home-purchase on track, starting with selecting and touring properties and continuing through negotiations, inspections, financing and closing. This is especially true in today’s market, where alternative buying opportunities, including short sales, have added even more complexity to some real estate transactions.
What is the best way to search for homes online?
Utilize the MLS search capabilities found at www.SamElam.com. This site has all property listings in the Arizona MLS. It also provides a wealth of other valuable information resources for home buyers including automatic notfication of new listings matching your search criteria updated in your custom MLS Portal and emailed directly to your Inbox.
1. Your maximum monthly mortgage payment should not exceed 28 percent of your gross (pre-tax) income.
2. Your maximum debt load, including your mortgage payment, should not exceed 30 percent of your gross income.
These ratios are typical of those required to secure a conventional mortgage. Lenders will be able to supply details about other types of mortgages, such as FHA or VA loans, which offer more flexible qualification standards. There are many types of mortgages and financial tools available that provide flexibility in interest rates, terms, and down payment requirements. Learn more about loans.
What’s the difference between being pre-qualified and pre-approved for a mortgage?
Typically you will first pre-qualify for a mortgage, then get pre-approved before you have found the specific home you wish to purchase. What is the difference?
Pre-qualification: An informal determination by a lender or mortgage broker stating how much mortgage you can afford. Usually a lender will request permission to contact the credit reporting agencies to learn your credit score and review your credit history. This can be done while you are on the phone speaking with the lender.
Having the lender indicate on your Pre-Qual Form (PQF) your credit has been reviewed is very important to the seller reviewing your offer to determine the probability the buyer will be able to qualify for a loan. No seller wants to accept an offer and take their home off the market unless they are confident the escrow will close.
Pre-approval: A guarantee in writing by a lender to grant you a loan up to a specified amount. Having a loan Pre-approval is as good as being a cash buyer. The only condition to closing is the home appraising for the sale price and that can be determined quickly.
1. Sellers will find any offer you make more attractive if you are pre-approved for a mortgage.
2. The length of time before closing can be much shorter if you’ve completed the steps to securing mortgage approval prior to signing a contract on a property.
3. You have the peace of mind knowing you can close on the home you select within your price range and the seller is willing to give you the best price for the home.