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Buying a Home: The Missing Manual by Nancy Conner

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Chapter 4. Assemble Your Real Estate Team

A well-known African proverb says that it takes a village to raise a child. As a new homebuyer, you’ll need nearly as many people to buy a home. Purchasing a home is a huge investment with many variables. It’s an obstacle course you’ll find tough to navigate on your own. You need the expertise of professionals who protect your interests as they take you through the process of finding a home, making an offer, getting financing, and finalizing the sale. This chapter introduces you to the real estate professionals who’ll make up your home-buying team. For each of the main players—real estate agents, mortgage provider, attorney, and home inspector—you’ll get tips on how to find the right one.

Real Estate Agents

In your quest for a new home, the person you’ll interact with most is your real estate agent. She’s a lot more than a smiling face in the classifieds, hovering over pictures of homes for sale. She’s a licensed professional, authorized to negotiate and carry out the sale of real property on behalf of a buyer, a seller—or sometimes both simultaneously. Read on to learn the different roles real estate agents play, how they make their money, and—most importantly—how you find one who works well with you.

Agents and Brokers and Realtors

Every state and the District of Columbia require real estate agents to hold a license, but not all licenses are the same. Most states define two types of real estate professionals: broker and agent. But you may come across several other terms as well. Here’s the lowdown:

  • Real estate broker. This is an experienced real estate professional who’s met state requirements to own, manage, or operate a real estate company. Licensing requirements usually include experience in the industry as a sales agent, advanced coursework, and passing an exam. (In some states, attorneys can become real estate brokers, even if they’ve never worked as real estate agents.) The broker in a real estate firm is its “boss,” the person who takes responsibility for all the agents who work there. Depending on where you live, you may hear real estate brokers referred to as principal brokers or qualifying brokers.


    Some licensed brokers choose not to run their own firm but to work as agents for another broker in that broker’s firm. These people are called associate brokers.

  • Real estate agent. This is someone who’s taken classes and passed a state-administered exam to get a license to sell property. The educational requirements cover the specific state’s real estate laws and practices. Real estate agents are associated with a real estate broker and act under that broker’s authority. Depending on where you live, real estate agents may be called subagents, sales agents, real estate salespeople, or, confusingly, brokers.

    As you look for a home, you’ll probably work primarily with a real estate agent. Real estate agents can represent the seller of a house, the buyer of a house, or both:

    • Seller’s agent. Also called a listing agent, this person works exclusively for the seller. Most often, you’ll deal with the seller through the seller’s agent. Except in cases where you have a specific agreement with an agent to represent you as a buyer (see the next item on this list), you should assume that any agent you work with is a seller’s agent. Even if an agent didn’t personally list the seller’s property, any agent involved in the sale of a property is considered a subagent of the listing agent—unless that agent has a contract to represent only you, the buyer (see “Buyers’ Agent” below).


      Agency means representation, and an agent is a representative. If you enter into an agency agreement with someone, it means that you’ve both agreed that that person will act as your representative.

    • Buyer’s agent. A buyer’s agent works solely for you the buyer, and represents your interests throughout the real estate transaction, from initial house-hunting through closing the deal. Buyer’s agency is a formal agreement, signed by you and a particular real estate agent, saying that the agent represents you and your interests in buying a home.


      In a transaction, the buyer’s agent is called, confusingly enough, the selling agent. To keep from being muddled by the terminology, think of agents’ roles this way: In transactions that have both a listing (seller’s) and a buyer’s agent, the listing agent puts a home on the market and represents the current owner; the selling agent facilitates the sale by representing the buyer who makes that sale possible.

    • Dual agent. This is a single agent who represents both the seller and the buyer in the same transaction. In most states, dual agency is legal so long as the agent gets the consent of both the buyer and the seller. But as the box on What a Real Estate Agent Does explains, dual agency can lead to conflicts of interest.


Dual agency can also occur when two agents who work for the same broker represent both parties in a real estate transaction. The box on What a Real Estate Agent Does tells you more.

As a homebuyer, you should work with a buyer’s agent. You want to be sure that your interests are represented in negotiations and that your agent keeps your confidential information to herself. Later in this chapter, you’ll find out how to choose a good buyer’s agent.


If a real estate agent fails to let you know that you’re in a dual agency situation—that is, the agent represents both you and the seller or both your agent and the seller’s agent work for the same firm—you may be able to revoke the purchase agreement you signed and sue the agent for concealing the relationship.

What a Real Estate Agent Does

Real estate agents are experts in local real estate: They monitor the market daily and look for housing trends (in prices, inventory, location, and so on). An agent tells you about available houses in your price range and takes you on tours of homes that interest you. Much of an agent’s day is taken up by phone calls, meetings, and home tours.

For sellers, a listing (seller’s) agent:

  • Researches recent sales of comparable homes to help determine an asking price

  • Helps sellers prepare their homes for sale

  • Lists the home with the Multiple Listing Service (known in the trade as the MLS, a searchable list of homes for sale within a particular region)

  • Advertises the home through various channels, which may include the Internet, classified ads, real estate magazines, and on-site advertising (the latter usually comprising a “For Sale” sign on the lawn and takeaway information sheets about the home)

  • Takes other real estate agents on a walkthrough so they can tell their clients about the home

  • Hosts open houses

  • Presents offers from interested buyers

  • Negotiates the terms of the sale

As a buyer, you can expect a real estate agent (either the seller’s agent or your own) to work with you in these ways:

  • Listen to your priorities in looking for a home, including your price range

  • Contact listing agents to check availability and schedule showings

  • Show you suitable properties

  • Notify you as new properties appear on the market

  • Suggest sources of financing


    You’re not bound to work with any lender recommended by an agent. Get the Best Mortgage has tips for finding the best mortgage.

  • Help you write a purchase offer and present that offer to the seller

  • Negotiate with the seller on your behalf

  • Write a purchase-and-sale agreement (Purchase Price)

  • Set up and attend the home’s appraisal and inspection

  • Review disclosure statements and let you know about problems with a property


    Agents know what to look for in disclosure statements and other documents. Although it’s important to find an agent you like, the most important quality an agent has to offer is his expertise.

  • Deal with contingencies (Contingencies)

  • Provide information to your mortgage officer, real estate attorney, and escrow officer

  • Coordinate with other parties to schedule the closing

  • Attend the closing


There are some things a real estate can’t tell you by law. If you have questions about a neighborhood’s character, diversity, crime rate, or schools, you have to look elsewhere for the answers. Federal fair housing laws prevent real estate agents from “steering” clients toward one neighborhood or away from another one. The idea behind the law was to prevent discrimination—to prevent real estate agents from deciding whether a client is a good or bad fit for a particular neighborhood. Despite the law’s good intentions, it can be frustrating to have basic demographic questions go unanswered. Chapter 3 suggests ways to find those answers.

How Real Estate Agents Get Paid

Real estate agents earn their money by commission: When a property sells, they get paid, usually 4 to 7 percent of the purchase price. If a property fails to sell, the agent doesn’t get paid—no matter how much time and money she’s invested in showing and advertising the home.

The seller usually pays the agent’s commission from the proceeds of the home’s sale. Of course, sellers are aware of this and take the commission into account when they determine their asking price and decide whether to accept an offer. If you use a buyer’s agent, he and the seller’s agent split the commission (each side may get half, or the percentages may vary somewhat).

Here’s an example of how buyer’s and seller’s agents typically get paid. Suppose you buy a house for $250,000 and the seller pays a 6 percent commission. In this case, the commission works out to $15,000. The listing agent and your agent split that commission down the middle, each earning $7,500. Each will probably pay a percentage of the individual commission to his broker, up to 50 percent—in this example, that’s $3,750.


The commission split between agent and broker varies depending on the agent’s experience. For a new agent without much of a track record, the split may be 50/50 with the broker (his boss), while an experienced agent who generates lots of business can get a much sweeter deal, keeping 70 to 80 percent of the commission.

Sounds like easy money, doesn’t it? Well…keep in mind that agents do a lot of work behind the scenes. On average, for each hour your agent spends with you, she’s putting in a full, eight-hour workday doing tasks you don’t see: making phone calls, checking listings, screening homes, setting up tours, filling out paperwork, coordinating with others on your team, and more.


Some buyer’s agents charge their clients a retainer, which may or may not be refunded if the agent fails to help you buy a home. Working with a Buyer’s Agent tells you more about working with buyer’s agents.

Working with a Buyer’s Agent

The whole point of working with a real estate agent is to have a knowledgeable professional represent your interests throughout the home-buying process, from identifying possible homes to closing the deal. So you want to find an agent who has your best interest at heart.

The concept of a buyer’s agent arose because of concerns about conflicts of interest between buyers and the agents. In the past, a real estate agent always represented the seller—whether the agent had listed the house himself or was simply showing it to buyers, he worked on the seller’s behalf. So a buyer could go to an agent, explain what he was looking for and how much he was willing to pay, and grow to trust that agent. But the agent had no obligation to fulfill that trust. In fact, as a subagent of the seller, he was legally bound to give the seller any information that was in the seller’s best interest to know. So if a buyer said, “Let’s ask for a $5,000 credit to pay for roof repairs, but I’ll buy the house even if the seller doesn’t go for it,” the agent would have to let the seller know that the sale didn’t hinge on granting that credit. No one protected the buyer’s interests.

By the mid-1990s, the idea of a buyer’s agent was in place, and most states had disclosure laws that required real estate agents to tell you whom they represent: the seller, the buyer, or both. When you agree to work with an agent, the agent must clarify your relationship, spelling out her responsibilities toward you. In some states, a conversation is sufficient; others require a written statement (as the next section explains).

Your buyer’s agent may represent you in one of several ways:

  • Buyer’s agent—single agency. In this role, the agent works for a brokerage that represents both buyers and sellers. However, this agent represents only you, the buyer, as you shop for and purchase a home.

  • Buyer’s agent—dual agency. Dual agency happens when a single agent represents both the buyer and the seller (for example, when you call a home’s listing agent to see a house and decide to work with that agent) or when the buyer’s agent and the seller’s agent both work for the same broker. The box on What a Real Estate Agent Does goes over some of the conflicts of interests that may arise in a dual agency.

  • Exclusive buyer’s agent (EBA). This kind of agent works for a real estate agency that represents only buyers. The agency doesn’t list properties, so the agents who work there never represent a seller. If you work with an exclusive buyer’s agent, you may have to pay an up-front retainer—and you may not get a refund if the agent fails to find you a home.

As How Real Estate Agents Get Paid explains, buyer’s agents usually get paid a commission, splitting the fee with the listing agent. But buyer’s agents can be paid in other ways, so make sure you know how your agent earns his money. Here are some of the ways buyer’s agents may get paid:

  • A percentage of the purchase price. This is the most common method.

  • A percentage of the purchase price and a bonus based on the difference between the listing price and the purchase price. In other words, the agent gets a bonus if she negotiates a sale price below the asking price. For example, you might give your agent a bonus of $100 for every $1,000 below the asking price you buy the home, up to whatever maximum you’re willing to pay. This gives the agent an incentive to bargain hard on your behalf.

  • A flat hourly fee.

  • An hourly fee plus an up-front retainer.

  • An hourly fee with a specified minimum number of hours.


Commissions and fees are always negotiable. Don’t be afraid to ask for a lower commission or a lower hourly fee.

Although your buyer’s agent has a fiduciary duty to represent your interests in a transaction, the commission system comes with a built-in conflict of interest: The more you pay for a home, the more money the agent makes. So some unscrupulous buyer’s agents may steer a buyer toward certain listings or advise you to overbid.


Fiduciary duty means a legal responsibility to act in the best interests of another party.

A good buyer’s agent puts your interests first because it’s the law. But smart buyer’s agents also realize that a satisfied client (and the good word of mouth that comes with it) is more important than a few hundred bucks. An extra $10,000 in the purchase price puts between $150 and $300 in the agent’s pocket. Ethical agents realize that a client’s trust in them has value far beyond that.


Look for agents who’ve earned the Certified Exclusive Buyer Agent (CEBA) or Accredited Buyer Representative (ABR) designation. These certifications, respectively administered by the National Association of Exclusive Buyer Agents and the National Association of Realtors, show that the agent has completed specialized training in buyer representation.

Signing with a Buyer’s Agent

To formalize your relationship when you hire a buyer’s agent, you’ll most likely sign a buyer’s agency or buyer’s brokerage agreement. (In some states, agency can be based on a verbal agreement, but it’s always a good idea to get it in writing.) This agreement specifies that the buyer’s agent works for you and spells out each party’s responsibilities.

There are countless variations on buyer’s agency agreements depending on where you live and the policies and practices of the agency you choose, but a typical agreement addresses these issues:

  • Your relationship with the agent. This may be exclusive or nonexclusive:

    An exclusive buyer’s agency agreement specifies that you’ll work only with this agent to look for a home.

    A nonexclusive buyer’s agency agreement places no limit on the number of agents you can work with, but it usually specifies that you can’t use one agent to buy a house another agent showed you first.

  • The term of the agreement. This may cover a period of days from the date of signing or specify an end date. If the agent helps you buy a house within that time frame, the agreement ends when you close on the house.

  • The geographic area of the agreement. If you’re looking for a primary home in the city and a weekend home three hours away, the same agent probably can’t help you. So this section lists the counties covered by the agreement.

  • The types of property covered by the agreement. This typically says that the agreement covers any residential property you might buy, whether listed with an agency or by an owner (see Bargain Hunting).

  • How the agent gets paid. As Working with a Buyer’s Agent shows, buyer’s agents can get paid in a variety of ways. This section spells out the compensation model. For example, you might agree to pay a certain amount toward the agent’s fee if the commission received from the listing agent falls below a minimum threshold.

  • Whether you’ll accept dual agency. Not all states allow dual agency because of potential conflicts of interest (as the box on What a Real Estate Agent Does explains).

  • Whether the agent is an exclusive buyer’s agent. EBAs (Working with a Buyer’s Agent) represent only buyers and will never represent a seller during the term of your agreement.

  • The agent’s responsibilities toward you. This section describes what the agent will do for you: find suitable properties, negotiate on your behalf, uphold fiduciary duties to act in your best interests, respect confidentiality, and so on.

  • How the agent will handle your earnest money. When you make an offer, you back up that offer with earnest money (Purchase Price) to show you’re not just fooling around and wasting everyone’s time. The agent may hold onto your check until the seller accepts your offer; after that, the agent deposits the earnest money in an escrow account.

Don’t rely on a handshake to cement your relationship with a buyer’s agent. Get it in writing. And if you have any concerns about your relationship with the agent that aren’t addressed in the agreement, bring them up. Working with the agent, you may be able to amend the agreement.

Finding an Agent You Can Work With

Don’t assume that you have to go house-hunting with the first real estate agent you talk to, whether that agent is a buyer’s or a seller’s agent. You’ll be working with your agent for weeks or months, so take the time to find a good partner in your search for a home. Talk to several agents and to their former clients before you choose your buyer’s agent.

Interview agents

Employers wouldn’t dream of hiring a new employee without an interview. When you choose an agent to work with, you effectively hire that agent. After you contact several agents, choose three who seem like good candidates. Sit down with each for a heart-to-heart. During the conversation, take notes and pay attention to body language.

Here are some questions to ask during the interview:

  • Do you work as an agent full-time? If not, find out how much time the agent devotes to his real estate practice. You want an agent who’s available when you have a question or concern.

  • How long have you been selling real estate? An experienced agent knows the local market and is both familiar and comfortable with the process of buying a home.

  • How many homes did you help buyers purchase last year? Ask for a list of these homes, along with the listing price and purchase price.

  • Do you represent both buyers and sellers? If the agent says yes, ask how she handles a dual agency.

  • What’s your average list-price-to-purchase-price ratio? As a buyer, you want to find an agent with a good track record of negotiating deals. Look for a ratio that shows the agent has helped buyers purchase homes for less than the asking price. For example, say the agent helped three clients buy houses that were all listed for $250,000: The first client paid $243,000 (97.2 percent of the list price), the second paid $248,500 (99.4 percent of the list price), and the third paid $241,900 (96.7 percent of the list price). That agent would have a list-price-to-purchase-price ratio of 97.7 percent, showing that, on average, his clients paid 97.7 percent of the sellers’ asking prices. When you compare two agents, a lower list-price-to-purchase-price ratio may indicate a better negotiator.

  • How will we communicate? Some agents will pick up the phone and call you when they see a listing you might like. Others will shoot you an email. Some contact clients frequently—possibly several times a day—others less so. Make sure the agent’s preferred communication style is compatible with your own.

  • How many buyers and sellers do you represent right now? What you’re really asking here is whether the agent has sufficient time to devote to help finding you a home. A super-busy agent who’s going to four or five closings a week and hosting open houses every weekend may not.

  • What’s your assessment of the current state of the local market? Find out whether the agent sees the current market as a buyer’s market, a seller’s market, or something in between—and how that will affect how she works with you.

  • What’s your strategy for helping me find a home? Listen to what the agent says about how he hunts down homes that look like a good match. If you’re likely to be in stiff competition with other buyers, ask how the agent handles multiple offers on the same property.

  • Do you have access to homes that are For Sale by Owner (FSBO)? Some homeowners decide to sell their homes themselves, without the assistance of a real estate agent (see How Real Estate Agents Get Paid). If you’re interested in FSBOs, ask how the agent can help you find such homes. Ask, too, about how the agent gets paid when dealing with FSBOs.

  • Will you help me find the other professionals I need to buy a home? Your agent can refer you to preferred lenders and title companies, home inspectors, and real estate attorneys. You don’t have to take any of these recommendations, but you might find it helpful to get suggestions of people who’ve worked well with the agent in the past.


    If the agent is “affiliated” with other real estate professionals, ask whether the agent receives a referral fee when someone becomes a client of those professionals. Be wary of any recommendation in which the agent has a financial interest—and perhaps of the agent who does business that way.

  • How do you find most of your clients? Look for an agent who does lots of business with repeat clients and referrals.

  • Can you give me some references to contact? The section below discusses what to ask people who’ve worked with the agent in the past. You want to know about buyers' experiences, so you don’t have to contact people who sold their homes with this agent.

  • What happens if you don’t find me a home? If things don’t work out with this agent, you need to be able to cancel the agency contract and move on.

  • What other question should I ask you? How the agent answers this question indicates what she thinks buyers in your area need to know.

Check references

After you interview agents, you may have a strong sense of which you’d like to work with. Before you sign a buyer’s brokerage agreement (Signing with a Buyer’s Agent), though, call some buyers the agent has worked with in the past. Checking references can confirm your hunch—or send up a red flag. It can also serve as a tiebreaker if you’re having a tough time deciding between two agents.

When you call references, be considerate. After all, the person is doing you a favor. Don’t call at an inconvenient time, like dinner hours or late at night. Introduce yourself, explain why you’re calling, and ask whether the person has a few minutes to talk to you (if you get “no” for an answer, ask if there’s a more convenient time when you can call back). Keep the phone call brief, but try not to hang up with a lot of unanswered questions.

Ask these questions to get a sense of how well the agent worked with previous buyers:

  • Describe your overall experience working with the agent.

  • Would you describe the agent as honest and trustworthy?

  • Did the agent devote sufficient time to working with you? Was it ever difficult to arrange a showing or a meeting because the agent was too busy? Did the agent deliver offers and complete paperwork on time?

  • What did you like best about working with the agent?

  • What did you find most frustrating about working with the agent?

  • Would you work with this agent again?

  • Looking back on your home-buying experience, do you think this agent helped you make the right choice?

Take notes during the conversation, and be sure to thank the person for her time before you end the call.


Go online to read reviews of real estate agents in your area at www.homethinking.com and www.incredibleagents.com.

After you speak to references, you have the information you need to choose an agent. Take these factors into account:

  • Compatibility. Is the agent someone you’d enjoy working with? You’re not looking for a new best friend, but you’ll spend a lot of time with your agent as you tour homes, discuss strategy, fill out paperwork, and do the myriad other activities involved in buying a home. Your agent should be compatible with you in terms of personality, approach, and communication style.

  • Understanding. It’s important that your agent “gets” what you’re looking for in a home. Otherwise, you’ll both waste your time looking at properties that aren’t a good fit for you.

  • Availability. Look for an agent who’ll work with your schedule. You don’t want to find yourself missing opportunities because you can never find a common time to meet.

  • Trustworthiness. Your agent has a fiduciary duty toward you; that means your relationship is based on trust and confidence. You need to work with someone you trust to deal with you fairly, to keep a lid on your confidential information, and to represent you with both honesty and honor.

Once you decide on an agent, sign a buyer’s agency agreement (Signing with a Buyer’s Agent). A written, signed agreement clarifies the responsibilities of you and your agent both—so you can get on with the business of finding your dream home.

Helping Your Agent Help You

No matter how perfectly you can picture yourself in your future home, your agent isn’t a mind-reader. To get the most out of your relationship with your agent, share information about what you want for your new home. You know to cover the basics—price range, neighborhood, style of home—but think broadly, too. Here are some questions to get you started:

  • What are your plans for the future? You’re probably thinking ahead to the day you’ll move in to your new home. But living in a new home doesn’t end with the excitement of moving day. How is your life likely to change during the years you’ll be in the home? For example, you might start a family, send your last kid off to college, or have an aging parent move in. You might be planning to start a home business or go back to school. Look ahead 5 or 10 years, and then share that vision with your agent, who can help you find homes that have the potential to accommodate your plans.

  • How will you use the home? Maybe you need a home office or workshop. If you entertain frequently, you might want a house with a formal dining room or an open floor plan. If you’re an avid gardener, you need space for your garden to grow. Think about the activities you’ll do in the home, and your agent can focus on homes that match your preferences.

  • What problems have you had in your past homes? If you can complain for hours about the time you lived next door to a noisy nightclub or the drafty old barn where you shivered though an entire winter, your agent can help you avoid similar problems in the future.

Agents have tons of experience matching homebuyers with homes that suit their needs and their lifestyles. Your agent may be able to see the potential—and potential problems—in homes that you might not. The more your agent knows about you, the better she can focus on finding homes that are a good fit.

Firing Your Agent

Not all matches are made in heaven—and that goes for relationships between homebuyers and agents, too. If the thrill is gone and your agent isn’t doing the job you expected, how do you move on?

It may not be easy. Agents do a lot of up-front work for free—usually they don’t get paid until you close on a house. So they need to protect themselves from unscrupulous buyers who use up a lot of their time and then try to cut them out of a deal. You may have to request a clause in your agent agreement that lets you terminate your relationship with 48 hours’ notice. Make it clear that you want to work with the agent and expect to have a mutually rewarding relationship, but you need a termination clause in case things don’t work out. If the agent is unwilling to include such a clause, you might want to set up a trial period by limiting the term of the agreement to 30 or 60 days.

You should only fire your agent with good reason: if, for example, she doesn’t show you appropriate homes or return your phone calls or emails. Before you fire an agent, sit down and have a talk; you may be able to work things out. If that doesn’t happen, you have three choices:

  • If your agency agreement has a termination clause, give notice that you’re ending the agreement. Don’t look at houses with the agent during the notification period. If you end up buying a home that you found while the agreement was still in effect, you may owe the fired agent her commission.

  • If your agency agreement doesn’t have a termination clause, explain to the agent why you feel the agreement isn’t working out and that you want to end it. The agent may or may not agree.

  • If the agent doesn’t agree to end your relationship, talk to the agent’s boss, the broker who manages the agency. If the broker won’t end the agreement, you have to wait for it to expire.


Don’t fire an agent and then buy a house that the agent already showed you. You could be setting yourself up for a lawsuit.

Your Mortgage Provider

Not many people have enough cash on hand to pay for a house. So an important member of your team is the mortgage provider who fronts the money that lets you buy the home. You may find financing through a mortgage broker or deal directly with a lender.

Working with a Mortgage Broker

Think of a mortgage broker as a matchmaker. But instead of helping people find their soulmates, a broker matches homebuyers and lenders. If you choose a mortgage broker, you work directly with her, and she acts as an intermediary between you and the lender.

Mortgage brokers work for brokerage firms, and both federal and state laws regulate them; most states require these firms to be licensed. Many brokers are members of the National Association of Mortgage Brokers (NAMB), which offers three levels of certification:

  • General Mortgage Associate (GMA). This entry-level certification shows a threshold level of professional knowledge about the mortgage industry. To receive GMA certification, a broker must pass an exam, but no industry experience is required.

  • Certified Residential Mortgage Specialist (CRMA). Brokers with this level of certification have at least two years’ experience under their belts. They must also pass an exam and earn at least 50 qualifying points, which are awarded for professional activities such as education, getting other certifications, experience, and leadership.

  • Certified Mortgage Consultant (CMC). This is the highest level of certification NAMB offers. It requires five years of experience in the industry, passing an advanced exam, and a minimum of 100 qualifying points for professional education and activities.

Here’s what you can expect a mortgage broker to do:

  • Gather information about your finances, employment, and credit history (Your Home’s Loan-to-Value Ratio) and assess your eligibility for a mortgage based on that information

  • Identify loans from a variety of lenders that meet your needs

  • Present those loans to you, along with a clear explanation of how they work and what the terms mean

  • Help you get preapproved (What are your future plans?) for a mortgage

  • Help you apply for a mortgage, from gathering documentation to filling out the paperwork

  • Present your mortgage application to a lender

  • Keep track of all the conditions you must meet before closing, acting as a liaison between you and the lender, home appraiser, surveyor, various insurers, and so on

  • Facilitate the closing, making sure that all your documents are in order and that the lender transfers the funds

Mortgage brokers typically get paid 1 to 2 percent of the loan amount. They may collect money through direct fees (called processing, origination, or brokerage fees), a slightly higher interest rate on your loan, or a combination of the two. You pay the mortgage broker, so be aware that these fees are open to negotiation. A good mortgage broker should be able to match you up with a loan that pays her fees by finding a lower-cost loan that you could find yourself.


About a two-thirds of American homebuyers get their mortgage through a broker; the rest work directly with a lender.

As with your real estate agent, talk with several mortgage brokers and check references before you agree to work with one. In fact, it’s even more important to check out potential mortgage brokers thoroughly—in most states (California is an exception), mortgage brokers have no fiduciary duty toward their clients. In plain English, that means the broker has no legal obligation to put your interests before his own. Good mortgage brokers are ethical and do serve your best interests, but you don’t want to find yourself in a situation where greed makes a broker steer you toward a loan that’s not the best deal for you.

Before you agree to work with a mortgage broker, get the answers to these questions:

  • Are you licensed (this is not required in all states) and/or do you belong to any professional associations, such as NAMB? Membership in one of these associations suggests a level of professionalism and industry experience.

  • How long have you worked as a mortgage broker? You want to work with a broker who’s successfully matched buyers and lenders for at least two years.

  • Do you specialize in residential mortgages? For this question, “yes” is the answer you want to hear.

  • How many residential mortgages have you brokered in the past year? Look for someone who’s successfully brokered 10 or more mortgages.

  • I’d like to make sure the broker I work with has my best interests in mind. What kind of fiduciary duty do you feel you have to clients? Make sure the broker convinces you that she’s working on your behalf and not putting herself first.

  • Could you give me the names and contact information of three recent clients to serve as references? If the broker can’t provide references, move on.

Check references the same way you checked them for your real estate agent (Check references). Ask these questions:

  • When did you work with the broker?

  • Did she listen to your needs and concerns?

  • How responsive was she? Did she answer your questions clearly and give you information in a timely manner?

  • Did she present you with a variety of loan choices?

  • Are you happy with the loan you chose?

  • Did the broker help you throughout the process of getting a loan?

  • What did you like about working with this broker?

  • What frustrations did you experience in getting a mortgage?

  • Would you choose this broker again if you were in the market for a loan?

Satisfied clients are a good indication that you’ve found a good broker.

Working with a Mortgage Lender

Some homebuyers prefer to work directly with a lender. You might want to deal with a local bank or credit union that has a thorough understanding of your area, or you might prefer to use the Internet to research the best rates yourself (Get the Best Mortgage). If you go directly to a bank or other financial institution, you’ll deal with a loan officer. This person works with you just as a mortgage broker does, identifying appropriate loans, analyzing your financial information, and guiding you through the mortgage process from application through closing. Unlike a mortgage broker, who searches different lenders’ products to find you the best loans, a loan officer is employed by a particular lender. That means she’ll present only mortgages offered by that lender.

If you work directly with a mortgage lender, you probably won’t get to choose your loan officer the way you choose a mortgage broker. Because loan officers work for a particular financial institution, you’ll most likely get an appointment with whoever is available. Even so, if a friend or family member had a good experience working with a loan officer, see if you can set up an appointment with that person.

What about a loan officer’s fiduciary duty? The situation here is more clear-cut than when you work with a mortgage broker. A loan officer is an employee of a bank, credit union, or other financial institution. The lender—not you—pays the loan officer. So never forget that your loan officer, no matter how nice and friendly, is working for the lender.

Your Real Estate Attorney

Buying a home means scaling a small mountain of paperwork—over and over again, you have to sign your name on the bottom line. It’s essential to understand each and every piece of paper you sign. Your real estate agent and mortgage broker or loan officer can explain many of the contracts and forms involved in your transaction—but neither of these people is a lawyer. It’s a good idea to have a qualified real estate attorney on your side to scrutinize the fine print, answer questions, and explain difficult concepts.

Every state has its own real estate laws. In some, such as New York, a real estate attorney is a normal and expected part of the home-buying transaction: Only an attorney can prepare the home purchase documents, perform a title search, and close the deal. In other states, such as California, your agent will help you fill in the blanks on standard forms that have already been approved by the state bar association. An escrow officer (see Chapter 13) handles the closing, so you may not need an attorney. But even if your state doesn’t require an attorney, consider bringing one on board early in the process. If things go wrong, it’s better to have an attorney who’s familiar with your situation than to rush around looking for one who might be able to salvage a deal.

What an attorney can do for you

What an attorney can do for you

If you’re a first-time buyer, a real estate attorney can give you peace of mind as you go through an unfamiliar and complex process. Here are some of the services a real estate attorney provides:

  • Reviews the purchase agreement before you sign it and, if necessary, revises it. Or, if you already signed a purchase agreement and worry there’s a problem, an attorney can void a purchase contract if it violates your state’s laws.

  • Reviews (or in some cases performs) a title search for the property, which confirms that the seller is its legal owner. (Getting Clear Title tells you all about title searches.)

  • Reviews all other legal documents related to the purchase, including the deed. If there are mistakes in the deed, such as misspelled names, the attorney can correct them.

  • Prorates costs you split with the seller. For example, the seller may have prepaid a year’s worth of property taxes, and you have to reimburse her for that money from the date you take ownership.

  • Coordinates among agents, your mortgage broker or loan officer, the lender’s attorney, and the seller’s attorney to make sure all documents are ready for the closing.

Even experienced homebuyers should consult an attorney in certain situations:

  • For complex transactions. If legal issues arise and your real estate agent doesn’t know how to address them, you definitely need a real estate attorney. For example, say the current owner converted his garage into a studio apartment that doesn’t have a certificate of occupancy; you want to know whether you can legally rent out the apartment. Or you want to buy a home with a partner who’s not a relative, or through a trust. If your situation doesn’t fit the language of standardized real estate forms, an attorney can get the wording right.

  • When you don’t have a real estate agent. If you buying a FSBO home (How Real Estate Agents Get Paid) directly from a seller, you definitely need an attorney to help you with the paperwork and make sure everything is legal.

  • When your state requires it. As mentioned earlier, some states require an attorney to prepare certain documents related to the purchase of a home. Ask your real estate agent if that’s the case in your area.

Choose a real estate attorney

It’s important to pick an attorney with expertise in real estate law. A lawyer might be a whiz at tax or probate law or corporate mergers, but unless she has significant experience with residential real estate transactions, you don’t want to hire her for this job. So before you hire an attorney, ask these questions:

  • How much experience do you have in residential real estate transactions? Look for an attorney who has five or more years of experience. An attorney who specializes primarily in commercial or rental real estate may not be the best person to represent you in a home purchase.

  • How many homebuyers have you represented in the past year? At least 10 shows that representing home buyers is a significant part of the attorney’s practice.

  • How do you charge for your services? Some attorneys charge a flat fee for real estate transactions, others charge by the hour. Ask how much in attorney’s fees a typical home purchase costs. Fees may vary widely; for example, hourly fees may range from $150 to $350 for each hour of the attorney’s time.

  • Have you ever been sued for malpractice or disciplined by a bar association? It’s in your interest to hire a competent attorney with a clean ethical slate.

  • Will you provide me with a list of recent clients? Get at least three names.


Before you hire an attorney, check with your state’s disciplinary agency to make sure that the attorney hasn’t been in trouble for ethical or other violations. You can download a list of state disciplinary agencies, complete with addresses, phone numbers, and website information, from the American Bar Association at www.abanet.org/cpr/regulation/directory.pdf.

References don’t mean much unless you check them. So talk to some of the attorney’s previous clients to get their opinions and their answers to these questions:

  • How did you choose this attorney? Did someone recommend her or had you worked with her before?

  • What services did she provide?

  • Did she meet deadlines and return your phone calls and emails promptly?

  • Did she explain concepts and answer your questions clearly?

  • Were you satisfied with her work?

  • Would you work with her again?

Your Home Inspector

In the movie The Money Pit, a young couple buys what looks like a beautiful home at a bargain price—until the house starts to fall down around them. A home inspector makes sure you don’t meet the same fate.

When you tour a home, it’s easy to notice the cosmetics—you like the carpet in the living room, but the kitchen cabinets have got to go. But how do you know whether the home’s foundation is solid and the central systems (electrical, heating/cooling, plumbing) work the way they should? No matter how well-maintained a home appears, it can hide problems that require a trained eye to spot.

A home inspector gives your prospective property a thorough going-over, from roof to foundation, checking the structure and its systems. Chapter 12 shows you what a home inspector does, step by step.

The purchase offer (How Much Should You Offer?) your real estate agents writes up should include a contingency (Contingencies) that tells the seller the offer is valid only if you’re satisfied with the results of the home inspection. Typically, this contingency gives you 17 days to withdraw your offer or move forward with your purchase: 14 days to conduct a home inspection and 3 days to make your decision. You should interview inspectors and choose the one you want to work with before you make an offer on a house. At busy times of the year or in areas where the real estate market is hot, you may find your preferred home inspector has a waiting list. So find an inspector and call her as soon as your offer is accepted.


Some sellers have a home inspection done before they put their home on the market. Even in that case, you should still hire a home inspector to look over the property. The couple of hundred dollars you’ll spend is worth it to get a second opinion.

As with the other real estate professionals on your team, you should interview home inspectors before you choose one. Ask these questions:

  • Are you a full-time home inspector? This isn’t a guarantee of competence, but it shows that the inspector is in enough demand to make a living at it and suggests dedication to the job and (perhaps) better availability.

  • How long have you been inspecting homes professionally? You want an experienced home inspector, especially one who’s familiar with your area and the problems that commonly occur there. Look for one who’s been in the business for at least a couple of years.

  • Do you have training in home inspections? Many home inspectors have a background in construction, but inspecting homes is a specialized discipline that requires specialized training. It’s a good sign if the inspector has taken classes in home inspection.

  • Are you a member of any professional associations, and do you have any special certifications? Some of the professional associations for home inspectors are the American Society of Home Inspectors (ASHI), the International Association of Certified Home Inspectors (InterNACHI), and the National Association of Home Inspectors (NAHI). Each of these organizations have standards of practice and a code of ethics that members must follow.

  • Do you have up-to-date professional liability insurance? Sometimes called errors and omissions insurance, this policy covers the home inspector in case there’s a mistake or oversight in the inspection report. If things go wrong and you end up having to sue the inspector over a faulty report, this insurance means you’ll get paid if you win a judgment.

  • What does your inspection cover? May I see a sample report? The inspector should assure you that your inspection meets state criteria (if applicable) and complies with the standards of practice and code of ethics of one of the major home inspectors’ associations. Look for a report that goes into a lot of detail instead of a quick checklist. (For an example of a good inspection report, check out Understand Your Home Inspection Report.)

  • How many residential home inspections did you do in this area in the past year? Look for one to two per month at a minimum.

  • How long does a typical inspection take? A thorough home inspection takes two to three hours for a single-family home. If the inspector whizzes through it in less time, he may miss problems.

  • May I attend the inspection? If you’re on site during the inspection, you can ask questions and see potential problems for yourself. If the inspector doesn’t want you around, choose someone else.

  • How quickly will I get the report after the inspection? Most inspectors deliver a report within 24 hours. And find out how the inspector gets the report to you as well—via email, fax, or in print.

  • Can you give me the names and contact information of at least three references? Homeowners know for sure how thorough a home inspection was only after they move in. It’s a good idea to talk to previous clients to find out whether the inspector missed something important.

When you get a list of references, check them out (Check references gives tips for checking references). Here are some questions to ask:

  • When did you work with the home inspector?

  • Did the inspector show up on time and deliver the completed report promptly?

  • Did you accompany the inspector? If so, did he explain what he was doing and answer your questions?

  • How much time did he spend going over the property?

  • Was the home inspection report thorough, easy to understand, and supported with photos and/or documentation?

  • Have any problems arisen that the inspector should have pointed out but didn’t?

  • Would you choose this home inspector again?

Watch out for inspectors who rushed through the inspection or who missed issues that later turned into problems for the buyer.

Other Real Estate Professionals

By now you’ve met the main players. Here are some other professionals you might want on your home-buying team:

  • Accountant. Your accountant or tax preparer can clue you in on the tax breaks associated with buying a home.

  • Appraiser. Lenders need to know that a house is worth at least as much as you’re paying for it. An appraiser inspects the house and compares it to similar properties in the area to determine its worth.


    Later, after you build some equity in your home, you may hire an appraiser when you apply to cancel private mortgage insurance (Coming Up with a Down Payment).

  • Contractor. If you’re thinking about buying a fixer-upper or making significant renovations to a home, it’s a smart move to have a contractor estimate how much the repairs and renovations will cost before you submit an offer.

  • Escrow officer. Sometimes called an escrow agent or closing agent, this neutral third party makes sure that the transaction proceeds as it should—in other words, that both you and the seller are living up to your agreement. The escrow officer may be an attorney, a full-time escrow agent, or someone who works for a title agency. In a typical sale, the escrow officer has these responsibilities:

    • Sets up an escrow account to hold money related to the sale, such as your earnest money (Purchase Price), until closing

    • Holds signed documents until all paperwork related to the sale is complete

    • Performs the title search and arranges for title insurance

    • Prorates costs, such as taxes and bills that the seller has already paid

    • Prepares the final paperwork

    • Distributes money due at closing

    • Ensures that the sale happens properly and legally


    In some states, such as California and Arizona, brokers and title companies are allowed to prepare legal contracts and title documents, hold money in escrow, and close real estate deals. These states are called “escrow states.” In other states, such as New York, only attorneys can perform these tasks. These are called “title states.” Your real estate agent can tell you whether you’re in an escrow or title state. For more on how closings work in escrow states versus titles states, see Chapter 13.

  • Insurance agent. At the closing, you need to prove to your lender that you’ve insured your property, so you need to find an insurance agent who specializes in homeowner’s insurance. Living trust has tips on how to shop for homeowner’s insurance.

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