Trafford Publishing: Winning the Home Buying Game

Here is the full reference card for this book...

If you'd rather place an order by talking to one of our cheerful order desk clerks, please call 1-888-232-4444 (USA and Canada only) or 250-383-6864. From Europe, ring our UK order desk clerk at local rate number 0845 230 9601 (UK only) or 44 (0)1865 722 113.

Winning the Home Buying Game

by Melvin Barlow

391 pages; quality trade paperback (softcover); catalogue #03-0001; ISBN 1-55395-638-9; US$49.99, C$65.00, EUR42.25, £29.28

"Home Buyers - Lambs to the Slaughter"
Everything you always wanted to know about home buying, but your real estate agent would not tell you.

Read more!

About the book About the author Sample excerpts or Table of Contents Catalogue info

About the Book

A home buyers textbook provides the training to meet the buyers’ education certification requirements necessary to qualify for certain assisted home purchase programs. Promotes buyer brokers and especially exclusive buyer brokers as advocates for home buyers. Provides home purchase counseling in the home buying steps complete with glossary, index, and removable blank checklists, worksheets and examples, and buyer broker and offer to purchase contracts ready for copying for the buyer's personal use. Includes all text and .xls spreadsheets on a CD. It will help the home buyer get a better deal in his home purchase.

About the Author

Mel is retired. He is a graduate engineer and former; general contractor, life insurance salesman, Bureau of Land Management Realty Specialist, Realtor, and New Mexico licensed home buyer's real estate broker.
He graduated from the University of Tennessee in 1956 as an electrical engineer and subsequently progressed to communications engineer, general engineer and finally to supervisory civil engineer before retiring from engineering and going into real estate in 1972.
Most of Mel's experience prior to his first real estate license in 1972 was in federal service work closely related to real estate, consisting of engineering with parks and recreation, public health, safety and sanitation; construction contracting and contract surveillance and maintenance of commercial buildings, homes, and utilities associated with municipal infrastructures; subdivision planning and development; federal disaster claims appraising and adjusting; and preparation and review of environmental statements and land use planning.
After his retirement from civil service he became the first exclusive buyer broker in the state of New Mexico on February 2, 1988 and is one of the early pioneers in exclusive buyer brokers in the nation. Before retiring as an exclusive buyer broker he accumulated a total of over 14 years working only for home buyers.

Sample Excerpts or Table of Contents

INTRODUCTION
THE REAL ESTATE BROKERAGE INDUSTRY
The real estate sale/purchase transaction is needlessly complex. This complexity seldom benefits anyone but the professionals who sell their ability to untangle it. The entire real estate industry has gone amok, where competition has been replaced with cooperation. This deprives consumers of the benefits of competition, resulting in higher prices for products and services.
For many years real estate agents have done a poor job of informing consumers relative to the agent's duties. This was well documented in a voluminous 1983 Federal Trade Commission study that reported "71 percent of all buyers believed that the agent working with them was representing them in their purchase" (P184) and "81 percent of sellers also thought that the same agent with the buyer was working for the buyer" (p67). Not so in both cases. The agent was working for the seller. Following are some comments and extracts from that study that are still as true today as they were then.
"Evidence indicates that consumers usually are unaware of the key fundamentals of broker selection, and that brokers today generally are not a particularly good source for the important information needed for informed consumer choice (sellers and buyers)." (p65)
"The selection of a broker is a very large purchasing decision. For example, at a 6 percent commission rate on a median-priced home of $100,000 involves a consumer cost of $6,000 in brokerage fees. Despite the magnitude of this decision, many consumers are unaware of basic aspects of the decision, including the fact that a brokerage fee is negotiable, and that the brokers’ services may not be as buyers believe them to be."
"The state of consumer information relating to these important transaction terms provides some evidence of an important deficiency in the performance of the information function of the real estate brokerage industry." (p70)
"Brokers provide many market-making services that consumers desire. Without intending to be overly critical of the industry, it is important to point out that those same brokers sometimes may engage either in practices that limit consumer information or fail to take much initiative to successfully provide consumers with appropriate facts. The conflicts of interest inherent in their agency relationship when combined with consumer lack of awareness and unfamiliarity with what they should expect can produce an ambiguous situation that may result in consumers sometimes receiving representation which does not fully comport with their objective best interests." (p79)
The study came to several conclusions of improprieties in the real estate industry, however it did not make a single recommendation for their correction.
One conclusion in the Report, stated that "The Historical Role of the Realtors evolved from a competition-oriented brokerage system to, in key respects, be replaced by the cooperative approach. Yet, when buyers were asked to identify the single most influential source of information used to determine the price that they offered to the seller, 21 percent of them indicated it was the advice of their broker (p183). In most of these cases the broker not only was representing the seller but stood to gain from a higher price. A buyer can benefit fully from a broker's knowledge only if he separately hires his own broker."(p182)
Even the sellers whom the listing agent represents have been inadequately informed. "Where brokers other than the listing agent was involved, 74 to 77 percent of sellers believed that those other brokers represented the buyer." (p191)
Some of the Report covered "alternative" or presumably discount "brokers who offer less than full service to clients. It should be noted, however, that a properly managed buyer brokerage will offer full service, provable, representation to client buyers in the buyers’ best interests." (Ex A).
The only place in the entire Report that mentioned "recommendations" was in Appendix D, page 32, and this seemed to be primarily from or for alternative brokers. This was primarily relative to the potential role FTC could spearhead to induce uniformity in real estate law, regulations, & licensing, Multiple Listing Systems (MLS), domination of state real estate regulatory agencies by agents, access to advertising, & disclosure procedures among the states, etc. There was no follow up on any of these recommendations in the Report Summary. Nor has there been any formal follow up by FTC over the ensuing years.
Also, the real estate agent's referral system network was only briefly mentioned on page 32, Appdx D. The extent of referral fees and its influence on the consumer was not adequately analyzed in the Report.
Referrals by agents for a fee (kickbacks) have traditionally been a normal source of agent's income. However, the Real Estate Settlement Procedures Act of 1974 forbids kickbacks to brokers making such referrals. Consequently this has resulted in a continuous running battle between realtors and federal regulators that has not yet been resolved.
Now a new wrinkle in referrals has been added to home selling and buying. Some real estate agencies are offering home sellers incentives such as a lower selling commission if the seller will purchase their next home from one of the agencies’ branch or affiliate offices, say in their new location in another state. This tying arrangement locks in the seller to the agents affiliate in the new location no matter how good a deal the buyer could find with another agent at the new location. But, what if a buyer decides to walk away from that contract in the new location? The legality of this kind of broken contract has not yet been tested in court.
Another oversight of the FTC Report was the complete absence of any analysis of the realtor prepared listing contract that is used by almost all agents to sell homes. This is the document that sets the stage for most of the problems and high cost of housing in America. This one document controls the selling, the marketing, and the buying of homes. Yet no one has questioned the legality of this contract.
This was briefly alluded to on page 194 of the Report where some commentators (survey respondents) believe that the conflicts in the brokers’ role, and especially the ill-defined nature of the relationship between the broker and the buyer, are directly related to the industry's goal of achieving professionalism.
A statement by former NAR president Joseph Doherty summarizes one view of this dilemma: " would think that professionalism would come when we represent one party for a fee. We have been living with the most difficult situation where we are the agent for the owner only. He pays us, and we have a fiduciary responsibility toward him and still we have to be very careful that we represent the best interests of the other party to the transaction in terms that will be absolutely fair, ethical, and so on. I can't think of another profession that would operate that way, unless it be a marriage counselor." (p194)
Yet nearly 20 years later the real estate industry is still doing the same thing, and has the same identical problems, only now the same problems are much greater.
Although alerted to the real estate brokerage industry situation almost twenty years age, the FTC has done no follow up or anything else to correct the problems they identified. Probably this is because they fear a similar situation they found themselves in when they did a similar study critical of the insurance industry in 1979. Immediately after that study, Congress pressured by the insurance industry passed a law preventing the FTC from ever again investigating the insurance industry (FTC Improvements Act, Public Law 96-252-May 28, 1980, 94 STAT.374). Maybe it is better for FTC to be able to collect data on the real estate industry, even if it is never used, than to be prevented evermore from collecting the data.
*(Federal Trade Commission Staff Reports, THE RESIDENTIAL REAL ESTATE BROKERAGE INDUSTRY, Los Angeles Regional Office Staff Report: Volumes I and II and The Butters Report, Dec. 1983, USGPO 1984-444-142)
PREFACE REFORMING THE REAL ESTATE INDUSTRY
The transfer of real estate is one of the most costly, complex and time consuming exchange mechanisms to be found anywhere in the nation. The combination of brokerage fees and other transfer expenses take an unreasonable huge toll from the buyer. Some of these expenses are unnecessary duplication with each and every purchase, i.e., survey appraisal and title insurance. The largest and most obvious of these fees is the real estate agent's brokerage fee, which in some cities can run as high as 7 to 10 percent of the selling price, with other costs adding up to a total of as much as 15 to 25 percent.
Simply stated, the more the buyer pays the more the industry earns. So, who is looking out for the buyer's best interest? Certainly not the real estate agent who is contracted to get the best deal for the seller, with his commission a percentage of the sales price.
Transferring real property should be as simple and inexpensive as transferring title to an automobile, recreational vehicle, or manufactured home. Many vehicles are purchased every day that cost more than some homes with the vehicle as sole collateral for the purchase loan. These vehicles are mobile and can easily disappear into the asphalt jungle. Real estate being purchased, however, is fixed. It cannot be moved. One would think that real estate as security for a purchase loan would be better security than a vehicle. So, why does the industry make a real estate purchase so complex and expensive?
When closely examined, most of the work involved in property transfers usually consists of no more than verifying items on a checklist and completing standardized forms. The complexity of real estate transfers certainly cannot be justified because of anticipated complications, because complications rarely arise, and when they do they are usually easily resolved.
These complexities impede the free marketplace as we know it and therefore increases the costs of home ownership. These practices must be changed. However, to change them there must be a major reform of the National Association of Realtors, one of the most powerful entities in our nation. For this to occur, more education of the general public is necessary. Laws and regulations must be drafted in plain language by other than real estate agents, and unnecessarily complex and cumbersome procedures must be simplified. Naturally the real estate industry and the legal profession will oppose such changes.
It is unlikely that the author will live to see those changes. But hopefully and maybe in the meantime, this book will help home buyers to better cope with the complexities of the purchase transaction and to better cope with the professionals who may be working for or against the buyer, help buyers get a better deal in their home purchases, and help them save money in their home purchases. That is the purpose of this book.

Catalogue Information