What’s Important to You?

Know Your Criteria 

How to do it Wrong

How to do it RIGHT!

Ever pull into a new, under construction community and waltz right into the Sales Center for some information?

Of course you have. Everyone does this. It’s fun and the folks in the sales center are typically oh so helpful and chipper.

“How are you today? It’s sooo nice to see you…can I offer you some water, cookies, maybe even a Diet Coke?”

This is fine for casual non-serious buyers but if you are a real buyer with a real timeline, you should go in with your Realtor. A good Realtor will know all the questions to ask and bring a ton of experience into this process.

Take a look at this actual occurrence:

Recently I was in one of these Sales Centers with a client of mine in South Forsyth County. My client was fairly interested and had decided that one or two of the floorplans worked for his young three-kid family. He was taking a look at the lot map, the map of the community with the lot numbers all over it.

He’s a smart guy so he easily identified all the good cul-de-sac lots and lots on low traffic roads, backing up to the woods:

Client: What about Lot 47?
Sales Center: Yes, very nice lot, cul-de-sac lot, large pie shape, woods in the back. It has a lot premium of $15k.
Client: Ouch! What a out Lot 53?
Sales Center: You’re good at picking these! Lot 53 is on The Preserve and has a $12k lot premium.
Client: Ouch again! Do all the good lots have premiums?
Sales Center: Un-for-tun-atel-y yes! [smile] …here’s a sheet showing all the lots and premiums.

REALTOR: C’mon. What’s stopping us from putting in an offer at a certain price that completely ignores the Lot Premium?

Sales Center: [hushed secretive type tone] That’s happened before and just between you and I, we definitely waive the Lot Premiums to get a contract done.

So we just saved my Client $15k or more and opened up his options to include all the very best lots in the community.

Here’s another Sales Center myth:

You can get a better price if you do not have a Buyer’s Agent (Realtor) with you because they will discount the Realtor’s commission from the sales price. This one is completely incorrect. To see why, you need to understand what the Sales Center is, and how they operate.

In communities with large national builders, like KB Homes, Centex, etc., the Sales Center is owned, run and operated by the builder itself. In this case, a 3% commission for the Buyer’s Realtor is built into the entire business model. If you show up with no Realtor, you will not get better pricing on anything, the 3% simply gets saved by the corporation. Kudos to the ladies working in there. Also, you will be completely unrepresented, which is very bad for YOU.

In communities with smaller builders, or a community that uses many different builders, the Sales Center will be run by a local Real Estate Brokerage. In this case, all the builders in the community have agreed to a 6-7% total commission on all sales. This is split with the buy-side Realtor and the Sales Cener Brokerage. If you happen to show up with no buy-side Realtor, the Brokerage running the Sales Center will pocket the entire 7%. It does not matter to the Builder that the buyer is unrepresented, they are still paying the Sales Center 7% on every deal. Unfortunately, you will still get no better pricing and most importantly, you will be completely unrepresented. Not good.

Hopefully this helps you understand these Sales Centers and what’s happening. By all means, go into them, give them the name of your Realtor, and gather all the info you need. Walk the models, the lots, talk Design Center Options pricing, the whole nine yards.

But if you get serious, take your Realtor in. If you have a good Realtor, you will get a much better deal on pricing, options, lots, extras, you name it!

Planning on using a Realtor to help you purchase a property?

If so, at some point early in the process, your Realtor is going to ask you to sign a form called the Exclusive Buyer Brokerage Agreement. If he doesn’t, you’ve got a pretty clueless Realtor on your hands.

So what is this Exclusive Buyer Brokerage Agreement and why do you need one?

In short, it’s an agreement between the buyer and his or her Realtor that most basically says:

• The Buyer is exclusively working with the Realtor.
• The Realtor is dedicated to and working for the buyer.
• The Realtor is treating the buyer as their client, not their customer.
• The buyer’s Realtor gets his commission paid by the seller, not his buyer.
• There’s no monkey business going on here!

Let’s take a closer look at these.

1. The Buyer is exclusively working with the Realtor. This means that the buyer is not working with more than one Realtor. This is really important because Realtors don’t get paid until ALL the hard work is done and only ONE Realtor gets paid for representing a buyer at a closing! Let me tell you – there’s nothing worse than putting in a honest 50 hours with a buyer to later have them say something like “I’m now going to look in Cobb County and I won’t be needing you for that.” Ouch.




2. The Realtor is dedicated to and working for the buyer. This typically is the case regardless, but sometimes the Realtor really represents the seller and in this case, you are just this Realtors customer, not client. This is what happens when a buyer roams into a builder sales center in a community without his Realtor. The Realtors in the Sales Center are working for the seller, and you are … unrepresented.




3. The Realtor is treating the buyer as their client, not their customer. Most people are not aware of the differences between Agent/Client and Agent/Customer relationships. But in short, an Agent/Client relationship is parallel to an Attorney/Client relationship where all information is confidential and the Attorney fully represents the best interest of only their clients.




4. The Buyer’s Realtor get his commission paid by the seller, not the buyer. It’s important to know where the commission is coming from. And it’s nice to know that you are not the one paying it.




5. There’s no monkey business going on here. This means that the Realtor and the Buyer are working together as a team and are not going to violate each others’ trust. The Realtor is not going to flake out on the buyer and go non responsive when it’s go time. And the buyer is not going to stop communicating and switch to their cousin’s brother’s mom’s Realtor when they discover they exist!

Lastly, by Georgia Real Estate Law, the Exclusive Buyer Brokerage Agreement has to be signed and on file prior to closing so the Closing Attorney knows what Realtor to legally pay the commission to.

So, don’t be afraid of the Exclusive Buyer Brokerage Agreement! It’s actually there for your benefit and protection.

Let me just come right out and state it at the top here: Lease Purchase Options are a complete rip off.

To understand why, you need to view it from the eyes of the people that invented it, the Real Estate Investors.

The Investor has an investment property to rent. He’s looking to make a little positive clash flow from it by charging more for the lease payment than his mothly costs. Or maybe he’s just looking to break even on a monthly basis with hopes to cash in years later when he can sell the property for a higher price. Or maybe a combination of both.

Nothing wrong with either of these strategies, both carry a fair amount of risk and are honorable business tactics.

Now, enter the investor that’s looking for much quicker returns. He’s not happy with either slow-boring-honest method so he invents an exponentially more profitable deal – The Lease Purchase Option. Here’s how it works:

The Investor is playing the odds that in 12-24 months, you will still be unable to purchase the property and he can pocket your Lease Option Payment.

These odds are very solid and probably somewhere around 100%. Also, the future purchase price is typically set high and you have no negotiation power on this, its just set by the investor in the Lease Option contract.

Sometimes the Investor will offer further enticement by allowing some small percentage of your lease payment to go towards the purchase price. He’s taking the same non-risk of this ever happening with no worries! In fact, he doesn’t even need to set any of this money aside. He’ll just reduce the inflated future sales price by the small total amount, should the deal ever get to that point.

So what do you do?

If you need to lease a property, forget about the Lease Option to Purchase. Just negotiate the best one or two year lease that you can. In the future, if you decide you want to purchase the property, just make the owner an offer to purchase – at any time during the lease.

If the owner really wanted to sell, you’re in, and with no competition. You can also negotiate on the price as you’re the one making the offer. If the owner does not want to sell, then the Lease Option route would of probably been quite painful, one way or another. Nothing like trying to work with an unwilling seller!

One last note. If you decide to make an offer on a lease property during the lease term, keep in mind that you are probably saving the owner six or seven percent commission normally paid to Real Estate Brokers, so factor that into your offer.

On November 6th, 2009, Congress signed into law The Worker, Homeownership and Business Assistance Act of 2009. This Act extends and expands the first-time home buyer credit allowed by previous Acts. The deadline was extended from November 30, 2009 to April 30, 2010 and the scope was expanded to include repeat buyers, not just first-time home buyers.

How do the new deadlines work?

To qualify, both first-time and repeat buyers must have a written, binding sales contract by April 30, 2010 and must close by July 1, 2010.

What properties are eligible?

The Extended Home Buyer Tax Credit can be applied on purchases of single family residences, including homes, townhomes, condos and co-ops.

What Buyers Qualify?

To qualify as a first time home buyer, the purchaser or his or her spouse may not have owned a residence during the three years prior to the purchase.

To qualify as a repeat buyer, current home owners must have used the home being sold or vacated as a principal residence for five consecutive years within the last eight years.

What Are the Credit Amounts Available?

The maximum allowable credit for first time home buyers is $8,000. The maximum credit for repeat buyers is $6,500. The Act refers to these repeat buyers as “long-term residents.”

How to Apply the Tax Credit.

Buyers can apply the tax credit to their 2009 tax return, filed on or before April 15, 2010. Or buyers can file an amended 2009 tax return. Lastly, the credit can be applied to 2010′s tax return, filed on or before April 15, 2011.

Watch the Income Limits.

The new law raises the income limits for people who purchase homes after November 6, 2009. The full credit will be available to taxpayers with modified adjusted gross incomes up to $125,000 or $225,000 for joint filers.

Those with modified adjusted gross incomes between $125,000 and $145,000, or double those for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

More Information?

This article is not a substitute for legal advise. Please consult with an Attorney or Accountant for more information as it relates to your specific circumstances. Also, you can read more at the IRS web site here.

Here are some interesting statistics compiled from the final 2009 FMLS data. The FMLS is the First Multiple Listing Service, or MLS, for the greater Atlanta Metro.

Of special interest is the number of buyers that use the internet, 87%.

Also, the number of weeks searched and homes seen, 10 each. Due to so much inventory being available and the fact that it’s a serious Buyer’s Market, I’m personally seeing both of these numbers maybe 4x that!

Wonder when was the last time that someone bought a home after only seeing 10!

Quick Stats: 2009 Home Buyers

Length of Active Home Search:

• Number of weeks searched: 10
• Number of homes seen: 10

First-Time vs. Repeat Buyers:

• First-time buyers: 41%
• Repeat buyers: 59%
• Median age of first-time buyers: 30
• Median age of repeat buyers: 47

Buyers who definitely would use same agent again: 70%

Actions taken as result of Internet home search:

• Drove by/viewed a home: 77%
• Walked through a home viewed online: 63%
• Found a new agent to help them search/buy home: 27%

Information sources used in home search:

• Internet: 87%
• Real estate agent: 85%
• Yard sign: 62%
• Open house: 48%
• Newspaper ad: 47%
• Home book or magazine: 30%

Data Source: National Association of REALTORS® Profile of Home Buyers and Sellers

Here is the FMLS coverage area:

FMLS Map Area Atlanta