Why you need a buyers agent: Part 1

Real Estate Agent with Our Home Real Estate of Plymouth, MN

Here are six special consumer reports about the advantages of using buyer agents:


Research shows that most homebuyers understand very little about whom their agents represent and its vital importance. While State law requires agents to disclose whose side they are on, most required disclosures are woefully inadequate, poorly explained, glossed over, minimized, and downright confusing. A growing number of brokers represent only the buyer, which is known as Exclusive Buyer Brokerage or Exclusive Buyer Representation. Buyer’s Resource® is the nations oldest brokerage franchise system working only for buyers and never having any conflicts of interest. 

ARE ALL REALTORS® ALIKE? No. There are four types of Realtors: Seller Agents, Exclusive Buyer Agents (or Brokers), Dual Agents (including non-exclusive Buyer Agents), and Transaction Brokers. 

1. SELLER AGENTS - list property and represent the seller. Remember that if you are buying a home and call the listing company, it is the legal obligation of the company's agents to get the highest price and best terms for the seller. Any information given by a prospective homebuyer to the seller’s agent must be told to the sellers. This includes any reference to the buyer's financial and personal data, potentially increasing the cost of the home by thousands of dollars. 

2. DUAL AGENTS - are real estate agents whose company lists property for sale, but act as buyer agents on those properties. Unfortunately, for buyers and sellers, dual agents are legal in most states. While dual agents attempt to justify this practice, consumer advocates warn NEVER to use a dual agent. The National Association of Realtors wrote that the practice of dual agency is as dangerous as playing Russian Roulette. If a real estate company lists property and represents the seller--you can strongly doubt any attempted claim that their agents can properly represent homebuyers. Funny how some folks like the CIA do not like dual agents, because they know them as "double agents!" 

3. TRANSACTION BROKERS -- are also known as a facilitators, finders, and statutory agents. These are true non-agents because there is no liability for wrongdoing. The attempt by a growing number of real estate agents to avoid the responsibility owed to buyers and sellers is legal in a few states (including Florida and Colorado). Services by transaction brokers are substantially reduced from those of true agents, and should be avoided by all sellers and buyers. 

4. EXCLUSIVE BUYER AGENTS -- represent homebuyers--never sellers. These agents are required by law to get the best price and best terms for the Homebuyer. All consumer advocates recommend that homebuyers take advantage of the benefits offered by exclusive buyer agents. Exclusive buyer agents are specialists in the home buying process. This higher level of professional service for buyers has resulted in an average of over 5% savings and greater satisfaction for homebuyers. Because these agents do not list property, they do not have company listings to try to sell to you first. Instead, all homes are available to homebuyers without bias, including For Sale By Owner, New Build Construction by homebuilders, and Multiple Listing Service homes (other Realtor listings). Exclusive Buyer Brokers will better protect the interests of buyers than dual agents, sub-agents, designated agents, or so called split agents. They are more likely to negotiate a lower sale price on a home, for example.   


According to the 

Consumer Federation of America,

when interviewing real estate agents or buyer brokers to buy a home,

"Make certain at least one is a Buyer Broker that works exclusively with buyers."


1. Will you (the agent) represent my interests only or those of the seller? 

2. Do you or your brokerage represent any sellers or builders? 

3. Do you have full access to the Multiple Listing Service? 

4. Will you show me for sale by owner properties? 

5. Can you give me the names of several current and former clients? 

6. What experience do you have as an agent and Buyer-Broker? What other designations or credentials do you have? 

7. Does your commission amount vary? What about bonuses, inducements, or rebates (kickbacks)? Do you give them back to me the buyer? (After all, you the buyer are paying it!) 

NO DUAL, DESIGNATED, OR SPLIT AGENTS! By agency law, a listing real estate company and all of their agents represent the individual(s) selling the home. If they say they can represent the buyer and the seller that is dual (i.e.: double, like a spy) agency or designated (also called split) agency. Confused? So are most traditional brokers and agents! If they try to minimize or downplay its importance to you be very careful. It is at this point that dual or split agents may begin to protect their commission checks rather than your interests. An Exclusive Buyer Broker does not take listings and never represents sellers. They will not "steer" you into looking at their company inventory of homes for sale, because they do not have any! 

The entire foundation of exclusive buyer representation is not having any real or potential conflicts of interest with a buyer/client. When representing a buyer/client who has a home to sell a true Exclusive Buyer Broker chooses not to "list" the property for sale. In other words, they turn down thousands of dollars in full commissions each month because their clients’ best interests are at stake. An Exclusive Buyer Broker will never change their fiduciary relationship with a buyer/client during their entire home buying process, whereas 99% of so called "buyer agents" and their brokerages gladly represent sellers and may "switch" their relationship with you. 

Remember that while buyers and sellers need not be adversarial in actions and attitude, their personal interests are adverse. Buyers want the lowest price and best terms, and sellers want the highest price and best terms. We do not make wild claims that we will save a client $100,000 on their next home purchase. We do negotiate for our clients without any chance of real or perceived conflicts of interest. You would not expect less from your doctor, accountant, or attorney, so why potentially settle for less on the biggest financial transaction of your life? 


1. Be sure the Exclusive Buyer Broker is a Realtor whose company does not ever take listings or represents sellers. 

2. Use only Exclusive Buyer Brokers who have access to For Sale By Owner, New Construction by Builders, and Realtor inventory Homes in the MLS (Multiple Listing Service). 

3. Membership in a national organization helps to assure a higher standard of quality service (for example, Buyer's Resource, the National Association of Exclusive Buyer Agents (NAEBA), the Real Estate Buyer’s Agent Council (REBAC), etc. 

4. Insist upon signing an Exclusive Buyer Brokerage Agency Agreement. This agreement assures that the real estate agent and company are committed to the buyer exclusively. Those companies who do not use this agreement are not able or willing to make a full commitment to you. 

5. Be sure that the Exclusive Buyer Agent uses a Purchase and Sale Contract that is "buyer friendly." (Most contracts are seller oriented.) Your Exclusive Buyer Agent will negotiate terms and conditions in the purchase contract that offer greater protection to homebuyers. 

BUYING A BUILDER’S NEW HOME: SHOULD I USE AN EXCLUSIVE BUYER AGENT? Yes. It is just as important to use a qualified Exclusive Buyer Agent Realtor in purchasing a new home. Benefits include:  

1. There is no additional cost involved to have an Exclusive Buyer Broker represent you. The builder cannot give you any cash back because you are not licensed as a real estate agent. It would be illegal, so therefore the builder cannot give anything back to you, the buyer. 

2. Knowledge and history of various developments help match the buyer with the right community. 

3. Knowledge of builders' pricing strategies helps buyers determine best negotiating strategy. 

4. Knowledge of other builders of equal and greater quality help buyers get the best builder for the money. 

5. Knowledge of builders' reputations regarding quality, follow- up, warranty, and financial stability, help prevent problems after the sale is closed. 

6. In many cases, lower prices or other concessions are offered to buyers with buyer agents, as builders consider these agents as "multiple sources of buyers." Individual buyers buy only one home; buyer agents bring in many buyers. 

Be sure, however, to use only Exclusive Buyer Agents who can help buyers with both new and existing homes. So-called new home specialists often do not have access to or knowledge of existing homes and may have monetary relationships with builders, which can cost you thousands

SELLING YOUR HOME: CAN AN EXCLUSIVE BUYER AGENT HELP ME? Yes. An Exclusive Buyer Agent only represents homebuyers and does not take listings. These agents, however, work with hundreds of listing agents. They know which ones will aggressively market your home and provide excellent seller representation.


Are you just out of college or new in your career or job?  Are you making big rent payments but have little or no down payment?  What if you could buy, are you confused between new construction versus 
existing homes?  

Buying a residence can be a fretful experience, one that you may be thinking is several years away from serious consideration.  However, what if you could stop renting now, begin to build equity, have Uncle Sam help with your payments, and not have a downpayment? 

Most people do little or no research before they invest time and money to buy their first home.  Doesn’t it make sense to become completely informed before you buy your first home?  This special report is designed to help you avoid 7 common and crucial mistakes.  The right real estate professional who specializes in Exclusive Buyer Representation can help you make good sound business decisions based on your personal circumstances. 

1. Choose the right agent.  When looking for new or resale homes, you need an advocate for you, protecting your interests in the home search.  Using an Exclusive Buyer Broker to help you is just like using a credit card to make a purchase.  It does not cost you any more and it gives you added protection for that purchase.  Most consumers do not realize that all merchants pay a “commission” to their bank for all credit card transactions as a cost of doing business.  It is just the same using an Exclusive Buyer Broker - the fee is part of the cost the builder pays or part of the listing commission the seller pays to sell a home through a Realtor®.  Trying to go it alone (buying directly from the builder or the real estate agent or company whose sign is in the yard) will not save you money.  Further, you have no representation (meaning no one is protecting you), and may end up costing you much in terms of time and money!  The only thing you invest with an Exclusive Buyer Broker is your time!  Would you defend yourself in court without an attorney?  Then why make the biggest financial transaction in your life without someone on your side protecting you, 
at no additional charge! 

2.  No down payment - no problem.  A common misconception is that you need 5, 10, or 20% downpayment funds to buy a home.  The opposite is true.  The homebuilders, lenders, and Realtors® nationwide understand that many people have the qualifying income to buy a home rather than wasting it on renting.  They also understand that saving up for a downpayment is the number one reason that prevents people from home ownership.  As a result, there are now loan programs that require little or no money down, such as 1% down, sweat equity (work for downpayment) on new homes (painting, cleaning, landscaping, etc.), FHA, VA, Community Home Buyers, special builder programs, and more.  Ask your Exclusive Buyer Broker about these programs and other options that meet your needs at this important time in your life. 

3. Little time on the job - just out of school.  Most mortgage lenders generally require at least two years on the job.  If you changed jobs less than two years ago, then it must be in the same field of work and that you are under no probationary or conditional period.  However, if your job or career is related to what you received your degree in - Bingo!  Lenders will count your school time as time on the “job.”  Consequently, consider the two-year requirement of being on the job as waived. 

4. Income Minus Lifestyle Equals Potential Mortgage Payment.  Sit down with your Exclusive Buyer Broker and honestly discuss your income level and living expenses.  Take into account future considerations, children, add-ons, amenities, fix-ups, raising income levels, promotions.  Your first home is certainly worth a sacrifice but do not mortgage your entire future.  Do not budget yourself two paychecks ahead of a foreclosure.  Remember that your first home will not be your final or ultimate dream home.  Be realistic and flexible on your goals. 

 5. Uncle Sam will help with your payments.  You may vaguely understand or have heard of the tax benefits of home ownership.  The mortgage interest on your house payment is fully tax deductible off your gross income in most cases.  In the beginning of a mortgage, almost all of the payment is interest, so you can have a superb tax shelter by simply buying a home.  Other expenses are also deductible, including real property taxes and moneys paid at closing by the buyer or seller for discount points.  Always consult a tax professional. 

6. Use Your Team.  By aligning yourself with the right Exclusive Buyer Broker, you will have an entire Team at your disposal.  Consult with your lender, home inspector, insurance agent, and real estate attorney.  Each of them should work hand in hand for your benefit.  Explore all the options. 

7. Loyalty Breeds Loyalty.  Be open, honest and up front with your Exclusive Buyer Broker.  Wrong motives or assumptions will cause headaches, delays, extra expenses, or may keep you from getting your home. 

According to the Consumer Federation of
America,  when interviewing real estate agents or buyer brokers to buy a home, “Make certain at least one is a Buyer Broker that works exclusively with buyers.” 

The CFA recommends asking the following seven important questions: 
1. Will you (the agent) represent my interests only or those of the seller? 
2. Do you or your brokerage represent any sellers or builders? 
3. Do you have full access to the Multiple Listing Service? 
4. Will you show me for sale by owner properties? 
5. Can you give me the names of several current and former clients? 
6. What experience do you have as an agent and Buyer-Broker?  What other designations or credentials do you have? 
7. Does your commission amount vary?  What about bonuses, inducements, or rebates (kickbacks)?  Do you give them back to me the buyer?  (After all, you the buyer are paying it!) 

Finally, do you work with first time buyers and are you knowledgeable about the special financing programs discussed in this report? 

No matter where you are moving to nationwide, please contact our office.  We can be of service to you at your destination!  In addition, remember that there is no cost for our relocation or referral services!  Take the time now to learn more at one of our consumer workshops or at a personalized buyer workshop.



Copyright Consumers Union of U.S., Inc., May, 1996 Transmitted Via Internet: 7/31/96 2:38 PM 

THE CURRENT MARKET.  The old rules of residential real estate no longer apply.  For most of the postwar period, the goal of most homeowners was to climb what economists call the "housing ladder.”  You grabbed hold of the first rung by buying a condo or a starter house, stayed in it a few years to enjoy some easy appreciation, then continued to trade up to the biggest new home you could persuade a willing banker to finance.  By the time you'd clambered to the top, your home was much more than just a nice place to live.  Its steadily increasing value made it an unbeatable investment as well.  

 For millions of homeowners today, the housing ladder has turned into a treadmill.  Home values have fallen in California and in the major urban centers of the Northeast, a phenomenon not seen since the 1930s.  By one estimate, some 45% of homeowning Californians couldn't trade up even if they wanted to.  They haven't enough equity in their current homes to scrape together a down payment.  It will still make more sense to own than to rent, as long as Congress continues to allow homeowners to deduct their mortgage interest payments from their federal income taxes.  

 Don't bet that you will be able to finance your kids' educations or your retirement from the growth of your investment in your home.  On average, housing prices are forecast to rise by about 3% a year in the next few years.  In some major markets, they aren't even expected to keep pace with inflation.  Consumer Reports' Table of modest gains lists METRO AREAs in the U.S., the MEDIAN home price in 1995 (in $000s), the annual growth rate from 1986 to 1995 (GROWTH 1986-1995) and the annual projected growth rate to 2000 (GROWTH 2000).  Sources: National Association of Realtors and, for projections, Regional Financial Associates.  

 Be clear about your motives if you are considering a trade-up to a bigger house.  If you need the space for a growing family, for example, it could make sense.  But if you do it expecting to reap a windfall when you sell, you'd probably be better off staying where you are.  It makes little sense to borrow heavily to buy a home that may lag behind other investments, such as mutual funds, especially since they may also be easier to sell should you need cash.  

 The most reliable indicator of a home's value is what similar homes sold for in the past.  Find out as much as you can about past transactions in the neighborhood you're interested in to get a sense of recent trends.  A good place to start is the Consumer Reports Home Price Service (800-775-1212), which offers information by phone on home sales covering approximately 80% of the U.S.  For a fee of $10 for a 10-minute search, you can get information on an individual property, all sales on a given street or all properties that sold for prices within a specified range.  By checking the Web page of the local newspaper, computer users may also be able to find price information for some locales online.  But in at least 10 states and in parts of others, no home sale price data are publicly available.  

 A good real-estate agent can help you settle on the right price, but buyers should keep in mind that brokers traditionally work for the seller.  If you confide in the seller's agent what you are willing to spend on a given house, the agent is obliged to pass that information on to the seller.  The local board of realtors in our area may be able to refer you to a so-called "buyer broker," who will work exclusively with you to find the right house, negotiate the deal and keep any information you share confidential.  But be aware that the buyer-broker's interests may not be identical to yours.  Typically, these brokers are compensated by a cut they take of the commission that the seller pays to his or her own agent.  

 There are other ways to pare expenses when buying a home.  The transaction's closing costs, which include fees for drawing up a purchase agreement, searching the title records and filing a new deed, can be cut in states that allow buyers to hire paralegals at a fraction of what attorneys charge.  You should also shop around for the title insurance most mortgage issuers require instead of simply going with the first company that your lender or real-estate agent suggests.  

 The rewards of today's housing market are unlike those of the recent past.  You may no longer be able to claim, as you once could, that your home is now worth two or three times what you originally paid for it.  But if you've done your homework, you'll be able to feel good about the home you can afford to live in.  For more information, you may also want to consult "How to Buy a House, Condo, or Co-op" (Second edition, $16.95), which you can order from Consumer Reports Books, at 515-237-4903.  

MORTGAGES – Introduction.  Perhaps the most consequential step you will take when buying a home, or refinancing the one you have, is finding a mortgage and a lender you can afford to live with.  Your monthly mortgage payment, after all, will almost surely be your heaviest financial burden.  Now that load is lighter than it has been, with all but a few brief exceptions, for over a generation.  Interest rates for a conventional 30-year mortgage have fallen by nearly two full percentage points since the beginning of 1995, to a national average of just 7.08% in February.  

 Despite the recent turmoil in the financial markets, housing experts still expect rates to settle around 7.5% for at least several more months.  Lower rates mean it's easier to buy a home, or afford a bigger one.  For example, potential first-time buyers can now qualify for a $70,000 loan to buy a condominium on an annual income of just $22,800, or nearly 20% less than a lender would have required in 1995.  A growing family living in a $112,200 home (the national median home value) can now buy a house selling for nearly 20% more and pay no more per month than it currently does.  Families content to stay where they are can cut their monthly payment, by more than $200 for a year-old $150,000 mortgage, and salt the savings away for the kids' education or retirement.  

 Shopping for a mortgage is a financial rite of passage, with many potential perils.  Lenders offer low initial teaser rates on adjustable mortgages that can climb steeply.  Some are beginning to add onerous penalty clauses to loan contracts that can cost you money if you refinance.  And there is no shortage of "experts" eager to sell you advice.  

 The banking industry wants Congress to throw another obstacle in the way of consumers thinking of refinancing.  Now, when would-be borrowers have provisionally agreed to refinancing terms, they have three days to reconsider whether they want to complete the transaction.  Lenders must honor the consumer's right to withdraw from the deal and refund any fees they have been paid.  But, if the banking industry gets new legislation passed, lenders would be able to keep fees consumers have paid for a credit check and a property appraisal.  

 Indeed, any missteps you make on the way to signing a mortgage contract can have costly repercussions.  Even within a single region, interest rates on a 30-year mortgage can vary by as much as two percentage points, according to HSH Associates, a Butler, N.J., firm that tracks the rates.  Choose a mortgage that charges a half-percentage point too much, or select one that has a maturity that is too long, or too short, and you could end up paying tens of thousands of dollars more than necessary over the life of the loan.  

Types.  Competition among lenders has given consumers a broad array of mortgage choices, but it hasn't made comparison-shopping easy.  Mortgages now come in nearly every conceivable combination of interest rate, duration and fee structure.  Which loan makes the most sense depends on how long you plan to remain in the home and the monthly payment you can afford.  If you live in a city where co-operative apartments are common, you will probably have fewer options.  Lenders consider not just the credit-worthiness of the co-op buyer, but the underlying financial health of the corporation that issues the building's shares.  

 The conventional 30-year fixed-rate mortgage has been the perennial favorite of borrowers, and it's more popular than ever as both buyers and refinancers scramble to lock in today's low rates.  It offers homeowners the peace of mind of knowing that even if economic conditions cause interest rates to rise sharply, their payments will remain steady.  But in these footloose days, relatively few people remain rooted in a home for a lifetime.  If you plan to relocate within a few years, you may find an adjustable-rate mortgage (ARM) less costly, at least at first.  

 The most common ARMs recalibrate interest once a year, based on an index of benchmark government bond rates.  ARMs made sense for many borrowers in the early 1980s, when interest rates were high and volatile.  Their lower initial rates were often the only way that many people could afford to buy a home.  That was still the case as recently as late 1994, when the difference between the initial rate on a single-year ARM and a  
30-year fixed was more than three percentage points.  

 With the average one-year ARM priced at 5.3% in February, the spread has narrowed to just 1.8 percentage points, too small to be worth the risk of paying more next year unless it's the only way your income qualifies you for a mortgage.  One breed of ARMs is worth considering.  These maintain a fixed interest rate for a specified number of years (typically 3, 5, 7 or 10) and then adjust annually for the balance of the loan.  

 Multiyear ARMs may be well suited for consumers planning to relocate within or soon after the mortgage's initial period.  In fact, the average mortgage is paid off in just seven years because the borrower moves to a different home or refinances the loan in that time.  Multiyear ARMs permit borrowers to lock in, at least for a few years, a lower initial interest rate than they could get for a fixed-rate mortgage.  And, because the monthly payment on an ARM is lower, banks are able to qualify borrowers with a smaller income.  

How To Lower Your Costs.  While the interest rate you get will be the biggest factor determining the ultimate cost of your mortgage, lenders have other ways of upping your costs.  You can save thousands of dollars and much frustration by getting pre-qualified and pre-approved for a mortgage and by minimizing transaction fees.  Following are your best opportunities to save:  

Pre-qualification.  Lenders expect borrowers to spend no more than 28% of pretax income on total housing costs, including mortgage payments, insurance and taxes.  Housing costs plus all other long- term debt, such as car payments and student loans, should not exceed 36% of your gross income.  Ask your broker or a potential lender whether you would qualify for a loan before you begin shopping.  It can save you time by focusing your attention on properties that realistically fit your budget.  

Preapproval.  As you get closer to selecting the property you want, consider lining up a bank that will give you its provisional agreement to grant you a loan.  Preapproval can boost your bargaining power with the seller, who knows that with financing in place you can close the deal quickly.  There are some pitfalls to beware of.  While many lenders preapprove free, some charge a fee.  At NationsBanc Mortgage in Roanoke, Va., for example, preapproved borrowers pay $50 for a credit check, but they won't get their money back if they decide to go with another lender.  

Locking in the rate.  Before you pay to lock in a given interest rate for a specified time period, ask if the lender will be willing to lower it if interest rates decline.  And get a commitment for at least 60 days.  A 30-day lock-in won't be useful if you're just beginning to shop for a home.  (It often takes 45 days to complete all the paperwork.)  

Points and other closing costs.  Your lender may be willing to offer you a lower interest rate on a mortgage that includes points (each point equals a 1-% fee paid at the closing on the total amount of the loan).  In mid-March, for example, Countrywide Home Loans, a California-based lender, advertised an 8.13% rate for a 30-year loan with no points.  Pay 2 1/4 points and the rate drops to 7.63%.  If you are planning to stay in the home you buy for at least six years, you will come out ahead by paying points to get the lower rate.  

 Your lender is required to give you a good-faith estimate of charges you'll be expected to pay to finalize the loan (for property appraisal, title insurance, credit reports and the like).  Carefully review every item on the list.  Sometimes lenders will pad the bill with unnecessary charges, such as courier fees.  Other items, like title insurance, you may be able to buy more cheaply on your own.  

The mortgage-insurance ripoff.  Borrowers who put down less than 20% of the purchase price must have mortgage insurance to protect the lender in the event of default.  But avoid "lender paid" insurance, a way some lenders like Countrywide and Chase Bank get you to make extra premium payments.  It sounds good, the premium is part of your tax-deductible monthly mortgage interest payment.  But you go on paying even after your equity exceeds 20% of the home's value.  You should pay the premiums separately in cash and drop the policy once your home equity crosses that 20% threshold.  
Prepayment penalties.  Watch out for mortgages that impose a penalty if you decide to pay them off ahead of schedule.  With more consumers trading in their old mortgages for lower-cost new ones, lenders want to write the penalties into more loan contracts, something many states currently allow them to do.  In
California, BankAmerica Mortgage already assesses a stiff 2% charge on the original loan amount to borrowers who pay off certain adjustable-rate mortgages within the first three years.  It may soon slap prepayment penalties on some of its fixed-rate loans, too.  

Accelerated payment.  Another thing you shouldn't have to pay extra for: biweekly payments that help you pay off your loan faster.  Lenders like Mellon Mortgage Co. in Denver, Colo., will charge you a fee of $400 or so to arrange it.  But if you make the extra payments yourself, you can avoid the fee and the obligation that comes with the lender's program.  Borrowers who regularly make 13 monthly payments a year instead of 12 can pay off a 30- year mortgage in about 22 years and save some $52,000 over the life of a $100,000 loan.  

Where To Find Help and Advice.  Can young families or other consumers of low or moderate income still share in the American dream to own a home?  Some moderation in prices along with lower mortgage rates should help these would-be buyers.  But many more need a boost over the financial threshold.  Now, there are several programs that help millions of Americans, thanks largely to the Community Reinvestment Act (CRA), a federal law intended to end discriminatory lending practices by requiring banks to lend to modest-income consumers.  

 CRA has spurred thousands of lenders to develop programs that let consumers who meet income guidelines put down as little as 3% of a home's selling price and qualify for mortgages on more lenient borrowing terms.  More banks are also being encouraged to lend to lower-income consumers by the Community Home Buyer's Program run by the Federal National Mortgage Association, the government-sponsored agency that buys mortgages from the original lenders.  

 The agency provides referrals to participating lenders as well as to local nonprofit organizations in your area that offer home-ownership counseling services.  (Call the public information office at 800-732-6643.)  To learn about other programs in your community, call your state or city housing agency or a local office of the U.S. Department of Housing and Urban Development (HUD).  Income is only one reason mortgage money can be difficult to raise.  If you feel that your mortgage application has been rejected because of racial discrimination, start by contacting the lender's Community Reinvestment Act officer.  

 If the bank's explanation still leaves you unsatisfied, contact your local or state fair-housing enforcement agency, which will be listed in the government pages of your phone directory, or call HUD's housing hotline at 800-669-9777.  The agencies can investigate your case to see if the lender may have violated any fair-lending laws.  

 In terms of finding good mortgage advice, lenders' ads in the local newspaper can give you a flavor of what's available, but don't buy on the strength of an ad alone.  The most attractive advertised rates are often a tease to draw customers in, and, in any event, the rates in effect when the ad is published will likely be different when you are ready to deal.  

 One good source of up-to-date information is HSH Associates' "Homebuyer's Mortgage Kit," which you can receive by mail.  For $20, you get a clearly written booklet on how to shop for a mortgage and detailed information on loan rates from 80% of the lenders in the market you select.  (To order, call 800-873-2837.)  Also, a good realtor should know which banks offer the best terms in the community where you are buying.  And the National Association of Mortgage Brokers can help locate a mortgage broker in your state who specializes in weighing the competing offers of several banks. (Write to them at 1735 N. Lynn St., Suite 950, Arlington, Va. 22209.)  

 Be careful before you act on any expert's advice. A real-estate agent may refer you to a lender that is affiliated with his or her company. And mortgage brokers don't work for free: If you aren't paying their fee, the lender to whom they refer your business probably is. A good real-estate professional can help save you time, money and anxiety, but you have too much at stake to trust an expert to do your homework for you.  

To Refinance or Not?  If you have a variable-rate mortgage, do you want to lock in a lower rate on a fixed-term loan? Or do you already have a conventional 30-year mortgage, even one that you may have refinanced just a year or so ago? Whichever is the case, you owe it to yourself to see if it makes sense to refinance your mortgage on more advantageous terms.  

 Consumer Reports' worksheet can help determine whether refinancing is the right step for you. First, write down your current monthly mortgage expenses. Then, use the interest-rate table to estimate what your monthly payments would be on a new loan at a lower rate. For example, if you can get a rate of 7.25% on a $125,000 loan, you'd pay $852.50 per month ($6.82 from the table, multiplied by 125 for the number of thousands of dollars you are financing, equals $852.50). Subtract this figure from your current payment to determine what your gross monthly savings would be.  

 Finally, add the transaction costs you will incur (points, appraisal, attorneys' fees and the like). Divide the total by the monthly savings. This will tell you how many months it will take to recoup your costs. It probably pays to refinance if you plan to stay in your current home longer than this period.  

7.00% $6.65    7.25  $6.82    7.50  6.99  
7.75     7.16     8.00  7.34      8.25  7.51  
8.50     7.69     8.75  7.87      9.00  8.05  
9.25     8.23     9.50  8.41      9.75  8.59  
10.00 8.78     Payment is for each $1,000 of principal. Source: HSH Associates.  

1). Your current monthly mortgage payment:  (excluding insurance and taxes)    $     
2). Monthly payment for your new loan:   (Use previous chart to compute figure)      
3). Closing costs: (points, fees for application, (title search, attorneys and appraisal)       
4). Monthly saving:      (Subtract line 2 from line 1)        
5). Number of months you'll need to stay in home to recoup cost of refinancing:  
          (Divide line 3 by line 4)         

NEOTRADITIONAL NEIGHBORHOODS – Introduction.  The millions of Americans who buy homes each year base their decision on a familiar list of choices, such as the commute to work, the number of bedrooms and baths, the quality of the schools.  But they have surprisingly little choice in one important factor: the physical layout of the neighborhood.  Many people dream of buying a home on an old-fashioned tree-lined street with a few shops on the corner.  But for a half-century, developers have maintained that tract houses with big front lawns in auto-oriented subdivisions are what Americans want.  And local officials have often made it illegal to build new neighborhoods in the old style.  
 As a result, in many cities 1920s-style homes, in traditional neighborhoods, have become highly desirable, despite small closets and baths.  "Ask yourself what neighborhood in your hometown people are willing to pay a premium to live in," says D.R. Bryan, a North Carolina builder.  "It's probably a neighborhood built between 1890 and 1920."  

 Over the past decade, the persistent appeal of old neighborhoods has persuaded a small but influential group of designers and developers to advocate building old-style communities for a new era.  These "neotraditional" places would look and work like the back streets of a comfortable pre-World War II city, with a rich mix of housing types, cultural centers and shopping districts within walking distance, and a vibrant public personality.  Such neighborhoods are being built in places as different in scale and location as downtown San Diego and rural North Carolina.  

 Consumer Reports visited several of these neotraditional developments and talked with leading proponents of the approach, as well as with developers, town planners and residents.  We also looked at the traditional neighborhoods that serve as the models.  There aren't enough completed examples to tell whether these will be honest copies of old-style, mixed-income communities or just pricey boutique villages for the well-to-do.  But we think this style of neighborhood is a choice that buyers ought to have.  

 We also learned that the forces discouraging such innovation remain embedded in the legal and financial apparatus that controls land development: thousands of local zoning codes, road standards, the requirements of national retail chains and the financial structure of the real-estate development industry.  Change, if it does come, will depend largely on decisions that need to be made locally.  

Building Better Towns.  The critics of suburban sprawl decry land-use designs that tear communities into far-flung fragments and make residents use a car to get anywhere.  Instead, they offer this alternative vision:  

1.  Houses occupy small lots clustered around pretty public spaces, such as parks or playgrounds.  
2.  Garages retreat to the rear of the lot or an alley.  
3.  Street grids replace isolated cul-de-sacs and the broader roads that connect them.  
4.  Shopping takes place on intimate Main Streets, with stores lined up along the sidewalk and parking to the rear.  
5.  Walking is encouraged by sidewalks, street trees, front porches, narrow roads that slow down cars and, most important, commercial and recreational areas located a short walk from most houses.  
6.  Public transportation is made possible by clustering neighborhoods and offices along lines that can readily be served by buses, trolleys, or light-rail lines.  
7.  Housing types are varied in size and price, to facilitate the kind of mix of people found in a city.  The mix also means that grown children won't have to move so far away to start a home, and older people won't have to leave the neighborhood when they retire to a smaller home.  

 Miami architects Andres Duany and Elizabeth Plater-Zyberk, pioneers of neotraditionalism and its most prominent advocates, feel this vision offers not only a livable alternative to regular suburbia, but also a path away from our dependence on the private auto.  

Where Do the Cars Go?  It is the handling of cars, not the addition of picket fences or front porches, that really distinguishes neotraditionalism from standard suburban design.  The movement's most radical proposal is to abandon the now-standard street hierarchy that dominates suburbia: Isolated residential loops or cul-de-sacs, which feed broad connector streets, which, in turn, feed busy multilane arterials.  Instead, homes would line a grid of neighborhood streets. 

 "What we have done with traffic...turns out to have been the worst possible thing," says Walter Kulash, an Orlando, Fla., traffic planner and convert to neotraditionalism.  "By concentrating traffic on a few arterial streets and prohibiting it from other streets, we've made people hostage to ugly congestion for the six to nine trips the average household makes in a day.  It affects the quality of life of everybody who has to do that kind of traveling."  

 Neotraditionalists also would repeal the long-standing suburban rule that every commercial building must come with on-site parking in the front yard.  Instead, they would park cars on the street (to slow passing traffic and serve as a physical and psychological barrier between road and pedestrians); behind the stores (to eliminate the unsightly "strip" store developments laced through many towns, and to encourage people to walk from store to store); and in shared lots (where spaces could be used, say, by bank customers by day and restaurant patrons by night).  

 All this sounds great to many city and county governments, which are desperately seeking ways to get out from under the financial burden of servicing sprawling suburbs with wide roads, big parking lots, and expensive police and fire protection.  City planners also believe neotraditional design offers a new way of halting or reversing decline in the inner city and in older suburbs.  In some cities, they've rewritten their building codes to encourage neotraditional design instead of outlawing it.  

 The neotraditionalist argument is gaining ground among traffic planners as well.  The Institute of Transportation Engineers is in the process of creating street standards for neotraditional communities.  These guidelines will endorse a connected road network, allow streets much narrower than the current suburban norm, and tip the balance away from cars and toward pedestrians.  This addition to the existing standards will have far-reaching influence, since cities and towns nationwide rely on them to guide local development.  

But what about people who want to live on a quiet street with little traffic?  Neotraditionalists say you don't need cul-de-sacs to keep traffic down.  In a well-connected grid of streets, they note, traffic distributes itself evenly and thinly as motorists given a choice of routes automatically select the least congested one.  What's more, narrow streets, sharp corners and stop signs force cars to move slowly, which in turn greatly reduces the noise and commotion they generate. 

 In the traditional neighborhoods Consumer Reports visited, among both the originals and their modern imitators, we saw no more traffic than in conventional suburbs.  And we found driving on their slow-moving, two-lane commercial streets a lot more pleasant than racing down a six-lane arterial, searching for a place to make a U-turn to get to the strip mall we passed a mile back.  

The First Communities.  Big neotraditionalist developments that have gotten the lion's share of attention include: Duany and Plater-Zyberk's Seaside, a resort town on the Florida panhandle; their other major project, Kentlands, outside Washington, D.C.; Laguna West, south of Sacramento; and Harbor Town, on an island in the Mississippi River across from downtown Memphis.  Though their streetscapes are attractive, none of these developments contains every element of the neotraditional prescription.  

 Laguna West doesn't yet have a single apartment.  Only Seaside has a central shopping street.  Except for Seaside, a free-standing beach community, all these neighborhoods remain isolated within a surrounding matrix of conventional suburban sprawl, with poor public transportation connections and limited shopping.  The center of activity in Laguna West, for instance, is a stylish new community building that bustles day and night with art and exercise classes.  But the only nearby businesses are a Jiffy Lube and a gas station.  

 But even as the big neotraditionalist projects have struggled toward completion, smaller-scale developments have quietly been succeeding in many places.  Among the ones Consumer Reports found: Fearrington, near Chapel Hill, N.C., which is built alongside anexisting cluster of specialty shops and restaurants, and Fairview Village, near Portland, Ore., which will bring a new Main Street-style downtown to a suburban area that never had one.  In Mashpee, Mass., and Boca Raton, Fla., neotraditionalist designers built successful downtowns literally on top of the vast parking lots of failed strip malls. 

 What may be the most complete realization of neotraditional principles is being assembled now on orchard land outside Orlando.  The Disney Co. is building an instant small town, called Celebration, which from the beginning will include shops, offices and large apartment blocks as well as single-family homes.  The first residents are to move in this summer.  

 Finally, neotraditionalism is prompting some real traditional towns to come full circle.  For decades, many tried to re-make themselves as suburbs, by replacing downtowns with enclosed malls and forcing new housing, even in old neighborhoods, to obey zoning and building rules that encourage sprawl.  Now, the towns are using neotraditional principles to restore and revitalize those shopping areas and neighborhoods.  Neotraditionalists are applying their ideas to big cities as well, by treating them as a collection of small, pedestrian-scale neighborhoods.  In San Diego, an empty urban-renewal site now boasts a profitable supermarket (with underground parking) linked to streets densely lined with townhouses.  
Neotraditionalists have also designed plans for, among other places, downtown Providence and Los Angeles.  So far, however, the great majority of neotraditional projects, both urban and suburban, have been for middle- and upper-income residents.  

Obstacles.  In spite of growing support from city planners, neotraditionalism has a long way to go before it becomes a standard community design.  Local fire departments worry that the streets will be too narrow for their trucks (a test in Laguna West proved they were wrong).  Builders are afraid the houses won't sell as well as standard suburban models.  "The development industry is full of legends about people who tried something different and went broke," says Steve Tracy, a Sacramento County planner who is trying to encourage neotraditional construction.  

 Neotraditionalism doesn't fit standard patterns of financing developments.  A major stumbling block is that developers, as well as the banks and insurance companies that lend them money, tend to specialize in one kind of project (retail, office or residential).  "Right now, we're in heavy conversation with three different banks, who specialize in three different categories," says Richard Holt, developer of Oregon's Fairview Village project.  

 Without a big front parking lot, many retailers won't locate in neotraditional downtowns, and might not be able to get a bank loan even if they were willing to come.  But some retailers are coming around to neotraditionalism.  Robert Gibbs, a Michigan- based retail consultant, says that such mall powerhouses as The Gap and Victoria's Secret are seeking out prosperous Main Street locations.  

 Some neotraditionalists liken the situation to that faced by the auto industry in the 1970s.  "Detroit had this very monolithic version of what car buyers wanted," observes John Massengale, a neotraditionalist planner from Bedford, N.Y. "Then Honda and BMW came in and showed that General Motors may have been right about three-fourths of the market, but nobody was building for the other one-fourth.  Developers ignore this.  They just look at what's being built today, but they ignore the fact that two miles away, an old house with substandard plumbing and wiring is going for twice the price."  
Environmental Impact.  Promoters of neotraditional neighborhoods say their plans would reduce car use and promote public transit.  That would be an environmental boon, since personal transportation accounts for a big chunk of the emissions causing global warming.  Consumer Reports calculated the carbon dioxide, a key contributor to global warming, generated per commuter in several major cities.  It turns out that commute distance and the extent of public transit make a big difference.  For average commuters traveling to the central city, the amount of carbon dioxide they generated each day was at least 50% greater in San Francisco and Los Angeles than in New York City, Washington D.C., or Philadelphia, where a much higher percentage of commuters use subways, trains and buses instead of cars.  But will building neotraditional neighborhoods get people out of cars?  The evidence is shaky.  

 Numerous transportation studies have shown that, unless a place is much more densely settled than most new neotraditional projects, people prefer to drive.  And studies of actual traditional neighborhoods show that residents drive about as much as people living in conventional suburbs.  To make a real dent in emissions of global-warming gases, governments will have to display a more serious commitment to public transportation in cities as well as towns, and to land-use patterns that bring people closer to jobs.  

 Neotraditional planning alone won't bring about the needed changes.  But unlike conventional suburban sprawl, neotraditionalism, with its mixed-use commercial centers within walking distance of houses and apartments, is fully compatible with these more far-reaching changes.  
What the Future Holds.   How many places will eventually embrace neotraditionalism is still unclear.  Overcoming the resistance of the retail and real estate finance industries may require inventing entirely new ways of building and financing shopping districts.  Then there's the question of what home buyers want: Neotraditionalism may not be for everyone, any more than a Toyota will satisfy the needs of every car buyer.  

 The market for suburban cul-de-sac neighborhoods remains strong.  But researchers have found that many consumers do like traditional neighborhoods, or would, if given a choice.  Anton Nelessen, a New Jersey planner, conducts innovative "visual preference surveys" in which he shows, side-by-side, slides of traditional and conventional city and suburban streets, homes, apartments and commercial districts.  Audiences of ordinary citizens of all ages and walks of life overwhelmingly prefer the look of traditional communities.  And studies by real-estate economists of Baltimore, Dallas and Oakland, Calif., show that when you strip away all the other factors known to influence home prices, buyers are willing to pay a steep premium for a home in a well-preserved traditional neighborhood.  Consumer Reports' biggest worry is that neotraditionalism will become an expensive "niche" product for upper-income homebuyers, maintaining the very socioeconomic uniformity that the movement's advocates are trying to undo.  We think neotraditionalism is worth encouraging, even if all it ever does is put a prettier face on the suburbs.  But in the long run we hope that these neighborhoods, and the lifestyle they make possible, once more are so common and affordable that they're ordinary.  

How Your Neighborhood Shapes You.  Looking at a house?  Before you commit yourself, take a minute to step back from it and consider its surroundings.  The lay of the land is likely to have a significant effect on your life: how much time you spend at stoplights, where you shop and even your sense of community.  The difference is most noticeable when you compare life at opposite ends of the scale, in neighborhoods built at opposite ends of the century.  

 Though neotraditional design is cropping up in some new neighborhoods, the overwhelming majority of homebuyers still have to choose between an old house in a pre-World War II neighborhood or a newer house in a postwar-style one.  To find out the consequences of choosing one over the other, Consumer Reports visited people living in both kinds of neighborhood in two fast-growing Sunbelt cities, Sacramento, Calif., and Orlando, Fla., and asked them how they felt about their neighborhood and how they handled the daily routines of their lives.  

 Consumer Reports also consulted the academic and professional literature on the relationship between urban form and travel patterns.  What we learned can be summarized as several questions worth considering no matter where you're planning to buy a house.  

 What's the traffic?  The standard street pattern in postwar suburbs assures that every single car has no choice but to get on the main drag, the arterial, at some point, for a trip of any length.  And as new malls, subdivisions and offices sprout along arterials, traffic inevitably builds from year to year.  We didn't find any residents who actually admitted to liking strip-mall development, but many were willing to tolerate it in exchange for a newer house.  Also, many appreciated the flip side of heavy arterial traffic: almost no traffic on neighborhood streets, where, as one suburban father told us, "there are more kids' vehicles than cars."  
By contrast, people who live in an older neighborhood with a connected grid of streets get a steadier but relatively light flow of traffic past their homes.  Meanwhile, these communities' "main" commercial streets never acquire the intense congestion of arterials, something inhabitants of old-fashioned neighborhoods especially prize.  "I really like going downtown, because you can take the back roads instead of those big, congested roads," says James Glazebrook, who lives in Winter Park, a traditional community just north of Orlando.  

 Homebuyer's tip: Before signing that sales contract, drive or walk to the nearest grocery store, drugstore, and dry cleaner and see how you like the trip because you'll be making it regularly for years to come.  

 What is my neighborhood?  Consumer Reports found a subtle difference in people's "mental map" of their neighborhoods, depending on what kind they lived in.  In modern subdivisions, where land uses are deliberately kept well separated, people think of their neighborhood as, basically, the streets within the subdivision walls.  There, they form strong social bonds with neighbors.  To describe the world outside the development walls, subdivision-dwellers tend to use purely utilitarian terms, not sentimental ones.  Asked where they shop for groceries or prescriptions, they answer with a description of how many minutes or miles it takes to get to the nearest neighborhood strip mall.  In contrast, people who have chosen a traditional neighborhood consider the entire neighborhood, not just their block, as a distinctive, cohesive community.  

 Homebuyer's tip: Think hard about your expectations for your neighborhood.  If you are community-minded, you might have trouble making all the connections you want in a subdivision on the outskirts of town.  If you want lots of privacy, though, a traditional neighborhood might feel too "public."  

 Who needs to walk, and why?  Whether the neighborhood you choose is conducive to travel on foot depends somewhat on whether you want to walk, or need to walk.  People stroll for pleasure and exercise no matter what kind of neighborhood they live in, according to surveys done in California and Texas by Susan Handy, a planning expert at the University of Texas.  When Consumer Reports asked residents in Orlando and Sacramento to keep a brief log of car and walking trips, we found exactly the same thing.  A neighborhood where your walk takes you to an actual destination is harder to find.  First, it must have schools, stores and parks within a quarter-mile or less.  

 To entice people out of their cars, the walk itself should be along narrow streets that have slow-moving, light-to-moderate traffic, and a variety of appealing things to look at, preferably all shaded by mature trees.  It also helps if there's a sidewalk.  These elements can be found more readily in traditional neighborhoods than in modern suburban ones.  

 Walkability is most important for people who don't have the option of driving, older children and some senior citizens.  In upscale Winter Park, retirees living in expensive apartments flock to nearby downtown shops and restaurants.  And Margaret Sanders, a mother of four, says the family chose the community having previously lived in a spread-out suburb near Milwaukee.  "Here the kids can ride their bikes to the library or to get an ice-cream cone downtown."  

 Homebuyer's tip: If you like or need to walk, get out of the car and take a stroll around the neighborhoods you're considering.  You can't assess walkability through the windshield of a moving car.  

 Will things stay the same here?  When Meg and Jay Clark moved into their new suburban Orlando ranch house in 1984, "we liked it because it was rural," Meg recalls.  Just beyond the back yard was a quiet orange grove.  The street outside the subdivision walls was a sleepy two-lane road.  Today, a forest of houses has replaced the orange grove, and that quiet country road has become an ever-busier six-lane arterial.  Development has brought some advantages, a larger selection of stores nearby, but no one would mistake the Clarks' neighborhood for "rural" any more.  In contrast, traditional neighborhoods, having long since been fully "built out," usually don't offer scenic rural vistas.  On the other hand, the best ones do have strategically placed parks.  In any case, what you see is likely to be what you'll get for years to come.  

Homebuyer's tip: If you're looking at a house at the edge of town, check with the local planning department to see what developments might be permitted there in the future.  Don't expect the developer to volunteer this information. 

Comments (2)

James Gordon
Sibcy Cline Realtors® - Cincinnati, OH
please don't copy and paste it's not ethical
Jul 15, 2007 10:42 AM
Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

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