The real estate industry can be completely mystifying to an outsider (and sometimes even the insider), but some secrets are more tightly kept than others. Here are some of the best kept secrets about the real estate industry that you should know.
- You need a Buyer’s Agent — Stat!
- If you want to be taken seriously, lay the right groundwork
- Referral fees exist and you might be missing out
- There could be things your agent isn’t telling you
- The final sales price will be higher than you thought
So you’re in the market for new real estate, congratulations! One of your first steps should be to find a real estate agent that you trust. While you can try handle your full transaction by yourself, the NUMBER ONE biggest secret in real estate is actually threefold. 1). The listing agent (the agent representing the property) is legally obligated to work for the seller’s best interest so even if they offer to help you out, they are working for the seller. 2). The seller pays for both their listing agent and the buyer’s agent. That’s right, as a buyer you don’t pay for an agent who will solely represent your best interests. 3). Even if you don’t sign an agreement with anyone or know about it, a real estate agent may still financially benefit from your transaction due to a common “referral” practise. Long story short, if it’s not going to cost you anything and it might happen anyways and it’s in your best interest, you should probably do it. Check out Questions to Ask a Buyer’s Agent for how to choose the best agent for you.
Before you start talking to agents, you should get a pre-qualification, pre-approval, or proof of funds letter. These letters, obtained through your financial institution of choice, help to show agents that you are serious about your purchase as well as help you to know what you can afford. These documents serve as proof that you have the financial backing necessary to complete a transaction and signal to an agent that you are a true buyer, not just a looker. While very similar, there are a few differences in these documents. Pre-qualification is the least serious of these letters. There are no hard credit checks required for pre-qualification and no guarantees that what is on the letter is actually the amount you would get, but it is, essentially, a solid guess at the amount you could qualify for. A pre-approval letter requires more information from you and a hard credit check, but the result is that you will know exactly how much money your financial institution would be willing to give you for your purchase. These are both applicable if you intend to finance your purchase, but if you’re a cash buyer, you’ll want a “Proof of Funds” letter. This is a statement from your financial institution that states that you have in your account a certain amount of funds.
Did you know that if you are referred to one real estate agent by another real estate agent, the first agent will get paid when you buy or sell with that second agent — even if all they did was make the introduction? Referral fees have been common in the real estate industry seemingly forever, but consumers are often completely oblivious. Often this information has been treated with a “what they don’t know doesn’t hurt them” mentality, but the tides are turning. RealtyHive is pioneering a platform where you can refer yourself as a buyer or seller and in turn reap the benefits of this referral fee system. Real estate agents benefit from this platform because this is the exact same system they are accustomed to and they are able to connect with buyers and sellers who really want to talk to them (rather than getting information from people who were tricked into submitting contact forms) and buyers/sellers benefit by getting what would be a referral fee paid back to them as cold hard cash back at closing.
Real estate agents are licensed professionals and as such have to abide by certain rules, regulations, and laws. One of the laws that especially shape the industry is the federal 1968 Fair Housing Act. This act aims at ending discrimination in housing, but has repercussions beyond the intent. For a more complete overview of possible things your agent can’t tell you (and how to find out yourself) check out 5 Surprising Things Your Real Estate Agent Can’t Tell You.
Congratulations! You found the right property and had your offer accepted (or you accepted an offer on your property). You just need the check for the agreed upon sales price and you’re done, right? Wrong! One of the biggest surprises to buyers and even sellers, especially first timers, are all the costs that come with a real estate purchase. While you can negotiate to have the buyer or seller cover some of the cost, there are fees that are not built into the sales price that will need to be paid. Some of these include closing fees, lender costs, mortgage fees, title insurance, any taxes or outstanding utilities that need to be paid, and potentially more. It’s important to keep this all in mind when looking at properties so that you don’t overreach on what you can spend. This is something that a Buyer’s agent would be able to help with (see Number 1 on this list!)
Ready to start your home search? Make sure to visit Cashifyd.com to get on the waiting list for your opportunity to get cash back at closing when the Cashifyd app officially launches or start searching now by clicking here.