What secrets is your real estate agent hiding from you? The Seattle home buying process can be a roller coaster of emotions at the best of times. It doesn’t help when you aren’t being told the whole story.
Buying a home in Seattle, WA can be a great investment. Done well, it can be one of the best moves of your life. The more you know about the process upfront, the better you’ll navigate it, and the better deals you’ll get on everything involved.
Realtors can be one of your best allies in an efficient and safe home buying experience. Sadly, even at the best of times, they can be sorely under trained or programmed with cliche lines that don’t really tell the whole story.
Here’s what you need to know before you pick an agent or make a house offer…
1. You Can Save A Lot On Commissions, If You Just Ask
Traditional real estate commissions for the buy and sell side together average 5% to 6% of the purchase price. The seller pays for both their own agent and your buyers’ agent. Sometimes they even pay bonuses on top of these commissions. Since the seller is paying for you to have an expert negotiator and someone who will protect you legally in the transaction, it is worth taking advantage of.
However, you can save big by simply asking for a discount. Most experienced agents have full discretion to negotiate and discount their commission. It is not uncommon for a buyers’ agent to offer a 1% cash back rebate at closing. On a $500,000 home purchase, that’s an extra $5,000 you can get to pay for your closing costs, moving costs or to decorate and host your new house warming party.
If there is only the listing agent involved you may be able to slash their commission in half and save 2% to 3% of the purchase price.
Just be careful of beating them up too much. You want to be a top priority among their clients. You want them to make their best efforts for you. If they are only making $500 for helping you, but $15,000 for another client, you can guess who is going to get the best service.
2. Their In-House Lender Is Terrible
In fairness, the real estate agent may not know this. They typically won’t have any choice but to recommend their company’s in-house mortgage lender as a financing source. Their bosses demand it. They will be penalized for not referring to them. They are bonused when they do. This is at least a very grey area, in which many brokerages receive some kind of kickback for referring borrowers to their in-house company.
The downside is that many of these loan officers are not very motivated. They have all these easy leads coming in. They don’t have to be very competitive on terms or work too hard. They’ll always have another application if yours is too challenging to bother with.
By all means let them give you a quote, without pulling your credit. Then apply with a truly independent Seattle mortgage broker who will work harder for you, and doesn’t have to add on extra fees or higher rates to pay these kickbacks.
3. They Don’t Always Have To Work In Your Best Interest
There are various legal statuses that a Seattle Realtor can assume when working with their clients. Rarely do they work exclusively for you and your best interests.
Some of those out on the Seattle home buying hunt think they can get a better deal by going right to the seller’s listing agent, instead of using their own representative. In these cases the agent is definitely working for the seller. It is their job to get the seller the highest possible price, and the best terms. Everything they do and tell you is for that goal.
Then of course, real estate agents are just people. They have car payments to make and kids to feed. That means even subconsciously they are driven to write the highest possible offers and structure the paperwork in a way that they think best secures their commission, whether or not you actually get the home. So, keep this in mind, and take most of what they say with a grain of salt.
4. You Don’t Have To Deposit Money With Their Broker
One of the side effects of the above is that they will try to get you to put up the biggest possible deposit at the time of making your offer. They will tell you that you should make the check out to their company’s escrow account.
You can do this, but it is far riskier and more work at closing.
If the money is in their escrow account and the deal falls apart, it is very easy for them just to keep your deposit money. If it does close, that money will have to be transferred over to the title company or real estate attorney’s office who is doing the closing anyway.
Always, always, put your earnest money deposit into your title company or attorney’s escrow account instead. They are far more likely to side with you if the transaction falls apart. It will be infinitely easier to have your deposit money refunded, and fast.
5. Many Closings Never Happen
The general news media often reports the failure of pending home sales in the low single digits. Your agent wants you to believe everything is going to be fine and easy, and that you can pick a quick closing date. They want the biggest deposit in, the offer that is easy to get accepted, and to get paid fast.
That’s understandable, but not necessarily in your best interest.
The truth is that a lot of contracts never complete. According to National Mortgage News, the average mortgage application completion rate in 2019 is only 75%. In 2018, almost 35% of VA home loan applications didn’t complete.
Of course, some Seattle mortgage lenders are much better than others. Those who prepare their clients properly and do as much of the work upfront as possible can have far higher application to funding rates than those who just want to grab all the applications they can and figure it out later.
Protect yourself by speaking with your loan officer and getting a reasonable closing date for the current market. If things are backed up and it is a busy season, you might want to allow 60 days to close. If it is slow, you probably still want 45 days. You can always close sooner once everything is ready.