Two weeks ago, we talked about how the role of real estate agents had changed to that of a transaction engineer, guiding and coaxing the contract from an agreement all the way to the settlement table.
Several readers asked me to be more specific. Here are some of the areas where the agent can and should play an important role in making a real estate transaction work:
1. The CONTRACT is nothing more than a written expression of the intentions of the parties. Since the buyer and seller have agreed on terms, it ought to be relatively easy to transfer that to a piece of paper.
But it’s not. Just to give you an example, when I first got my real estate license, the Atlanta Board of Realtors contract form was exactly one page, front and back. In the new Georgia Association of Realtors suggested forms set, the “Purchase & Sale Agreement” alone is eight pages, and that doesn’t include either the Seller’s Property Disclosure Form or the Lead-Based Paint Disclosure Form. In reality, with addendums, disclosures and additional special stipulations, it is not unusual for a typical residential real estate contract to exceed 20 pages, plus legal description and survey.
As a result, a well-written and clear agreement between buyer and seller is a critical part of the transaction. Yes, most every agent uses well-written boilerplate documents crafted by lawyers, but it’s up to the agents to fill in the blanks with the right words. Few buyers are willing to pay for a lawyer at this stage of the game. And a poorly written contract can doom a sale as fast as a lawyer can say “I’ll bill you.” The agreement between buyer and seller is often vital to the success of a sale.
2. APPRAISALS that come in low are a huge problem for today's borrower. Lenders, in an effort to shield themselves from federal liability for approving bad loans, are pressuring appraisers to be more conservative than in years past. And banks are now requiring appraisers to include foreclosure resales as comparable sales, even though common sense tells us they are not selling to the same market.
Additionally, lenders are no longer able to select appraisers with demonstrated knowledge of a particular market, and instead must use the next appraiser in the pool. The end result is a stream of appraisals from a variety of sources, all claiming to establish a fair market value.
Here again, the agent can be worth her weight in gold bars. It is not unusual that the agent is intimately familiar with the condition of the comparable sales, while the appraiser is reading about them as past history. A smart agent will prepare a detailed market analysis in advance for the appraiser to back up his contract price with rock-solid data, thus allowing the loan application to proceed.
3. INSPECTIONS in the late 1970s often involved the buyer's father touring the house, turning off and on lights, flushing toilets, and staring at the furnace and water heater for no reason. Today, buyers expect their purchase to be in near-perfect condition, and often try to use any less-than-pristine system of a house as a negotiating tool to re-open price negotiations during the contract period.
Real estate agents assist here by encouraging buyers to employ only professional home inspectors who are much less likely to overreact to a dripping faucet by proclaiming the need for a complete plumbing replacement. We still have no licensing of home inspectors in Georgia, so anyone can hang out a shingle and offer an inspection service.
Likewise, it is in the parties’ best interests for agents to lower expectations of major price concessions for a likely finding of normal wear and tear in a previously owned house. Many deals fall apart when a deal-killer inspector declares a house uninhabitable based on the presence of a dime-sized spot of mildew in the bathroom. Agents serve as educators of the normal conditions likely to exist, especially in older homes.
As I have said before, a real estate transaction lacking the assistance of an experienced agent is much, much more likely to fall by the wayside than one being shepherded by a real estate professional.
That’s why nine out of ten home sellers were assisted by a real estate agent or broker last year, a trend that I fully expect to continue.
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