Friday, February 24, 2006

What is a Buyer's Broker?

It's come to my attention that many people still do not know what a buyer's broker or buyer's agent is. The simplest definition is a real estate broker or agent that works specifically for buyers. A true buyer's broker will be one that never takes listings and is known as an "exclusive buyer's broker or agent". It can be difficult to find such a real estate agent since most real estate agents work with both buyers and sellers often on the same transaction. This leads to an inherent conflict of interest since buyers and sellers generally have opposing interests. Sellers wish to sell their home at the highest possible price and buyers wish to pay the lowest possible price for that same home. See the conflict created? In order to minimize conflicts it was decided that both buyers and sellers had the right to equal representation which meant undivided loyalty from their respective real estate agents. The problem for buyers has always been that there is a shortage of exclusive buyer's brokers out in the marketplace. As a buyer you really need to do your homework in order to find a buyer's broker or agent that can work in the geographic area you are looking to purchase in. A good place to start your search is through the National Association of Exclusive Buyer's Agents otherwise known as NAEBA. Their website can be found at Good luck and happy hunting!

Thursday, February 23, 2006

Have Buyer's Agents become relevant again?

Let's face it, I may be a bit prejudice when it comes to agency law since I believe the right way to practice real estate is to have both the buyer and seller professionally represented by their own agent who should have a fiduciary duty to protect their client's best interests. However it seems that by and large the bulk of home buyers out there have disregarded their own need to have true representation and 100% loyalty when making perhaps, the largest financial investment of their lives. I wondered if maybe the reason that buyers took temporary leave of their senses was because we here in the metro New York area have been in the throes of a hard core "seller's market" for the past 8 years. For those of you who don't know what I mean, I'll try to explain it in plain terms. A "Seller's market" is when there are more buyers willing to purchase then there are houses for sale. Therefore the prices on this limited inventory of houses start to rise due to pent up demand. A "Buyer's market" is when there are more houses available for sale than there are buyers willing to purchase and therefore prices start to fall. In a "Seller's market" buyers become desperate to purchase and sellers hold all the cards. The buyer's ability to analyze and negotiate each home becomes severely diminished since they end up in a mad rush just to place a bid or offer on any home that is minimally acceptable. In a "Seller's market" many homes end up with multiple full price offers and even offers that exceed full price. If the buyer hires a home inspection company to check out all the systems and construction of the home, it is generally done with the understanding that it is for the buyer's knowledge only since sellers rarely renegotiate price in a "seller's market". The seller's attitude is that "if you don't want my house, that's fine since I have multiple back up offers". It becomes easy to see that buyers literally become the "whipping boy" of sellers and their real estate agents in a serious "seller's market". For buyers this is probably the time when they need a dedicated buyer's agent the most. A good Exclusive buyer's agent can prevent hapless buyers from getting raked over the coals and acting from pure emotion instead of a little logic. Unfortunately this is also the time that they are least likely to use one. You see, in a "seller's market" buyers have felt that representation was irrelevant. All buyers wanted was to get to that house as fast as they could and make an offer even if that offer wasn't rooted in reality. Well the times they are a changing............. We are now heading into a "Buyer's market". Hiring a buyer's agent to protect and promote a buyer's best interests should become relevant again. In a "Buyer's market" a good buyer's agent can basically cherry pick an assortment of good homes for their buyer client to look at. The buyer's agent will also be able to carefully analyze all the good and bad qualities of each prospective home from a logical and clear headed point of view. The buyer's agent will also be able to actively negotiate to get their buyer client the lowest possible price and best possible terms. All these abilities will add up to some hefty savings for the buyer who was shrewd enough to hire the right exclusive buyer's agent.

Wednesday, February 15, 2006

Foreclosures on the Rise

Well you heard it here first in one of my recent postings, foreclosures are on the rise nationwide. This news comes as no shocker to those in the know. Pretty soon foreclosure rates will reach historic levels and Florida is leading the pack with 14% of the country's new foreclosures in 2005. New York, meanwhile, has had a 141% increase in the amount of foreclosures from the 1st quarter of 2005 til the last quarter of the year. This news is pretty frightening for existing homeowners who bought within the last 5 years with some of the more interesting loan products such as interest only loans. They will be in for a rude awakening when the payment resets itself so that the loan can start being amortized. Most of these mortgage payments will jump up at least $500 per month which can really takes it toll on the homeowner's ability to make timely payments. My advice to those homeowners holding adjustable rate mortgages and interest only mortgages is to either refinance into a plain vanilla fixed rate mortgage or sell your home while prices are still high enough to be able to bail out without owing the bank money. It's time to take a deep breath and watch which way the wind blows.

Thursday, February 09, 2006

Florida Real Estate

I just got back from visiting my cousin in Miami and began to ponder the condition of the South Florida real estate market. Afterall owning a piece of the pie does seem incredibly tempting when you're lying poolside in a bathing suit when way back North everyone is donning winter clothes and wondering how they are going to pay this month's heating bill. So I started to do some research on property values and found out that it actually makes more financial sense to rent than it does to purchase right now if you plan on being a "snowbird" and spending 6 months down there (during our winter up North) and 6 months up here on Long Island when it's beastly hot down there. Now you may wonder how I arrived at this conclusion and to be honest it was just a case of simple math. A nice one bedroom waterfront condo in a lovely complex which is loaded with amenities like a pool, gym, sauna, fitness club and business center will cost at least $350,000. Now add on top of that $300 monthly common charges plus exorbitant real estate taxes (which have been going up at a much faster rate than on Long Island) of $7000 per year and insurance to protect your interior walls (from a dreaded hurricane). If you put down 20% and mortgaged the $280,000 balance at let's say a 6% interest rate, you would be stuck with a total payment of approximately $2600 per month. Meanwhile you would be able to rent the same exact unit for approximately $1500 per month. You tell me what's a better deal? As for me, I am going to wait to see if the prices start to come down because I'm betting that they will. too many condos have been bought by investors instead of owner occupants. This means that if these investors begin to realize that they are losing money every month when the rent does not cover the mortgage payment they will begin to bail out and start flooding the market with thousands of units. I see a good opportunity if this comes to pass.

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