5 for Sellers and 5 for Buyers.
Article originally published on JUL 26, 2004 – Reviewed and approved.
By Neil Jenman
Most sellers and buyers get their real estate knowledge and experience at a hefty financial price. They are so busy earning money they don’t have the time to research and save money. These few brief hints, in today’s fast-paced world, may save you several thousand dollars if you are buying or selling today.
1. INSIST ON A WRITTEN QUOTE
When an agent quotes you a likely selling price, get the quote in writing with a clear condition that if your home sells below the price quoted by the agent, you do not have to pay the agent.
Sure, if the market price genuinely falls and you believe the agent has made an honest mistake, you can decide whether you wish to pay a commission.
However, by insisting on a written quote and a condition on the commission, you are only doing what you would do if you dealt with any other professional person.
You would ask two questions of a professional service provider – First, what are you going to do for me (the price)? And second, what are you going to charge?
2. MAXIMUM 7 WEEKS
If you sign up with an agent, put a limit on the time that you are ‘tied’ to that agent. The longest time should be 7 weeks. Some sellers insist on a maximum of 30 days. You do not want to be stuck with an agent you don’t like. If you like the agent, you can always extend the agent’s time when the period expires.
Putting a time limit on a selling agreement gives you control over the agent, not the other way around.
“You do not want to be stuck with an agent you don’t like. If you like the agent, you can always extend the agent’s time when the period expires.”
3. FOCUS ON TODAY’S PRICE
Yesterday’s price is gone. Sure, the price you can get today may be less than you could have got yesterday. However, tomorrow the price could be lower than the price you can get today.
Too many sellers today are costing themselves a lot of money because they are holding out for a price that is no longer achievable. The longer you wait, the lower your price can become.
4. ACCEPT THE BEST OFFER
When you are selling a property, you need the best price available in today’s market. Do not confuse the price you want with the best price available.
“Unless you are willing to take the BEST offer in today’s market, don’t even put your property for sale.”
5. DON’T PAY ANYTHING
No matter how tempted you may be or how much pressure is placed upon you, never pay any money to any agent for any reason until your home is sold and you are satisfied.
And be careful that the agent’s selling agreement does not have a fine print clause which requires you to pay advertising expenses if your property is not sold or if you change agents.
6. USE A LAWYER
One of the most dangerous acts done by buyers is to sign legal contracts with real estate agents. Agents are rarely interested in the welfare of buyers. Agents are interested in their commissions.
Agents want to make a sale; they do not want to spoil the sale by having the buyers discover that the home is in a flood area or that it has had illegal building work done to it.
Signing a contract with an agent is like going for medical treatment and having the doctor’s receptionist do the operation in the stationery cupboard. Take care of your financial health and use a lawyer – and not a lawyer recommended by the person or company who is trying to sell you something.
A good lawyer is a great property investment.
7. BUILDING & PEST INSPECTION
Ask your lawyer to recommend a reputable and qualified building inspector to check the property – before you sign a contract.
Amazingly, people are more inclined to get a mechanical inspection when they buy a car than to get a building inspection when they buy a home.
If something arises from the report (that was not pointed out to you before you ordered the report), you can go back to the agent (or the seller) and ask for the price to be lowered to compensate for any repairs that are needed. The few hundred dollars you spend on a building (and pest) report could save you thousands of dollars.
“The few hundred dollars you spend on a building (and pest) report could save you thousands of dollars.”
Do you really feel you have the knowledge and expertise to know if you are paying the right price? What if the price you pay turns out to be $50,000 (or more) than the true value of the property? Will you be okay with this discovery? If not, then hire an independent valuer before you sign a contract to buy.
Again, when it comes to the value, do not listen to the company that is trying to sell you the property. Have you ever heard of an agent saying to a buyer, “You are very foolish for paying such a high price.”? Of course not. An independent valuer is far more likely to be truthful with the price.
9. ALLOW FOR THE HIDDEN COSTS
No matter what anyone tells you – or no matter what you believe – buying a home is going to cost you more than you think. You will discover fees and expenses that you never knew existed.
To be safe, always allow that you are going to need SEVEN per cent of the price of the property to cover hidden costs. Yes, it’s often less. But if you use the seven per cent rule you will end up with more money instead of less.
10. WHAT PRICE, PRIDE OR EGO?
Before you buy, ask yourself which is more important to you: Having a home that looks great and you worry about the repayments or having a home where you don’t have to worry about the repayments?
Always consider buying a smaller home for a cheaper price or home in a less salubrious area. It’s much cheaper to buy extra beds for visitors than it is to buy empty bedrooms.
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