Month: January 2016

Should I Use My Friend or Family Member as My Realtor?

A good Realtor® is sort of like your own personal Yoda—someone you can trust with your most pressing questions and biggest decisions, guiding you safely toward your destiny (of a brand new home!).

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But how do you choose the right Realtor when there are literally hundreds of options in your area?

They say in California the difference between a driver’s license and a real estate license is that not everyone in California has a driver’s license. The joke rings true in other states as well.

With so many options, why not go with a known commodity? Like, for example, a friend or family member—someone who not only knows you, but has a license and is thus perfectly qualified to help you buy your dream home. Sounds like a dream scenario, right?

The answer is usually “no way” for a host of reasons (except in a few rare cases). And don’t feel guilty about not sending business their way—recommend them to someone else!

Heed the following expert advice about why you should be wary of mixing business with friendship:
The pitfalls

While your personal relationship might seem like an important qualification, if your Realtor doesn’t have the other key attributes you need, you’re not doing yourself any favors. Experience with and understanding of the area where you’re hoping to move, rave reviews from previous clients, and the ability to assess your situation dispassionately are absolutely essential.

Real estate often brings out the worst in people. It’s very stressful. It’s a big and expensive life decision. Sometimes you just need the assistance of someone who doesn’t have a personal relationship with you.

And, if the home-buying process isn’t going well, you need to be able to fire that person. Better to tell your friend you can’t hire them right off the bat than risk canning them—an act almost guaranteed to ruin your relationship.

And your relationship will definitely be in jeopardy if you have trouble relinquishing control. Your agent will likely need to hold the reins—after all, they’re in a better position to quickly find you an amazing space.

If you get two controlling people, there’s going to be problems. You have to be able to find someone whose personality will mesh with yours.
How to ease the sting

Still feel like you need to extend the offer to your “frealtor“? (Yes, we just made that a word.)

If they’re local but you’re not confident because of their experience level, ask them to co-list with someone from their office—giving them valuable experience during the buying process. That way, they feel involved and you still receive expert guidance.

And if they’re out of the area but still want to help, it’s recommended arranging for them to receive a referral fee from the agent you choose, and leaning on them for advice and commiseration during the process.

That’s a nice thing to do, and you always have them in your hip pocket to rely on if the Realtor you thought was great turns out not to be.

When to say yes

OK, but maybe your friend has tons of experience, is super-familiar with all your favorite ‘hoods, and your personalities meld perfectly. If you’re 100% comfortable entering a business relationship with them, go for it!

A good agent who is also a good friend is going to work harder for you than any other agent you can hire.

Not only will they work hard, but they may be better able to understand your specific needs. For example, if they’ve seen the mess your children make in the living room, they probably won’t encourage you to temper your playroom dreams. And, since they know your preferences, they might just spot an oddball house you wouldn’t have considered otherwise—which may turn out to be perfect.

Bottom line: A real friend wants to do right by you.

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So You Wanna Buy a House? Step 1: Clean Up Your Credit Score

It’s easy to fall in love with the idea of buying a home. You’ve got it all planned out: a five-bedroom home in your favorite neighborhood with a manicured lawn and—why not?—a nice pool.

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Well, it may be the middle of winter now (we haven’t even tossed our Christmas trees yet, actually), but you’ve got a lot to do before prime home-shopping season this spring. So if you really want to land that dream home, you’d better get started now!

Step 1 is to clean up your credit score, also called a FICO score—a simplified calculation of your history of paying back debts and making regular payments on loans. If you’re borrowing money to buy a home (as most do), lenders want to know you’ll pay them back in a timely manner, and a credit score is an easy estimate of those odds.

Here’s your crash course on this all-important little number, and how to whip it into the best home-buying shape possible by spring.
Pull your credit report

There are three major U.S. credit bureaus (Experian, Equifax, and TransUnion), and each releases its own credit scores and reports (a more detailed history that’s used to determine your score). Their scores should be roughly equivalent, although they do pull from different sources. For example, Experian considers on-time rent payments while TransUnion has detailed information about previous employers.

Or check with your credit card company: Some, including Discover and Capital One, offer free access to scores and reports. Once you’ve got your report, thoroughly review it page by page, particularly the “adverse accounts” section that details late payments and other slip-ups.
Assess where you stand

It’s simple: The better your credit history, the higher your score—and the better your opportunities for a home loan. The Federal Housing Administration requires a minimum credit score of 580 to permit a 3.5% down payment, and major lenders often require at least 620, if not more. So what can you do if your credit report is in less than shipshape? Don’t panic, there are ways to clean it up.
Dispute any errors

A 2013 Federal Trade Commission study found that 5% of credit reports contain errors that can erroneously ding your score. So if you spot any, start by sending a dispute letter to the bureau, providing as much documentation as possible, per FTC guidelines. You’ll also need to contact the organization that provided the bad intel, such as a bank or medical provider, and ask it to update the info with the bureau. This may take a while, and you may need documentation to make your case. But once the bad info is removed, you should see a bump in your score.
Erase one-time mistakes

So you’ve made a late payment or two—who hasn’t? Call the company that registered the late payment and ask that it be removed from your record. If you had an oopsy and missed just a payment or two, most companies will indeed tell their reporting division to remove this from your credit report. Granted, this won’t work if you have a history of late payments, but for accidents and small errors, it’s an easy boost for your score.
Increase your limits

One no-brainer way to increase your credit standing is to simply pay off your debt. Not an option right now? Here’s a cool loophole: Ask your credit card companies to increase your credit limit instead. This improves your debt-to-credit ratio, which compares how much you owe to how much you can borrow.

Having $1,000 of credit card debt is bad if you have a limit of $1,500. It isn’t nearly as bad if your limit is $5,000. The simple math: Although you owe the same amount, you’re using a much smaller percentage of your available credit, which shines well on your borrowing practices.
Pay on time

If you’re often late with payments, now’s the time to change. Commit to always paying your bills on time; consider signing up for automatic payments so it’s guaranteed to get done.
Give yourself time

Unfortunately, negative items (such as those habitually late or nonexistent payments) can stay on your report for up to seven years. The good news? Changing your habits makes a big difference in the “payment history” segment of your report, which accounts for 35% of your score. That’s why it’s essential to start early so that you’re sitting pretty once you’re shopping for homes and find one that makes you swoon.

Once you’ve set your credit on a better path, it’s time to tackle the next major hurdle: saving for a down payment. Stayed tuned next week for the steps!

8 Things Your Realtor Does Behind Your Back

Have you ever wondered what on Earth your real estate agent is doing behind your back?

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No, we don’t mean anything underhanded, naughty, or downright felonious—far from it, in fact. So relax. What we’re talking about is a mystery: In the sometimes confusing, occasionally hectic, and always stressful world of buying and selling, what are your agents really doing behind the scenes?

We’re here to shed some light! For every hour an agent spends in your presence, he or she will spend an average of nine hours out of eyesight working on your behalf. Why? Because agents don’t get paid if they don’t close the deal! Unlike lawyers who bill by the hour, agents won’t receive a penny until (or unless) a sale comes through. It’s all a gamble, in which they could shoot snake eyes and come away empty-handed. This is the business.

So if you’re wondering what that 6% commission is actually going toward, we’ve compiled a list of things agents do when you’re not watching (or should be doing—if they’re not, maybe you need a different agent!).
They shop property online

Don’t we all? And yet, their real estate research goes beyond oohing and ahhing over a few photos on a Saturday night.

This could include looking up flood zones, previewing the homes for out-of-state clients, or any number of specific things.

Plus, listings come and go fast in the real estate world, so agents need to check their multiple listing service database constantly, or else they’ll miss out. Sometimes the process of matching up properties with clients can take a very long time.

I have a client who wants a Mid-Century Modern house in Carlsbad, but there aren’t many there. That means that she’s been searching the database regularly for that particular kind of property for three years (here’s hoping all that patience pays off).
They go prospecting

Of course, there’s nothing like seeing a house in all its brick-and-mortar glory, which is why most Realtors worth their salt spend tons of time driving around checking out new listings. In Friedman’s San Diego area, they call it “caravan day.”

It’s a good way to preview properties, and it’s a good time to network with other agents and talk up your listing,” she says.
They attend pitch sessions

Agents don’t spend all their time sizing up homes. They also spend tons of face time with other pros at pitch sessions—gatherings of local agents at cafes where they swap listing info in order to spread the word about your property if you’re selling, or to find the house that checks every box on your wish list if you’re buying.
They spend their own money on marketing

In addition to not getting paid until a deal is done, selling agents also spend their own money on marketing: magazine and newspaper ads, fliers, hiring a photographer, glossy prints, and premium placements on listing sites.

Agents can spend thousands marketing a property.
They write up offers and counteroffers

Offers and counteroffers are an extremely important part of the transaction, as they can save or net you thousands of dollars on a sale. Yet getting to the right price requires written offers and counteroffers every step of the way.

It’s time-consuming to be writing them up, explaining to the client how to counteroffer and the ways to do so, and just keeping track of it all.
They stick around for inspections

You might not be present when it’s inspection time, but a good agent will be. This gives the agent an immediate knowledge of what’s going on. Anything from termites to an iffy foundation can be relayed to the buyer immediately, according to Friedman. McGlone estimates inspections take roughly two hours.
They smooth bumps in the road

Not every sale goes smoothly—buyers and sellers get difficult all the time—but good agents try to shield their clients from the high drama unless there’s a reason to fill them in.

It’s called putting out fires. It’s just fixing issues that a lot of times buyers and sellers never needed to be made aware of.
They keep you calm when the pressure’s on

Good agents don’t just hand you a house. They can also act as a therapist, making your sale much less stressful.

People get emotional. You have to be a problem-solver and keep a positive approach and come up with a positive solution. It might not take a lot of time, but it takes emotional energy.

Tell that to your therapist.