I just had a friend who is seeking to make a purchase out of state ask me the following:
“…can I forward you some email correspondence I’m having with a Realtor. I like her, but if you can get me insider tips and tricks to get the property as cheap as I can, I’d love to hear them. I know that real estate is different in each state. I’d still appreciate your opinion on the situation though. Thanks!”
I know my friend was expecting a short answer but honestly there are no short answers to what my friend was asking me. However here is a good place to start and what follows is my response:
First off, an agent cannot give you any advice or opinions regarding a property unless you are in Buyer Agency Agreement with that agent. In the state of Wisconsin all agents (listing or otherwise) represent sellers by default, even if you are on a showing with that agent. In order for you to get true advice and opinions from an agent you will need to enter into a Buyer Agency Agreement with that salesperson.
Until you are in an agency agreement with an agent they are not your agent and you are not their client, you are a customer and they are a salesperson. Once you have signed an agency agreement contract (whether for listing a home to sell or making a purchase as a buyer) that salesperson has become your agent and you their client.
Some firms require that you enter into this agreement for a minimum amount of time and will charge you to end the contract early. At my firm there is no charge for entering into a Buyer Agency or terminating the Buyer Agency Agreement early. They can be executed for any duration of time or specifically for a specific property on a specific date and time. In the state of WI Buyer Agency fee’s are traditionally paid for by the seller at the time of close.
I would ask the agent about what their Buyer Agency agreement entails. Generally I would advise to enter Buyer Agency Agreement for a minimum of 3 – 6 months. Make sure you have the option to terminate the agreement at any time and at no cost for doing so, you never know what might happen in the future and you will want that as an option to utilize if the need arises.
A Buyer Agency Agreement is a “loyalty agreement” between you and the agent that allows an agent to negotiate on your behalf. Generally this means that you will not find another agent to look for properties in the same area that you have that agent looking in, nor will you have another agent look for properties that are comparable to the properties you have the agent representing you for. Also this means that the agent is going to bust their butt to help you find what you are looking for. Once you are in Buyer Agency agreement you will want to make certain to have your agent schedule all showings for properties of interest, do not contact listing agents directly from that point on.
Now once you have found an agent and are in a Buyer Agency Agreement with them you’ll want to go on showings of properties that are of interest to you. Once you’ve found a few properties (or “THE ONE”) that you’d like to submit an offer on ask the agent to do a CMA (Cross Market Analysis) of the properties. Make sure the properties used in the CMA are as comparable to the listings you are interested in as possible, in that you want to compare APPLES TO APPLES, and specifically the same kind of apples not a cross section of honeycrisp, to granny smith, to braeburn.
A CMA provides you with what the Market Value is of a property. The CMA should compile data that represents current trends in the market too, generally no more than 6 months back (unless the market you are interested in doesn’t have enough data points to pull from, then you’d go back further as needed).
Don’t let Assessed value guide the offer price, ultimately its the Market Value that is king. Assessment value is for tax purposes, appraisals are for lenders, and market value is a compilation of the sold prices of comparable properties. Market Value is generally close to one or both of the appraisal and assessment numbers, but not always.
When it comes time to submit an offer make sure to go in guns blazing ask for EVERYTHING you can in the first offer! That way if you enter a counter phase (and you likely will) you can appear more comprising and give the seller a sense that you are giving up more than they are. If you are going to lowball fine but keep it within 3-6% of the market value and do it out of the gate, ask for a closing cost credit towards buyer prepaids and closing costs (start high at say $3000.00). Implement contingencies such as a Finance Contingency, an Appraisal Contingency, and an Inspection Contingency. Use those 3 no matter what. Additional contingencies might be a Radon Contingency, Lead Based Paint Contingency, Mold Contingency, etc.
Contingencies are there as safety nets to give you the ability to legally and contractually back out of a deal should you need to.
There is more to Buyer Agency but this should get you started for now.