Learn how not to get burned when buying real estate!
Once again I have heard an unfortunate story of someone who was looking to get a deal, but who actually got knocked-back significantly, because they did not have an expert in “their corner.”
We all want to get ahead. And who doesn’t want to get a deal? But it also makes sense that we need to be aware of the risks that come with cutting corners. If you are a Prize Fighter, you take a risk every time you step into the ring, but you have a team behind you. You have experts who help you to prepare, give you advice, and try to give you the edge. The same goes for Olympic athletes who are at the top of their sport. Even though they are the best in the world, they still have coaches and other people helping them to do even better. They also stand to lose it all if they are found to have cut the wrong corner…Real Estate can carry the same risk.
The other day I was talking to someone who is thinking of selling. He bought his property during the previous highs of the market. He had gone to the listing agent to “get a deal on the purchase. He got a deal all right …a bad deal. Because the agent was going to get both the selling and the buying commission, he gave Mr. Buyer a reduction on the price, through returning a portion of his commission. However, he did not give Mr. Buyer any representation. That meant Mr. Buyer was on his own to make decisions and negotiate the deal (the agent just made sure everything was done to legal standards).
You may ask yourself, “What is wrong with Mr. Buyer negotiating and looking out for the best deal he can put together?”
The answer comes into focus if we take a step back and look at the big picture. The agent selling the home has an obligation to represent the seller; in other words, the seller has someone looking out for him. The agent’s job is to sell the property and get the best deal he can for his client, the seller. If a buyer comes along, he is still obligated to his seller – and only to the seller. He has no obligation to the buyer. (After all, how would you feel as the seller if your agent gave away all of your strategy?) The selling agent’s job is to make his client happy and get the property sold to whomever is going to buy it, whether they have their own agent or not. So, let’s ask the question: who is the selling agent going to be negotiating for? You guessed it — the seller.
Now, what happens when Mr. Buyer needs to ask questions and do his due diligence? Well, he is on his own. Again, that is not the selling agent’s job; he or she represents the seller. You may ask, “Doesn’t the selling side have to disclose what they know about the building”? Yes, they do, but often people do not really know anything about the home they live in. They may not go to strata meetings or read minutes, or it may be Grannie’s house that is being sold as an estate and the family has no idea that the roof is leaky. Or, it may be belong to an investor who has never lived in the home or even lived in the country! The point is, a seller cannot disclose what they do not know; so don’t rely on them to tell you all the problems that come with the property, because they are not likely to come though for you.
Some time later, Mr. Buyer is ready to sell and he has been learning more and more about the property and all the problems that he never knew were there when he bought it. There is costly work that needs to be done and it is going to take time. He has the choice of living there and paying his way through a colossal headache, or selling at a loss — if he can. He got a bit of a deal up-front but he could be paying it back and more in the long run…
Buying property is a big investment. Be sure you get people in your corner to aid and coach you! Get a whole team in your corner! As the buyer in BC, it is rare that you would pay a commission to the buying agent, so work with them! Let them help you – at no cost to you — negotiate a good deal for you and save you from a potentially bad decisions, by leveraging their knowledge and expertise. You don’t have to know all the answers, you just have to know people who do. Local experts like real estate agents, inspectors, and mortgage brokers get to know their area well, and often they can give you local knowledge on buildings before you even step through the front door.