Possible Scams to Avoid When Buying a House
This Guest Blog was written by Andrea Needham of Eldersday.org
Making the decision to purchase a new home as a senior is an exciting one, but it can also be quite stressful. There’s a lot to consider when it comes to choosing a home that will allow you to age in place. But no matter how much planning and preparation you do, probably the last thing on your mind is the possibility that you might run into a potential scam. Unfortunately, seniors can be especially susceptible to home buying scams so learning what is and isn’t normal during the home-buying process is key in making sure things run smoothly and you are being treated fairly.
Be Wary of Dual Agents
In a typical scenario, the buyer and the seller each have their own agent, but there are some cases in which you might run across a new term – a “dual agent.” Dual agency can happen when the buyer and seller have the same agent or the agents are from the same real estate firm. Cases of a dual agent are rare, but it can happen, so it’s best to know when a dual agent can be beneficial and when it might cross the line.
According to Realtor.com, dual agency can be beneficial in that it could help to quicken the process, since there are fewer parties and schedules involved. In addition, having one agent means there will only be one agent getting paid a commission rather than the commission being split between two agents. Since the agent keeps the entire commission, they may be a little more willing to lower its price, which could lead to a little more wiggle room when it comes to price negotiating.
As a homebuyer, you may find that the downside of a dual agent far outweighs the benefit. Having a dual agent runs the risk of decreasing fairness and neutrality. Since a dual agent represents both the buyer and the seller, he or she might find it difficult to remain neutral. For example, an agent’s commission is calculated by the percentage of the sales price, so it makes sense to shoot for a high selling price. This benefits the seller, but not the buyer.
Do I Pay My Agent?
When purchasing a home, it can get a little confusing when it comes to understanding how all involved parties are getting paid. You know you have an agent who helps you find potential homes and make offers, but how do they actually get paid for their work?
The Balance explains that all commissions are paid to the seller’s broker, who then pays the buyer’s broker. Brokers serve as middlemen for their agents since all real estate licenses must be placed under a real estate broker’s license. Once the brokers are paid, they divvy up the commission to their agents based on an agreed-upon contract. Investopedia provides the following example: If a home is sold to a buyer for $250,000 and the real estate commission is 6 percent, then the commission on the sale is $15,000. The commission comes out of the cost of the home. It is never tacked onto the sale price.
All of that said, if the home you want to buy is FSBO, aka for sale by owner, the payment structure outlined above may be a bit different. Bottom line, make sure payment is addressed and completely understood before signing any form of contract.
Homebuyers need to remember that they will never have to pay their agent to find or show homes to them, and if your agent asks for fees to do so, end your business with them quickly. If at any point during the home-buying process you feel uncomfortable, or even if something just feels “off,” speak up, or get a second opinion.