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Negotiating a real estate deal can be a daunting endeavor. There’s so much at stake! As a house flipper who’s bought and sold hundreds of homes on “Flip or Flop,” I’d be the first to say that I’ve made plenty of dumb mistakes that cost me hundreds of thousands of dollars.
If I’ve learned anything, though, it’s that you don’t have to brave the home-closing process alone. A whole cast of professionals can save a seemingly doomed deal, and while they charge for their services, I’m going to explain why they’re worth every penny. Allow me to introduce you to three key players you may meet in the process of buying, selling, or financing a home, and how they can keep your deal from imploding.
A mortgage broker
When I was 21, I wanted to buy my first home, and I found the perfect property in Orange County, CA—a bachelor pad complete with a shark tank.
I was so excited and ready to buy that home, I went to a lender to get qualified for a loan. This person told me I’d need a 20% down payment … but all I had was 10%. As you can imagine, I was pretty bummed!
But I didn’t give up. Searching for alternatives, I came across a mortgage broker. Unlike a lender, a broker has access to dozens of different banks with different financing guidelines. By shopping around, this broker was able to find me financing with only 10% down.
It put my dream home back within reach.
What I learned is that if you’re struggling to find good financing, it’s worth checking with a mortgage broker who can do a deep dive through all your options. Granted, mortgage brokers do charge for their services, but it ends up costing about the same as a bank. I, for one, wouldn’t have been able to buy my first home without a broker’s help.
A home inspector
Many years ago I was working with a buyer who fell in love with a house that was pretty much new. Since the place looked so pristine, the buyer didn’t want to bother hiring a home inspector—in his mind, it would be a big waste of money. What could possibly be wrong with a new house?
But I was adamant that he hire a home inspector anyway. And a good thing, too! During the inspection, we learned that the roofing used on this house was so heavy, the structure below might collapse beneath it.
Can you imagine if we hadn’t done an inspection and this buyer had moved in? Disaster.
We were able to negotiate with the seller and demand they repair the roof to the tune of about $20,000. Home inspectors typically charge $300 to $500—a small price to pay to protect what will probably be the biggest purchase of your life. Right?
A real estate agent
Odds are, you’ve wondered what real estate agents do to earn their commission, which varies by agent but hovers around 6%. On a $300,000 house, that amounts to $18,000.
While this might seem like a lot, home sellers should keep in mind that their listing agent splits this fee with the buyer’s agent, so it’s already down to about 3% each. The commission also goes toward a whole bunch of other expenses, including the money it’ll take to market your home.
While it might tempting to cut corners and try to negotiate with an agent for a lower commission, all I’m saying is, you get what you pay for. Really.
A few months ago, I met with a guy who wanted to hire me to sell his house, only this guy was looking to save some money, and offered me a 4% commission.
I said I wouldn’t do it. He was shocked.
“I’m sorry, but my time is valuable, and 4% was not worth my time,” I explained.
He didn’t believe me, so I politely thanked him and we parted ways.
A half hour later, he called me and offered me 4.5%. Again, I said no.
This seller did eventually find an agent willing to take 4%. Only once his house was listed, it just sat on the market untouched. After three months with no buyers, the listing expired … and the seller called me, again, agreeing to pay my full commission.
Within three days of listing the home, I generated four offers and sold it for $20,000 over the asking price that the previous agent had set.
My point is not to pat myself on the back. (At least, not much.) It’s to show that many home sellers’ efforts to save money can backfire, badly.
You don’t make money selling your home by reducing commission. You make money by hiring a great real estate agent who’ll sell your place for the highest price possible, while answering the many questions you’ll have along the way.
Follow Tarek on social media @therealtarekelmoussa, and if you’re thinking of selling your home, buying a new one, or in need of some renovation, take a look at Tarek and Associates for more information.