Will Mistake #2 Cost You $75,000?

In my last newsletter I spoke of a buyer who made a $75,000 mistake on the purchase of a condominium.  Assumptions were made.  To steal a line from Loudon Wainwright’s song “Homeless” – “You suppose something will happen when someone is paid.”

Well something did happen.  Someone got paid (a real estate agent “representing” the seller and buyer).  The results were not good for the buyer but very, very good for the seller.

Recall in my last writing I suggested many home buyers make three assumptions that can cost them money:

1.  The real estate system will protect home buyers;

2.  The agent has the best interests of the home buyer at heart;

3.   A lender will not make a mortgage loan unless the value is substantiated by an appraisal.

Let’s address # 2, the agent has the best interests of the home buyer at heart.

I work in real estate.  I work with other agents and brokers.  Most are nice people, some communicate better than others and all have a primary motivation to sell.  That is what they do, they sell real estate.  The agent doesn’t have the best interests of the buyer at heart.   They shouldn’t.  The agent’s job is to sell the property for the highest price possible.

What if the agent isn’t the listing agent?  Unless you have a signed contract with the agent, (remember my opinion of part time buyer agents however) that agent’s job is to – sell the home for the highest price possible.

While I describe real estate, the same concerns could be raised about investing and conflicts that exist in the financial world.  The brokerage community is going through the same types of discussion as real estate.  The question is how much disclosure is required and what type of disclosure?.  How about that?  The two largest pots of money people have – a home and investments – and each can be fraught with conflicts of interest.

What is a homebuyer to do?   The simple answer is use Homebuyer Associates and our Exclusive Buyer Agent services.  But forget about Homebuyer Associates for a moment.

If you are not going to use our services, understand that the real estate system will not protect you and that real estate agents (unless you have a contract with the agent but really…) don’t have your best interests at heart.  But don’t blame the industry or the agents.  Blame yourself.  The industry and agents are actually doing a good job at what they are supposed to do:  SELL.

If you don’t use our services, at least know who works for whom and how they are paid.  Know the right questions to ask.  If you don’t know the right questions, then just ask real-estate- related questions and maybe important information will fall your way… and then verify that information.  Why ask and verify?

–  Without questions, you will be accepting the word of an agent who claims to represent the seller and buyer.  Do I really have to say more?

–  If you ask questions you may avoid mistakenly paying $75,000-$90,000 more than a property is worth (based on median sale price representative of the area over the past 5 years).

–  By asking questions you may avoid mistakes that hurt you financially.  Because of compound interest, those mistakes can cost you more than just the initial financial loss.   You bear a responsibility to understand the real estate system.

So you thought the appraisal process would protect you?  I’ll let Seamus address that in the next newsletter.

Thanks for reading.