In an article posted earlier this month, we addressed issues related to selling a home from the seller's perspective. In this article we will examine issues from the buyer's perspective.
In most cases on both the South Fork (The Hamptons) and North Fork of Eastern Long Island, real estate brokers by custom represent sellers. The practice of representing buyers is still pretty much in its infancy, although more buyers are requesting buyer representation.
A buyer may employee a brokerage firm to represent the buyer by entering into three types of buyer agency agreements: an exclusive right to buy buyer agency agreement; an exclusive agency buyer agency agreement; an open buyer agency agreement.
With an exclusive right to buy buyer agency agreement the brokerage firm representing the buyer is entitled to a commission whether the buyer buys a property through that brokerage firm, another brokerage firm, or directly from an owner.
In an exclusive agency buyer agency agreement the buyer is obligated to pay a commission to the brokerage firm whether that brokerage firm finds the property or another brokerage firm finds the property, but not if the buyer purchases a property directly from the seller unless a broker had shown that property to the buyer. This type of buyer agency agreement is not as appealing as the first type because the brokers could be working for nothing as well as competing with the buyer.
With an open buyer agency buyer agency agreement the buyer is only obligated to compensate the brokerage firm that finds the property or no broker if the buyer finds a property not shown to them by a broker. This is not appealing to brokers and may also impose potential liability upon the buyer for acts of each of the agents.
A buyer who has been pre-approved by a lender has an advantage over a buyer who has not. It provides the buyer and the seller with a more realistic picture of what the buyer can afford to pay.
Many buyers today start their search for a property on the internet and eventually work through a real estate broker. Typically, most of the brokerage firms in a given area share listings and therefore it is not necessary to go through a number of different brokerage firms to see properties listed for sale. They also usually share the commissions equally, whether representing buyers or sellers.
A buyer who doesn't have to sell one property to buy another is more attractive to a seller and brokerage firms than one who does.
"An educated consumer is our best customer," said businessman Sy Syms. Today, as a result of the internet many buyers of real estate are educated consumers. But just as Mr. Syms knew his product better than most consumers, so do real estate brokers.
Among the issues that can obstruct a purchase could be the existence of certificates of occupancy, closing dates, environmental issues, transfer taxes levied in certain areas, covenants and restrictions, and liens and encumbrances.
It is advisable to consult the attorney who is going to represent you in the purchase of a property before beginning the purchasing process.
John is a St. John's University graduate, licensed Real Estate broker, lecturer, teaches real estate license classes at LIU, NYU, and Cook Maran Real Estate School, and is a well-respected consultant to the real estate industry. www.johnaviteritti.com