Building Your Team
In this AskChristee article, we will focus on reviewing your financial options with a loan officer and real estate agent. Hopefully, you have already created a financial strategy and are prepared to have informed conversations.
I. Selecting your Real Estate Agent
Real Estate Agent. A real estate agent is a licensed individual that is associated with a real estate broker (company) and is legally the agent representing the Broker (company). You may make your decision based upon the salesperson; however, you are hiring the company. The salesperson represents the firm and the firm represents you.
Agency Agreement Buyer. Today, most home buyers are represented by an agent contractually via a ‘Buyer Agency Agreement’. This agreement establishes an agency relationship between the home buyer and real estate agent. Like any other agency relationship, your real estate agent is bound to fiduciary, loyalty, trust, accountability, and confidentiality. In other words, the agent must act in your best interest. Remember, this is a contract and you should review the terms such as: (a) When will the agreement expire? (b) What are the terms for cancellation? (c) What are your financial obligations? Generally, under the agreement, you are responsible for paying the agent a commission, however, the seller pays the commission in all but very rare circumstances.
Exclusive Agreements. Some agency contracts are exclusive, which means you are responsible for paying the real estate commission during the agency period, even if you don’t buy with the agent. For example, if you wanted to buy a FSBO (For Sale by Owner) during the agency period, you would be responsible for paying the agent’s commission.
Non-Exclusive Agreement. In a non-exclusive agreement, the agent is only entitled to earn a commission for properties which they introduced you. In other words, you could work with multiple agents.
Agency Agreement Seller. The listing company has an agency agreement (listing agreement) with the seller. Generally, the listing agreement provides for a commission to be paid to the listing company and a separate commission to be paid to the company representing the buyer.
Unrepresented. You have the option to purchase a home without signing a buyer agency agreement. Should you choose this path, you will be unrepresented in the purchase transaction. Typically, the salesperson can provide clerical like duties such as preparing the paperwork; however, they will be restricted in any advice which they can provide. Prior to the advent of ‘buyer agency’ this was a normal scenario for homebuyers; thus, the adage ‘Let the Buyer Beware’.
Dual Agency. In dual agency, the same Broker (company) represents both buyer and seller. Typically, different sales people, from within the company, represent the buyer and seller. Generally, the buyer and seller must agree to this arrangement in writing.
Most likely, you will be reliant on the real estate agent to provide recommendations for: (a) Mortgage Company (b) Home Inspector (c) Termite Company and (d) Title Company. Additionally, you will be dependent upon the salesperson’s knowledge and skillset in: (a) Searching Properties, (b) Market Values, (c) Negotiations, (d) Contract Preparation, (e) Mortgage Process, and (f) Closing Process. As a bonus, the salesperson should be familiar with mortgage options – A Christee certified agent is knowledgeable in Christee reports to help you (in conjunction with the loan officer) select the best finance options for you.
Experience. Years of experience may or may not prove to be vital in your decision. Years in the business may or may not equate to competency. Whereas a relatively new licensed person may possess the enthusiasm and intelligence to provide great representation.
Real Estate Company or Salesperson. Will you select your agent based upon the company reputation or are you most interested in the individual salesperson? Real Estate Companies fall into three basic categories: (a) Nationwide Corporate Companies (b) Franchise Companies (c) Locally owned independent companies.
Salesperson. Most likely, your experience will be based upon the competence of the salesperson, notwithstanding the company he/she represents. Therefore, it is vital you be comfortable with the salesperson that will be directly representing you. You should be very comfortable in communicating with the agent.
Unless you select the agent based upon a referral, it is important you interview prospective agents. Remember, you are hiring someone for representation in one of the largest transactions of your life. You must be able to communicate with this person and you must feel comfortable with their competency in real estate matters.
Searching for an Agent. If you cannot get a good referral, you may research agents in your area on AskChristee.com. We recommend you speak with one of our ‘AskChristee Smarter Network’ agents.
II. Selecting a Loan Officer
Mortgage Companies come in three different configurations.
(1) Direct Mortgage Lenders. Large Institutions, typically a bank or a subsidiary of a bank. They sell their loans directly to FNMA (Federal National Mortgage Association- Fannie Mae), FHLMC (Federal Home Loan Mortgage Corporation- Freddie Mac), or GNMA (Government National Mortgage Association – Ginnie Mae). They originate, underwrite, and close loans.
(2) Mortgage Bankers. Generally, they originate, underwrite, and close loans. Quite often they sell their closed loans to ‘investors’ that are larger institutions which in turn package loans and sell them to either Fannie Mae, Ginnie Mae, or Freddie Mac.
(3) Mortgage Brokers. They originate loans but do not underwrite, or close loans in their name. They have established relationships with lenders. Mortgage brokers are paid a fee, from the lender, for originating the loan application.
Loan Officer. A loan officer may be affiliated with either a Direct Lender, Mortgage Banker, or Mortgage Broker. While they are substantial differences between the three types of mortgage companies, the service you receive will be very dependent upon the loan officer.
Loan officers that work for a bank are registered with the Nationwide Multistate Licensing System (NMLS). Loan officers that work for non-banks are licensed with NMLS. A Mortgage Originators License (MLO) does not guarantee any level of expertise within the mortgage industry. The MLO license educational requirements are minimal. Mortgage knowledge is acquired by either company training or on the job experience.
Your real estate agent will refer a loan officer. You should ask if the real estate company has any affiliation with the mortgage company. Many, if not most, real estate companies are affiliated with a mortgage firm.
The loan officer will take your mortgage application (either online or in person) and will be your contact person during the buying process. You should interview a couple of loan officers to satisfy yourself with:
(1) Communication Skills. Are you comfortable in communicating with them? If not, you should interview another person.
(2) Loan Availability. Not all mortgage companies process all mortgage types. Most companies process Conventional loans, however, not all companies process VA, FHA, or USDA loans. If your best loan option is a USDA mortgage and you unknowingly apply with a company that only does conventional and FHA loans, then you will be switched to either an FHA or Conventional loan.
(3) Experience. You should ascertain how much experience the loan officer has with your particular type of loan application.
(4) Processing Time. You should discuss how much time they would reasonably expect to approve and close a loan – specifically a loan like yours i.e., Conventional, FHA, VA, or USDA. Eventually, you will have a ratified contract which provides a specific amount of time for approval and closing. Time will be of the essence.
You should review various AskChristee loan option reports with your Real Estate Agent and Loan Officer. Click here to run AskChristee’s ‘Buyer Qual’ Program.