When it comes to major financial decisions in life, the purchase or sale of your home is likely to be one of the most significant. Some people do choose to buy or sell homes without the help of a real estate agent.
While there is nothing in the law that requires you use an agent to buy or sell a home, your state may have laws requiring that a real estate agent be involved with the paperwork when you close on a house.
However, there are are a lot of rules and requirements involved in real estate transactions. A real estate agent will know the in and outs of the process, and can make it much easier for you, especially if you are a first-time homebuyer.
However, keep in mind that agents do take a commission, which means part of the sale of your home will be given to the agent.
Who are Real Estate Agents?
Real estate agents are not required to sell a home, but typically the process can be so long and require formal paperwork that it will save time and stress to hire one.
While real estate agents can vary in their skills and abilities, some may be licensed to practice law and others may be licensed notaries, here is what they can do:
- They are licensed. Real estate agents in every state must complete pre-licensure coursework. They must then pass state and national exams in order to obtain their licenses. This insures that agents have the knowledge needed to guide buyers and sellers of real estate.
- They have access to the Multiple Listing Service (MLS), which allows them to find homes for you the day they go on the market. Realtors’ access to immediate listings gives them an advantage with homebuyers who are in a competitive market where homes get snapped up quickly.
- They are knowledgeable about the real estate market in your area. They know what homes in your area are selling for, so they can help you price your house if you are selling. In terms of buying, they can find houses in your price range and which meet your requirements.
- They also know everything required throughout the process and can advise you. For instance, you need to get pre-approved for a loan before you can really get into the process of looking for a home to buy. Real estate agents can guide your through all the complexities.
- They have a duty to you as your agent. Because they are licensed professionals, they are to a standard of care that is reasonable for real estate agents.
What is a Listing Agreement?
A listing agreement is a contract between you and the agent that creates the obligations and rights of the business arrangement.
It is wise to consult with an attorney before signing any legal document or contract in order to make sure that your interests are represented and protected. The listing agreement usually provides:
- How much commission the agent expects and when the broker will receive it (or whether the agent will receive a flat fee);
- A beginning and end date for the agent’s relationship with buyer/seller;
- The length of time that the house will be listed; and
- The list price.
Learn About Any Disclosures About the Property
Disclosures are issues with the property that the seller must reveal to the buyer. Different states have different requirements. Usually, the seller completes forms that have checklists of all the major typical disclosures. Sellers can be held liable after the sale for things they fail to disclose.
Sellers are required to disclose major defects of which they have knowledge. This may include anything from presence of termites to disputes with neighbors over property lines. Again, the active concealment by seller of a known defect can come back to haunt them.
Separate from the seller’s disclosures, the buyer should also hire an inspector to make an independent survey of the property for any defects. The inspector may catch problems the seller was not aware of or did not disclose.
The buyer can place a clause in the purchase contract stating that the sale is contingent on the completion of a property inspection by a qualified engineer or construction expert at the buyer's expense.
Check for Any Encumbrances on the Property
An encumbrance on the property is something that may prevent a buyer from taking the legal title or possession of the property.
They can include easements, encroachments, and other kinds of boundary and title disputes. Most encumbrances are recorded at the county recorder's office.
Mortgages and Liens
Sometimes, a piece of property can be sold subject to a mortgage or other financial lien. A buyer can check whether a piece of property has a lien or mortgage by doing a title search through the county recorder's office. If you do not want to check yourself, a title insurance company can check for you and inform you of any such encumbrances on the property.
A buyer may not have enough cash up front to pay the entire purchase price for a piece of property. In this type of situation, a financial institution may be able to lend the buyer the purchase money in exchange for attaching a mortgage to the property.
Do I Need an Attorney to Help Me Buy or Sell a Home?
A local real estate attorney can guide you through the process and help you negotiate a deal that is right for you. An attorney will also review listing agreements with brokers, offers, and purchase contracts before you sign them to make certain that your requests are met. Finally, a real estate attorney can advise you on financing the house of your dreams.