A
buyer agent is obligated to represent only your interests as
described in a written agreement, not the interests of the seller.
If your buyer agent is a member of the Wilmington Regional Association
of Realtors he/she has access to every listing in the Wilmington
Multiple Listing Service. The advantages of having such representation
is that one person learns your needs, helps you screen all properties,
arranges all showings, helps you negotiate the offer, arranges
all of your inspections and attends the closing.
Because
the concept of buyer agency is relatively new in North Carolina,
many buyers are unsure of how much this service might cost them.
Another reservation comes from wanting to make sure an agent
is competent, trustworthy and committed to your goals before
you enter into an agreement.
While
any agent actively licensed in North Carolina who is a member
of the Wilmington Regional Association of REALTORS can act as
your buyer agent, the National Association of REALTORS has provided
an easy way for buyers to recognize agents who have been specifically
trained in buyer representation. If they have the ABR (Accredited
Buyer Representative) designation beside their name you know
they have completed a certain number of buyer agent transactions
and passed the NAR exam. This is a minimum threshold.
Other
factors to consider when selecting a buyer agent are: the number
of years in the business (experience), the number of years lived
in Wilmington (knowledge of Wilmington), the types of professional
designations (degree of training), whether he/she has an e-mail
address and web site (computer expertise).
Still,
there has to be a sense of trust and rapport even if most of
the above considerations are in place. The best buyer agents
are good listeners, clear communicators, skilled negotiators,
pay attention to details and help their clients stay focused
on their needs.
In
order to have an agent represent you as your buyer agent it
is required that you enter into a written agreement called the
Exclusive Buyer Agency Agreement. There are certain elements
that should always be included. The duration of the agreement
can be just for one showing, one day, a weekend, a month … you
and the agent can make that decision. The length of the agreement
is not as important as the ease with which you can end it.
I
always include a clause that allows both buyer and agent to
end the agreement immediately upon notification by fax, e-mail,
voice message or written notice. The rational for a quick and
easy cancellation is that trust and respect are what
keep the agreement together. When the relationship is no longer
satisfactory for either party it should be ended.
Buyer
agents are independent contractors and negotiate their own fees,
however, the most common method of payment in the Wilmington
area is for the listing company (employed by the seller) to
split the commission with the selling company and its buyer
agent. Simply stated, the buyer customarily does not pay the
buyer agent for this service, the listing company does.
For
your information, any property in the MLS can vary in the amount
of the commission fee, as well as how the fee is split between
companies and under what conditions a bonus might be offered.
The important thing to remember is to ask the agent to clearly
explain how he/she is paid for services, and then make sure
it is written into the agreement.
Your
Needs & Wants List
The
sooner buyers can distinguish what they must have in
their next home and what they would like to have, the
faster the process can move ahead. Another way to separate the
needs from the wants is to ask which things, if missing, would
be reasons to reject the house or neighborhood. Those things
are your needs and they will be used to search out all of the
properties worth considering while the wants will be used to
narrow down the list to a manageable size.
A
useful exercise is for each person involved in the buying process
to make a list of his/her needs, wants, and dreams. Compare
and combine each person's list until everyone agrees on the
most important things. The agent will use this information when
setting up criteria for searching the database for your property.
Do not be surprised if the list changes while you are looking
at different properties. Each property will reveal at least
one thing that you either want or do not want in the property
that you eventually purchase.
Beginning
with Neighborhoods
A
good way to become familiar with the area is to have your buyer
agent take you on an orientation tour of neighborhoods in your
price range as well as show you the important landmarks and
service areas. Many people find there is no better way to discover
a place than to spend time in your car with a map getting lost
and finding your way again. Just keep in mind that you do not
have to see the entire city to discover a great place to live.
If
you can give your buyer agent the name of several neighborhoods
that you find interesting, he/she can show you others that rival
those settings. Another method that works is to focus on the
houses that fit within your budget and evaluate the neighborhoods
as you tour.
You
can become cyber oriented to some of Wilmington's neighborhoods
on www.neighborhoodfind.com
before you ever arrive.
How
to Search
The
search for your new home should be as fun and exciting as your
first scavenger hunt. You are the expert on your needs, lifestyle
and tastes and your buyer agent knows the neighborhoods, service
areas, housing inventory, financing resources, etc. Together
you will exchange your banks of information through observations
and questions so that your goal of finding the right house in
the right neighborhood is ultimately accomplished.
More
and more buyers are getting a head start by researching the
area via the Internet (like you are doing). For traditional
buyers the search begins with the initial conversation with
your agent when you describe what you think you are looking
for. Once your buyer agent understands your needs they
become the criteria used for computer searches through all of
the homes in the Multiple Listing Service. The initial search
could retrieve a hundred or more properties. Your buyer agent
can narrow the list by looking at each property report marking
those that have some of the "wants" on your list and are in
the types of neighborhoods you favor.
Now
it is time for you to review the property reports and pictures
indicating which properties you would like to tour and which
can be eliminated. Many buyers go through the local real estate
magazines and the Saturday real estate section marking properties
that interest them.
Buyer
agents will sometimes announce what they are searching for at
their weekly sales meetings or e-mail or fax their criteria
to agents in other companies. Eventually, the buyers and agent
realize that there are two to five properties that meet the
needs and many of the wants, but just one has the emotional
impact to prompt the offer. Once that decision is made, the
search shifts to making an offer.
The
Buyer Agency Confirmation Form is used to let you know for
whom an agent is working. When you visit a new home development
the agents on-site will usually ask you to sign this form. If
you call a company and an agent shows you property, that agent
is required by law to ask you to sign this form. Signing the
form indicates that the agent has told you whom he/she represents.
It does not obligate you in any way.
The
Exclusive Buyer Agency Agreement enables the agent of your
choice to work solely in your behalf. You may safely assume
that all other agents are obligated by law to work for the seller.
This is the form you will sign only if you are comfortable working
with a particular agent. You should make sure that you could
easily cancel this agreement if you are not getting exceptional
service.
The
Dual Agency Addendum is signed at the time you sign the
Exclusive Buyer Agency Agreement if you agree to allow your
buyer agent to represent you during the purchase of any property
listed by the agent's company.
The
NC Property Disclosure Statement is one of the few forms
that all sellers (even FSBOs) are supposed to complete about
the material condition of their property. It does not relinquish
your responsibility to heed the advise of "buyer beware". Selecting
an experienced buyer agent, having a thorough home inspection,
pest inspection, survey, home warranty insurance, title insurance,
homeowners insurance and flood insurance are precautions buyers
should use to safeguard their investment. Completed copies of
this form are often available at the houses you tour. If not,
you can have your buyer agent request one from the listing agent.
The
Offer to Purchase and Contract has been developed
and refined by the N.C. Bar Association and the N.C. Association
of REALTORS. It has been proven over the years to work for most
situations. If you or your agent have doubts as to whether your
transaction needs additional legal wording, by all means see
a local real estate attorney. The Special Provisions and Conditions
Addendum is a supplement to the Offer to Purchase and Contract.
Included are the most common situations that a buyer might want
to add to the Offer to Purchase and Contract. As a rule, if
you cannot fit the additional items in paragraph 16 of the Offer
to Purchase and Contract, you probably should include this addendum.
The
Buyer Agent Commission Confirmation Agreement is a form
that lets the seller, seller's agent, listing company, buyer
agent, buyer agent's company and the buyer know how the commission
for a particular property will be disbursed at closing.
Writing
an Offer to Purchase
Once
you have decided to make an offer on a particular property,
your buyer agent will accumulate information on the property,
on recent sales and on the neighborhood from the MLS, tax records
and any other available sources. The process is similar to the
competitive market analysis that the listing agent performed
for the seller when pricing the property. Hopefully three nearby
and similar properties (location, size, age, etc.) have sold
within the last six months. Adjustments are made for significant
differences among the properties.
An
experienced agent will help you get all of this empirical information
into perspective so that you can make an offer that is in your
best interest without affronting the seller.
Once
you've established value, the next challenge is to minimize
risk. The home inspection and the wood destroying insect inspection
are designed to catch structural, mechanical and operational
problems. A survey should reveal right of ways, easements and
encroachments on the property. Home Warranty coverage can help
defray the cost of mechanical failures and title insurance can
reduce the cost to correct title errors.
Still
there are many more threats to your property investment that
can range from obsolete wiring to friable asbestos or underground
storage tanks to the presence of synthetic stucco. The more
experience and training the agent has, the more likely a complication
will be recognized and handled properly through the writing
of the offer. Line 16 of the Offer to Purchase and Contract
is one place to address special concerns and the Special
Provisions and Conditions Addendum is another.
Negotiating
A
savvy seller will price his property just above market value.
A common mistake is to price well above market value, then add
something for a negotiating margin and before long, the seller
either has no showings, no offers or a low-ball offer. Smart
buyer agents will research when and how much the seller paid
for his house; the "sold price" of every other property in the
neighborhood over the past three years; and probably do a market
analysis on the sellers home if needed.
I
advise sellers and buyers to negotiate as if you were playing
bridge. If the buyer opens with a low bid, rather than feeling
offended and making no response, the seller should come back
with a small counter that sends the message that the offer was
simply too low. On the other hand, if the buyer makes an initial
offer very close to what the seller had hoped for, the seller
should think twice before rejecting it with a counter. Some
of the best offers are the first early offers.
Always
find out what is the primary objective of the buyer and seller.
Is it price, timing, terms, etc.? If each party's primary objective
is different, a win-win agreement is very possible. In a buyer's
market, the buyer has the advantage of being able to walk away
from a seller's property and buy one of many others for sale.
My advice to both buyers and sellers is to stay calm, rational
and flexible. Keep focused upon where you want to end up and
realize that there are many ways to get there. The best deals
are those where both parties walk away winners, not walk away
over a $1,000 difference!
The Real Loan
Application
The
Offer to Purchase and Contract will require you to begin the
loan application within a certain number of days of reaching
contract. Your mortgage lender and the closing attorney will
both need a copy of the contract to do their work. Your mortgage
lender will usually give you a checklist of information that
you will need to take by the office. Here is a list of the most
commonly required information for a loan application:
·
Each buyer's social security number
· Signed contract (preferably an original)
· Last 3 months bank statements
· Most recent pay stub
· Name, address and phone # of employer for last 2
years
· W-2 statements for past 2 years
· Tax-returns for last 2 years if self-employed
· Residential address for past 2 years
· Bank name, account name & # of checking, savings,
stock, 401ks
· Name, address, account name & amount of open loans
· Information on other real estate loans and leases
· Credit Report and personal check (Lender will order
it for you)
· Certificate of Eligibility or DD-214 (VA loans only)
Most
lenders expect you to initially pay for a credit report ($30-50)
and the loan application fee if there is one ($250-350). These
costs will show up on the HUD Settlement Statement at the
closing with (POC) beside them, which means, "paid outside
of closing". Every buyer wants to know how much the monthly
payment will be and about how much the closing costs will
be. Your mortgage lender will be able to provide you with
that information.
Your
lender will give you the option of "locking into" the current
rate or "floating" in case rates drop. Some programs allow you
to "lock-in" to the current rate but drop down if the rates
go down. An experienced lender will be able to advise you on
which of their programs will best work in your situation. They
will also have the experience to work through problems that
could possibly delay closing.
The
Inspections
In
North Carolina the inspections are customarily done on or before
a certain date as specified in the Offer to Purchase and Contract.
Your buyer agent can recommend the names of several companies
to perform the pest inspection and the home inspection and arrange
for an inspection time with the sellers' agent. It is in the
buyer's interest to attend the inspection to see the condition
of the structure first hand and to ask questions about any serious
problems right there on the spot.
If
it is impossible for the buyers to accompany the inspectors,
you may want to speak to them by phone after reading the report.
Your buyer agent will help you write a letter to the sellers'
agent requesting which items you would like to have addressed
and which ones you might eventually handle. A good common sense
guide is to address those problems that affect structure (especially
water damage), health, safety and the operation of systems.
Also
in the Contract the sellers are given a certain number of days
to respond back to the buyers as to which items they are willing
to address and which ones they choose not to do. The sellers
may respond by either repairing the item prior to closing, offering
money toward repairing the item, or refusing to fix the item
period. Resolving the repair list is a second round of negotiation.
Skilled buyer agents will invariably help their clients find
a fair resolution to the inspection reports.
Closely
associated with Home Inspections are various environmental and
land use concerns that your buyer agent should help you to address
if they occur. The more common concerns appear at the end of
this guide.
Homeowners
Insurance
Fewer
than 10 insurance companies are writing homeowners' insurance
policies in coastal North Carolina at this time. This is due
to the higher risk of property loses associated with hurricanes.
For this reason it is important that you contact your insurance
agent immediately after you apply for your loan. The companies
that are still writing homeowners' policies in Wilmington are:
Flood Insurance
If
the property you intend to purchase is in a special hazard zone
classified as an "A" or "V" zone, your lender will likely require
that you purchase flood insurance. If your property is outside
the special hazard zone and you suspect that your home might
be remotely susceptible to flooding from surface water originating
off-site from your property, you should still consider flood
insurance. Always ask neighbors if their neighborhood has ever
flooded.
Taxes
| LOCAL
GOVERNMENTS |
YEARS 2001/2002
|
| |
|
| New
Hanover County |
.6900
|
| Unincorporated
Fire District |
.0500
|
| City
of Wilmington |
.4700
|
| Town
of Wrightsville Beach |
.1430
|
| Town
of Carolina Beach |
.3950
|
| Town
of Kure Beach |
.2950
|
| Brunswick
County |
.5925
|
| Pender
County |
.6680
|
| Village
of Bald Head Island |
.6350
|
Local
governments set their tax rates as part of their budgetary process
prior to 1 July each year. The tax year goes from 1 July through
30 June. Your actual property tax is determined by multiplying
the tax rate(s) that apply to your property times the tax valuation
divided by $100.
Your
tax valuation is determined by a tax appraisal that is different
from a market appraisal used for loan purposes. In both Brunswick
and New Hanover counties, 100% of the tax valuation is used
when figuring your property taxes. New Hanover County's last
tax valuation was for fiscal year 1999. It is North Carolina
law that local governments revalue property at least every 8
years.
Example:
If you live in the City of Wilmington and the tax value of your
property is $150,000, your property tax would be:
|
JURISDICTION
|
TAX
RATE
|
TAX
VALUE/$100
|
TAXES
|
| |
|
|
|
| New
Hanover |
.69
|
$150,000/$100
|
$
1431.00
|
| Wilmington |
.47
|
$150,000/$100
|
$
705.00
|
| |
|
TOTAL
|
$
2136.00
|
Homeowners'
Association Dues and By-laws
The
amount of the Homeowner Association dues can be found on the
MLS property report. If you are concerned about the financial
condition of the Association ask your agent to find out the
name and phone number of the Association treasurer. Your buyer
agent should be able to get a copy of the Neighborhood Association
By-laws from the seller's agent or from the Association's officers
or management company. The By-laws will explain how the Association
is supposed to be operated.
Neighborhood
Covenants and Restrictions should also be read before you make
an offer, especially if you are concerned about such things
as pets, out buildings, fences, outside boat storage, conducting
a business from your home, etc. Not all properties are located
in a neighborhood governed by an association. Such properties
tend to be located in the older parts of the city or towns or
in the rural parts of the counties.
Utilities
and Other Services
After
all of the contingencies are lifted and the closing seems imminent,
it is time to arrange for your utilities and services. You can
actually save money by coordinating the switchover of water/sewer
and electrical services with the seller so that the Service
Company only has to make one reading during one trip.
| Power |
Water |
Sewer |
| Gas |
Trash
Pick-up |
Telephone |
| Postal
Service |
Cable/DSL |
Newspapers/Magazines |
The
Closing
The
buyers, buyer agent and closing attorney attend the closing
at the closing attorney's office. Sellers seldom attend as long
as they have signed over the new deed to the buyers. Sometimes
the sellers' agent attends the first part of the closing to
make sure the HUD Settlement Statement is correct, all papers
are signed on behalf of the seller and that all concerns of
the buyers have been satisfactorily addressed. Once the closing
attorney begins to lead the buyers through the paperwork of
the loan, the seller agent's work is complete.
The
meeting usually begins with the explanation of the buyers' portion
of the HUD Settlement Statement. Each line item will be clearly
explained and the buyers will be able to ask questions about
how taxes and homeowners' dues are pro-rated, why taxes and
insurance are placed in escrow, the purpose of title insurance,
etc. The property does not actually change hands until after
the closing when the closing attorney actually goes to the registrar
of deeds and records your deed. Most routine closings are completed
in a half-hour.
The
HUD Settlement Statement
The
HUD Settlement Statement is a form used by the closing attorney
to account for how all monies are dispersed at the closing.
It is a form that you should keep with your tax information
long after the sale. As a matter of fact, your accountant will
probably ask you to supply it with this year's tax information
so he can complete your return.
Sellers
can expect to pay the sales commission, the cost of preparing
the deed, the revenue stamps to pay for recording the deed,
pro-rated taxes and homeowner dues for the year of the sale,
and the cost to express mail the paperwork to the sellers' mortgage
company. If the seller offered home warranty coverage that cost
could be reduced from the proceeds of the sale at closing.
The
Buyer can expect to pay for all costs associated with the loan
from the origination fee, credit report (POC), loan application
fee (POC), appraisal, floodplain certification fee, and any
other "loan" fees. The buyer will also pay for the home inspection,
the pest control inspection, and a survey if ordered. Since
the buyer selects the closing attorney, the attorney's fee is
charged to the buyer. It covers the administrative tasks associated
with collecting and dispersing the monies, guiding the buyer
through the loan package, researching the title and ordering
the title insurance, and recording the deed. The cost of the
title insurance policy is in addition.
The
buyer will be credited the sellers' share of the property taxes
for the year, but will be expected to pay the entire year's
property tax bill that he/she will receive in September and
due in early January. Your mortgage lender will more than likely
pay that tax bill when due with money that will come from the
buyer's escrow account. A portion of each monthly mortgage payment
will go into your escrow account so that enough money will be
available to pay both your property taxes and annual insurance
premium when they are due.
Buyers
should expect their first year's insurance premium to be charged
at closing, plus several additional months to bankroll the escrow
account. If flood insurance is required, it will be handled
in the same manner.
The
above costs are typical for a buyer who must borrow to purchase
property. Obviously there are other possible costs that if charged
will appear on the HUD Settlement Statement.
A
day or two before the closing, the attorney's office will send
a draft of the HUD Settlement Statement to both agents to review
with their clients. An easy way to make sense of this Statement
is to turn to the back page and if you are the buyer, look for
the section that pertains just to buyers. Each cost will be
described and summed up at the bottom. That figure is brought
forward to the front page under the buyers' section. If something
is unclear or if you find a mistake, call your agent or the
closing attorney's office for an explanation.
The
Move
Most
moving companies prefer at least 10 days notice for scheduling
your move. A representative will stop by well ahead of time
to estimate the size of your move and to let you know what to
expect from the movers. If you decide to have your movers perform
a full service move, you will still be expected to make decisions
about art pieces, fine jewelry, liquids and gases, fire arms,
prescription drugs and computers. If there is a chance that
your things will go into storage make sure your important papers/disks
are accessible. Also perform an inventory with video tape or
digital camera in case of loss or damage.
Warranties
Most
new appliances carry manufacturer specific warranties. Builders
of new homes and owners of existing homes should collect and
give documentation of coverage to the buyers.
Home
warranty protection can be purchased by the seller to cover
existing appliances while the home is being sold and continues
to offer protection for the buyer one year after the closing.
Even if the seller does not offer such coverage, the buyer can
purchase coverage at or after closing. While it does not make
sense for a new home with manufacturer warranties in place,
it is certainly worth considering for homes with older appliances
and mechanical systems.
A
builder's warranty on a new home is only as good as the builder's
character and the solvency of his/her business. It is in the
best interest of owners of new homes to get as many repairs
completed prior to closing as possible and to follow-up on any
other repairs as soon after closing as possible.
Land
Use and Environmental Issues
ASBESTOS
Asbestos is a naturally occurring mineral made of tiny easy
to inhale fibers that can increase the risk of certain cancers
when disturbed into the air and inhaled. It was used in a number
of home construction products prior to 1980. Places where you
may find asbestos products include insulation of old steam pipes
and furnaces, old vinyl asbestos floor tile, and asbestos cement
roof, shingles and siding. A general rule is to have asbestos
removed by professionals if it is likely to become airborne.
Asbestos products such as vinyl asbestos floor tile that can
be covered without disturbing it is another option. As long
as asbestos cement siding is not broken and is painted, it can
be left in place. For more information on this material go to
www.dhhs.state.nc.us.
FLOODING
Every property located within the 100-Year Flood Plain is supposed
to be identified on the property report form in the MLS. Buyers
should also have a survey performed on which the 100-Year Flood
Plain boundary is drawn on the plat or else it is stated that
the property is not within the 100 year flood plain. There is
some peace of mind in knowing the first floor elevation of an
existing house. If you want this information, ask your surveyor
to provide you with a Certificate of Elevation for the first
floor living area. It will be written on the survey plat.
RADON
If you are moving from a part of the country where radon gas
is sometimes detected in basements you can relax. Not only do
we have few basements, we do not have the geological formations
that contain radon gas. You do not need to test for radon gas
if you live in coastal North Carolina.
