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2011-04-27 13:03:04
Who's Who for First Time Buyers

From your real-estate agent to utility companies, many folks may be a part of your home buying experience. Here's what they do — and why they do it.

By Leah L. Culler of MSN Real Estate

If you want to buy a latte or a novel, you find the one you want, hand over some money and go on your way, interacting with one or two people along the way. But if you're buying a house, the process — and the number of people involved — is exponentially more complicated.

It can be overwhelming to keep all of the players and processes straight. Who does what? Do you really need all of these people? Why can't you just do it all yourself?

'Without all those people, buying a house would take at least a year,' says Ilona Bray, author of 'Nolo's Essential Guide to Buying Your First Home.' 'You'd have to figure out all these things yourself, and it's a complex thing.'

Each of the people involved in the home buying process is an expert in that particular step. Just like a sports team, each player has a role and ability that helps the team come together to get the job done.

Here's a look at all the players and why — or if — they are essential to the process.

Real-Estate Agent
In 'Nolo's Essential Guide to Buying Your First Home,' the real-estate agent is called the team captain. Your agent will be with you every step of the way and is the person with whom you'll spend the most time.

Most agents are found through word of mouth: A friend or neighbor had a good experience and passed along the name to you. You'll want to interview prospective agents to find out whether they specialize in the neighborhoods or property types you are looking for, whether they can answer your questions and whether you feel comfortable with them.

You should also check an agent's license by visiting the website of the Association of Real Estate License Law Officials. Many agents are also members of the National Association of Realtors and have the Realtor designation, which means they comply with NAR's ethics code and standards of practice.

Michael Wolf, a San Diego-area agent and author of 'The First Time Homebuyer Book,' says an agent should be a local expert who understands the nuances of location. Agents can tell you if homes north of a certain street are better than homes south of it, for instance.

After helping you find the right home, your agent will manage the process of putting in an offer and negotiating the sale. The agent should explain the steps of the process from the beginning and keep in constant communication with you.

So, is an agent necessary? Considering that a buyers agent usually doesn't cost a cent, it doesn't make much sense to go without one, Wolf and Bray say. A buyers agent makes a commission that the seller pays, though this sometimes is worked into the final sale price. If you buy a home without an agent, you could save on the purchase price, but it's not a certainty.

'Compared to what you give up in negotiating power, a good agent can earn back their commission and then some by finding ways to talk the price down, etc.,' Bray says.

Wolf says a buyer may not know which reports are necessary, which inspections to get, whom to contact, how to rank and address problems that come up, and whether something is a deal-breaker. An agent who spends every day entrenched in the home buying process will be familiar with these things.

Mortgage Broker or Lender
The financing aspect of your home purchase may begin before you find an agent with a loan pre-approval. But the real work with a mortgage broker or lender starts once you've found a home and want to buy it.

A mortgage broker's job is to shop around to find you the best loan and lender to fit your needs.

Your local bank may offer home loans, but it may only have one or two options, says Don Frommeyer, vice president of the National Association of Mortgage Brokers. A mortgage broker will be more aware of the dozens of other options out there.

'This is all we do for a living,' Frommeyer says. 'Banks are also worried about their checking and savings. We are dealing with mortgages all day long.'

A mortgage broker can assess your financial needs and plans and find a loan to match. If you have a child heading to college in a few years, for instance, that may affect your desired monthly payment and the type of loan you want to get. You'll probably have daily contact with a mortgage broker for a couple of weeks while you're finding the right loan and filling out all the paperwork.

You can go straight to a lender for a loan, but you're going to need to do a lot of research on your own.

'For the number-crunchers, that might be a way they're happy to spend their time, figuring out all the various comparisons to be made,' Bray says. 'But it seems like the average human being isn't excited to be doing that.'

If you do go straight to a lender, you may interact with one person or several. A loan officer or mortgage banker will help you pick a product from the lender's offerings and help you apply but may have assistants during the approval process.

Appraiser
Before you can get a loan, the bank will have an appraiser look at the home and decide if it's really worth the money you're planning to spend. Many homeowners hire their own appraisers to make sure they're getting the best value.

'With so much supply in the market, if a home is overpriced, people are going to bypass that and go on to other homes,' says Joseph C. Magdziarz, president of the Appraisal Institute.

Magdziarz says an appraiser is an unbiased third party who can actually tell you the truth.

'He has no vested interest in a sale or purchase and can give you a reasonable and reliable opinion of the value,' he says.

An appraiser isn't actually determining the exact value of the home but is mirroring the market using comparable sales and listings. An appraiser answers the question: What can people buy if they don't buy my home?

If someone is buying a home with cash, an appraisal isn't required, but Magdziarz says it's not something you'd want to skip.

'For the amount of money spent in the deal, the appraisal is probably the least costly but most important tool you can have in making that decision,' he says. 'It pays to be well-informed.'

Property Inspector
Before you buy a home, you should have it inspected to understand its condition.

A home inspector will evaluate all major systems and components of the home, documenting and explaining anything that is unsafe, inoperative or damaged, says Steven Richer, owner of Primo Home Inspections in Farmingdale, N.Y.

'The inspection can provide peace of mind, or the issues found can be reasons to not buy the house, ask for a reduction in price, (ask) for a monetary credit, (ask) that repairs be made prior to purchase, or to budget the repairs needed,' Richer says.

Wolf says a home inspector is the 'first line of defense in terms of your knowledge base for the property you're going to buy.'

In addition to the general home inspection, there are dozens of specialized inspections. A lender may require a pest inspection before you can get a loan. But you can also hire specialists to inspect the home's foundation, roof, electrical system, sewage system or chimney, for example. General home inspectors may recommend one of these detailed inspections based on something they find.

Richer says some buyers will skip the inspection if a home is new, recently renovated or appears to be in good shape. But he says that this can be dangerous because of all the hidden problems an inspection may uncover.

And Bray says the inspection report is a great baseline for a homebuyer to have. It may tell you that the roof will need replacing in five years, for instance.

'It's nice to get a written guide to what the systems in your house are that need watching and what to look back at,' she says.

Closing Agent
A closing agent is a neutral third party who is in charge of all the details of your home-purchase agreement. This person also is called an escrow agent, escrow officer, closing officer or title agent. Depending on the state in which you are buying a home, this person will likely work for a title or escrow company.

This is a detail person who focuses on whether the money is where it should be and whether the deal is going to happen when it should, Bray says.

A closing agent is part of the entire transaction but becomes a major player toward the end of the process. This person is 'absolutely vital and important,' Wolf says.

Here are a few of the details a closing agent will handle:

  • Perform a title search and arrange for title insurance.
  • Coordinate with your lender and the seller's lender to make sure the money transfer is completed.
  • Establish an escrow account for any deposit you make; this will be transferred to the seller when the deal closes.
  • Record the deed that transfers the property to you.

Other Players
In addition to the five major players in your home purchase, you may need the help of some of these people, depending on your state and your transaction:

Real-estate Attorney: In some states, real-estate attorneys are a standard part of the process and draw up the purchase contract. But you may want to use one even if it's not required where you live. If there is any legal issue, such as claims against the property, problems with the title or a co-ownership issue, hire an attorney. And if you're buying a home in a development that has a homeowners association, an attorney can help you wade through the covenants, conditions and restrictions that will govern your community.

Tax Professional: In her book, Bray says a buyer may want to consult an accountant or another tax pro to learn how to take advantage of the tax benefits of buying a home.

Insurance Agent: Don't forget that you'll need homeowners insurance. Bray says she advises buyers to shop around and figure out which company will offer the best coverage, based on their needs. It's also important to look for an agency that has good customer service. If everyone in your area is facing disaster all at once, such as after Hurricane Katrina, how easy will it be to file a claim?  

You'll also interact with a notary during the closing process and representatives from utility companies as you set utilities. If you are remodeling or renovating your new home, you may hire a contractor.

The total number of people you have contact with will vary. First-time buyer Andrew Martin, who bought a house late last year with Wolf's help, interacted with at least 15 — four from the loan company alone.

The key to a smooth home buying process is to understand who does what and to pick the right person for each job. Do your research and interview anyone you may want to hire, starting with your agent. Nolo.com has sample interview questions to ask real-estate agents.

 
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