Maybe you've been looking at open houses for months, but you haven't hooked up with an agent yet because you're not sure you're really going to follow through and buy a home.
Then one Sunday afternoon you find a home that changes your motivational level -- it has everything you'd hoped to find in a home. But, you're not alone. The open house is buzzing with activity. You're sure the listing will sell fast.
You call a friend who's a real estate agent and ask him to represent you. There's just one hitch. He's a real estate broker from another part of the state. Although it's perfectly legal for your friend to represent you, is it a good idea?
Recently, a couple tried to buy a home in Oakland. Their brother, a broker in Southern California, represented them in a multiple offer competition. They didn't get the property; their offer wasn't competitive with the other five offers.
The out-of-area agent couldn't counsel his clients about what price to offer because he knew nothing about local property values. The agent also didn't know local custom regarding closing costs.
The City of Oakland imposes a transfer tax of 1.5 percent of the purchase price. Normally, this is split 50-50 between the buyer and seller. The out-of-area agent's offer asked the seller to pay the entire tax. This amounted to thousands of dollars.
In Southern California, sellers usually pay for the title insurance and escrow fees. The Southern California agent wrote his clients' offer according to local custom in his area. In Oakland, however, the buyers usually pay these fees, which also amount to thousands of dollars.
Sellers are obviously looking for the best price. But, aside from price, there's another issue with an offer that's written contrary to local custom. It causes the sellers and their agent to wonder what else the out-of-area doesn't know about local real estate that might adversely effect the transaction.
Also, buyers can gain a competitive edge by having their agent present their offer in person to the listing agent and/or the sellers. An out-of-area agent usually faxes the offer to the listing office.
You might wonder why a buyer would be so foolish as to allow an out-of-area agent represent him or her -- particularly if it diminishes the chances of successfully negotiating a purchase. Sometimes, buyers do it because their agent friend promises to kick back part of the commission to them.
It's natural to want to save money. But, it becomes foolhardy if it jeopardizes the purchase, or results in a shoddy real estate deal. If your agent isn't local, you must hope that the seller and the seller's agent are especially diligent.
Who is going to look out for your best interests? Who'll tell you about local soils conditions, slide areas or toxic waste dumps? State laws differ on how much sellers are required to disclose. Regardless of what the law requires, to be protected, you'll need to do research to make sure you discover all the conditions that might effect your decision to buy the home.
Good agents have a wealth of information about local conditions and property values. They also know the best inspectors, title and escrow officers, loan brokers, insurance agents, and contractors who can give estimates. An out-of-area agent isn't likely to have this type of information.
Rather than work with an out-of-area agent, have that agent find out who would be the best local agent for you, and refer you to him or her.
