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From: gadfly@ihuxn.UUCP (Gadfly)
Newsgroups: net.consumers
Subject: Re: Need advice on bidding on a house
Message-ID: <1185@ihuxn.UUCP>
Date: Tue, 24-Sep-85 12:40:23 EDT
Article-I.D.: ihuxn.1185
Posted: Tue Sep 24 12:40:23 1985
Date-Received: Wed, 25-Sep-85 04:00:26 EDT
References: <713@whuxl.UUCP>
Organization: AT&T Bell Laboratories
Lines: 94

--
> First of all the prices are outrageous! I sincerely believe,
> that real estate agents intentionally jack up the listed price of
> a house to increase their commission.  So question one:

I'm no fan of realtors, but I think your analysis is wrong.  They
make 7% of the sale price, which amounts to only $700 per $10K,
and only half of that if there's 2 realtors splitting the commission.
Not a lot, when you consider that $10K might be the difference needed
to make the deal at all, and thus the difference between some
remuneration for their work and none at all.  The real factor is supply
and demand, and tax considerations here and there (Calif.).

> (1) Does anybody have a formula (or rule of thumb) for coming up
> with a price offer, based on the listing price, location and/or
> other factors? 

There are formulas for rental property (easiest rule: price = 100 *
monthly income), but nothing for owner-occupied residence.  There's
no substitute for getting a feel for the market, which means making
a lot of very low offers (don't be embarrassed, the realtor has to
submit whatever terms you want).  Sooner or later, one won't be
rejected out of hand--you'll get a counter-offer, and you bargain
from there.  By which time, the realtor has spent a lot of time on
you, and will probably try to convince the seller to come to some
agreement with you so that he (the realtor) can get paid for all
the schlepping around.

> (2) Is it better to deal exclusively with one realtor or use
> several? 

Gee, you don't know much about these folks.  You deal with one.
But remember: THE REALTOR ALWAYS REPRESENTS THE SELLER WHO LISTED
THE HOUSE WITH HIM/HER.  Even if the house is listed through some
other realtor--in which case the two split the commission, AND
BOTH REPRESENT THE SELLER.  Realtors are ethically and LEGALLY bound
to that principle.  If you deal with one realtor behind another's
back and either finds out, both will stop doing business with you.
Of course, you should shop for a realtor who will take an interest
in you and not put on the screws for a quick sale.

There are people other than "realtors"(tm) in the real estate biz.
In most states, you have to be licenced to buy and sell real estate.
Such folks can (and most do) join the Board of Realtors(tm), which
costs a pretty penny.  Members get in on the Multiple Listing
Service (MLS), which is updated weekly, and subscribe to a not-very-
demanding code of ethics.  Realtors MUST work on 7% commission (or
3.5% each if your realtor is not the same as the realtor the property
is listed with), and MAY NOT kick any of it back to you.
"No-frills" real estate brokerages are becoming more popular now.
They usually charge a flat fee.  Realtors(tm) hate them.

> (3) Should I apply for a mortgage now, before I've found a
> house, or wait until I find one? 

You can, and you should, shop for rates, points, and the zillion
things they nickel-and-dime you to death for upon closing.  (Title
insurance is one of the niftier scams at about $150 a crack.)  But
most lenders want to see an accepted offer, and since they send
an appraiser to the property (whom you pay for but whose report
they'll never let you see), you need a property before the bank will
get serious.  Check everywhere you can think of, especially the
mortgage corporations, and check with your state and municipal
gov'ts to see if there are any special programs you might qualify
for.

> Any advice on general strategies for dealing with agents and
> sellers would be appreciated. 

See above.  Remember--when you go to buy a house, the real estate
agent always represents the seller, even if that agent is a total
stranger to the one the seller listed the house with.  The agent
is obligated to submit to the seller ANY OFFER AT ANY PRICE AND
ANY TERMS you specify.  Don't be railroaded by what a realtor
wants.  All real estate offers are transmitted with so-called "earnest
money", usually about 1% of the offer.  If you want to show that
your offer is really serious (even though it seems low), throw in
another $1K with the paperwork.  Earnest money is returned if the
offer is not accepted; it's part of your down payment if it is.

> Thanks in advance, roy 

Good luck and good hunting.

[How I know about this stuff:  I worked with a co-operative housing
organization in Madison, Wis. for most of the 70's.  And I've bought
a few houses myself.]
-- 
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