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Buying Real Estate Know What You Want

(The housing slump has caught pretty much everybody by surprise.)

And the one’s who called for the correction probably did not expect it to correct so forcefully.

Sales are down, way down, prices are making largest percentage decreases in a decade and loan mortgage; nobody knows what the fixed mortgage are doing.

The only thing that has been consistent for the past 10 months is the steady decline of sales. As the newspaper articles and media coverage has been focusing on the poor real estate investors who are stuck holding properties that have become financial disasters; what about the real estate agents?

This is a real estate agents job, to buy and sell properties for their clients. If a seller is having a horrible year trying to sell one property, then real estate agents are going to have to do just about anything to conduct a transaction here and there.

This is exemplified in the article, “Do Real-Estate Agents Have a Secret Agenda?” written by James R. Hagerty and Ruth Simon and published in the November 9, 2006 edition of The Wall Street Journal.

“Home buyers have a new reason to be wary in this weakening housing market: Real-estate agents increasingly have lucrative incentives to push one home over another.”

“Slow sales have prompted builders and some individual sellers to offer unusually generous incentives to agents whose clients buy a home. Sellers normally pay the buyer's agent 2% to 3% of the home's price. Now many are offering thousands of dollars or other rewards, such as travel vouchers, on top of the normal commission.”

The basic idea of these incentives is nothing new, but the generosity of them has increased as the recent inventory swarm of unsold homes has made selling properties even more difficult. Real estate agents and home builders alike are gasping for air in the flooding market.

“‘These guys are desperate,’ Ivy Zelman, a Cleveland-based housing analyst at Credit Suisse Group, says of home builders.”

While there is no concrete national database that tracks these incentives, real estate agents and builders agree that these special offers have greatly increased in the past few months, especially in areas that are experiencing the most amount of unsold inventories (Florida, Nevada, Arizona and Washington, D.C.). These cities were also kings of the national market during the booming years from 2000 to 2005.

“Builders and sellers also are offering lots of incentives to buyers, including free kitchen upgrades, help with closing costs and even new cars.”

The primary problem with these incentives is that consumers may not know their agents have a potential conflict of interest when shoeing properties. Of course, agents can’t make buyers purchase a home they do not want but the agent can easily steer their client away from a property that may be in the desired price range offering no incentives to a similar property within the same property that will net the agent a Caribbean cruise or a cash bonus if it is sold.

“Las Vegas builder American West is offering agents a $15,000 bonus to sell homes in its Glen Eagles development, provided they come in with a full-price offer within 30 days. The bonus drops to $10,000 for negotiated offers and those that take longer. ‘The goal is to try to push them to make a full-price offer,’ says Jeff Canarelli, vice president of sales at the builder. It is up to the broker to decide whether to give the bonus back to the buyer, he says.”

In an industry where predatory lending and selling has produced a few black eyes, these non-disclosed incentives are not going to help.

So if you are a buyer, do some homework on your own by searching MLS web sites on the Internet to determine what properties you would like to view prior to going out with your real estate agent.

Remember, you are buying the property so as long as you remain in control of the decision making your experience will be successful.

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