Is Your Buyer's Agent Qualified to Represent You?
When I first came into the business, I primarily worked with buyers. It was a good way for me to learn the area and the complexities of writing contracts.
I always worried that I would make a mistake which would cost me my hard earned commission because of an oversight.
Fortunately, that never happened. Why? Because I was very cautious about dotting every i and crossing every t before submitting an offer.
Imagine my surprise, when I received an offer on one of my listings a few weeks back and the agent had not been as cautious.
It was a VA loan and her buyer was asking for assistance with closing costs. This is very common with FHA/VA loans.
Here is how the buyer's agent worded the request:
Seller to pay 5% of buyer's closing costs.
At first glance, I knew this was wrong. But I did represent the seller. My responsibility is to make sure he pay as little as possible. However, I also knew if we signed the offer written the way it was the buyer, in all likelihood, would not qualify.
I called the agent:
ME: "What assistance is your client looking for in reference to closing costs?".
BUYER AGENT: "Five percent."
ME: "Five percent of what?"
BUYER AGENT: "Of closing costs?"
ME: "So your client wants the seller to pay 5% towards the total closing costs?"
BUYER AGENT: "Yes"
ME: "Really?"
BUYER AGENT: (Finally realizing what was wrong) "We are asking the seller to pay 5% of the purchase price towards closing costs."
BINGO!!
This is a big distinction. On average, closing costs and pre-paids will run a buyer approximately 3% of the purchase price.
Closing costs and pre-paids must be paid at the closing table. No rolling the closing costs and pre-paids into the loan. That's why most FHA/VA loans request assistance with closing costs.
For example, if the purchase price of a home is $150,000, the buyer would be required to pay approximately $4,500 in closing costs and pre-paids.
The way the buyer's agent originally worded it, the buyer was asking the seller to pay 5% of the $4,500 or $225. That is not good for the buyer.
He would have been very surprised the day of the closing when he was told to bring $4,275 to the closing to cover his costs.
I wish I could say this was the only thing that occurred during the negotiation/contract period.
The buyer's agent submitted a counter offer on a Contract Amendment form rather than a Counter Offer form. She didn't carry over requests from one Counter Offer onto the next even though the form clearly states in bold:
ALL OTHER TERMS AND CONDITIONS OF THE ORIGINAL ATTACHED PURCHASE AND SALE AGREEMENT ARE ACCEPTABLE TO THE UNDERSIGNED. ALL TERMS AND CONDITIONS PROPOSED IN PREVIOUS COUNTER OFFERS, IF ANY, ARE NOT INCLUDED IN THIS COUNTER OFFER UNLESS RESTATED HEREIN.
I had to point this out to her when I requested she re-submit the counter on the correct form.
She asked me to complete the VA Addendum because she didn't know how. Even though, it was her buyer's loan. And instead of sending a Buyer Inspection Contingency Removal/Notification, she made her home inspection requests via another Contract Amendment form.
The real kicker is this agent has had a real estate license since 2008. It's unbelievable that she has made it this long in the business. I suspect other agents have been covering her butt just the way I did.
BUYERS BEWARE: Just because an agent has been in the business for years, does not mean they are adequately qualified to represent you. Using the wrong agent could be a costly mistake. Make sure you use due diligence when choosing a buyer's agent.
P. S. Looking to buy a Franklin TN home? Contact Franklin Homes Realty LLC today at (615) 495-0752.
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