Q & A with Jerry: When should I get pre-qualified? How do I get realtors to stop soliciting me?

Happy New Year folks! My new years resolutions regarding my real estate business was to find a more efficient way to keep my clients and friends informed about real estate. So with that, i present to you....ta da...My new blog. :)

Last week I was talking to two friends of mine who are dating and looking to buy their first home in the Brentwood and Pacific Palisades soon. They asked a lot of questions, but there were two that stood out. I followed up with them through email and here are the responses:

Question: So we've started looking at open houses, but we don't really have a time frame. We are mainly looking for the right deal, so we don't feel like we need to be in a rush to meet with a mortgage broker as we both have stable, well-paying incomes. At what point in the process do we need to get pre-qualified? Also, how hard it the pre-qual process?

The process in and of itself is quite easy, I have no doubt you two will qualify. Pre-qualification is the easier first phase. Pre-approval requires a bit more, but is also fairly painless. In real estate, any good agent will tell you that any offer you write should always be accompanied by a pre-approval letter…no exception. Usually, the pre-qual process when you first meet with a mortgage broker goes like this: (1) You fill out a one page form stating how much money you make per month and year, what your expenses are, and what your savings are, (2) They will run your credit, (3) they will probably ask for your last 2 check stubs. From this, they should be able to pre-qualify you. To move forward to full pre-approval, they may ask to see more verification of income and probably will want to see your last years tax returns. There’s really not much more than that. Your mortgage broker can advise you on what program will suit your needs best, everyone has different needs.

As far as when to get pre-approved, I would advise you do it sooner rather than later. It’s a fairly easy process that really requires no further obligation, and I’ve always felt it’s better to know exactly what to expect before getting your wheels turning. From a professional standpoint as a realtor, I have found that the best properties come on the market and get swept up within the first week (yes, even in this market, a deal is still a deal, and buyers will recognize it.), and I’ve had clients that missed out on homes because they had a delay getting their pre-approval together. Good agents will generally have their clients pre-approved as early as possible so there won’t be any delay when the right home comes along.

Finally, find someone you can trust. Referrals from friends and family are a good way to go. I have a great lender I work with, and am happy to pass his information along.

Question: So, I think someone told me that realtors make 6% on a deal, split between the agents, but if the listing agent represents both sides, he gets the entire 6%. So is there any discount for working without an agent?

As we discussed yesterday, the seller will pay a commission on the sale of a home that is agreed upon at the time of listing. When the home sells, the buyer’s agent and listing agent split that commission. Usually it’s 6%, but for homes over a million it is often 5%. The buyer never pays any commission. If you are a buyer, you should probably find your own agent. Someone you can trust and will work for you. The idea of working without an agent is one that is often misunderstood. When you go through the listing agent, the listing agent then becomes your agent and gets the entire commission. Furthermore, it is important to understand that it is hard, if not impossible, to simultaneously represent two opposing interests, in this case, the seller and the buyer.

In the end, most listing agents loyalty, as you could understand, will lie with the seller first. They will do what you ask, but will not proactively fight for you. That is not what the seller would want. That said, it is possible for a listing agent representing both sides to discount his commission, however, this is all a little grey. What I mean is, in the end, who knows if this money benefitted the buyer or the seller. Furthermore, a good buyers agent will fight for a better deal for you and fight to get you credits in escrow. Having a buyer's agent is FREE. Think about that. It's free. Why would you not want to choose someone you know specifically will give you the best representation if it does not cost you anything, right?

Question: Since we've started looking at homes, I swear I get about 4 calls a day from realtors. At this point, if I don't recognize the number, i just let it go to voice mail. I think I had 3 calls already today! Is there a different way we should be going about this?

The ONE piece of advice I would give you as a first timer ABOVE all else is this: It is much better to have one agent working for you diligently than to have a few or more agents working for you on a haphazard basis. Per our conversation yesterday, I think you are already starting to feel what it feels like to be bombarded by realtors trying to become your agent. It’s annoying. You might as well find someone who really willing to go all out for you and just stick with them. As mentioned before, all agents have access to the same information. In the end, what sets agents apart are (1) the legwork they put in behind the scenes (previewing properties, making calls, going to broker’s opens for you) and (2) Their negotiation expertise and how hard they are willing to fight for you for credits in escrow.

For me personally, once I know you want me to be your guy, I would definitely start doing a lot more research behind the scenes for your benefit. In laymans terms, that means I will start previewing properties for you all the time, looking for the “deal” properties/opportunities, and letting you know about them as quickly as possible. That’s it in a nutshell.

The other advice I would give is, stop signing in at open houses. That’s like an invitation for solicitation. When you decide that you have found your agent, call all those other agents, and tell them “Thank you, but could you please stop contacting me as I’m working with a Realtor.” Any good agent will respect that. No more explanation needed. Keep in mind, if you don't communicate to realtors to stop contacting you, don't blame them if they continue contacting you. It's their job to put buyers and sellers together, and contacting people like you is part of the job description!

There’s a lot more information about stuff like this at my website’s Frequently Asked Question section: http://www.newhomesla.com/frequently_asked_questions-c4986.html

-Jerry