I read a Bankrate-penned article this morning in the "Homes" section of our newspaper which, at least as it relates to my area, had definite errors. The article, found here in its entirety, pertains to tips for buying foreclosures. The article starts off by providing differences between buying a typical resale versus buying a foreclosure. The first two differences, per Bankrate, were:
- Only one real estate agent needs to be involved in the transaction, and
- The buyer needs to provide a pre-approval letter prior to making an offer.
The first is wrong in any transaction, whether it is a foreclosure, a short sale or a "regular" resale. Why is that? Because in general, if a buyer uses only the listing agent, they are not getting anyone to represent their needs*. A buyer should definitely use a buyer's agent in any foreclosure transaction. That agent will be the one to review the comps (a listing agent who is working for the seller will not do this for a buyer), make and negotiate an offer (contrary to the article, there can be negotiation room with a foreclosure), ensure the buyer understands issues associated with the process and what the bank will or won't do and more. The article indicated a buyer should work directly with the bank's broker because "that way, the commission doesn't have to be split between two brokers." How does that help the buyer? It only helps the listing broker. The commission that is paid from the proceeds of the sale are the same regardless of the number of agents involved, and it certainly makes sense for a buyer to use an agent that can assist him/her.
The second item above is not a difference between a regular resale and a foreclosure. Again, every single transaction, whether a foreclosure, short sale or regular sale needs a mortgage pre-approval prior to making an offer or a proof of funds document if the buyer is paying cash. So stating that this is a requirement only for foreclosures is incorrect.
Bottom line, a buyer would have a much easier time purchasing a foreclosure home using the services of a buyer agent, rather than calling listing agents trying to find appropriate representation. Also, a buyer should always have a pre-approval in place prior to shopping for a home. Bankrate is once again incorrect.
*There are states with "transactional" brokers who assist both the buyer and seller, and there are also agents who provide "dual" representation to both buyer and seller; however, neither of those are a true buyer agent who would represent just the buyer.