It’s so easy to get caught up in the excitement of owning or selling property that you forget to analyse the fine print thoroughly. Remember, there’s often more to the buying and selling process than meets the eye and your real estate agent might not be forthcoming about it.
From hidden fees and costs to potential conflicts of interest, we’ll explore some things your real estate agent might not tell you and offer insights and advice on protecting yourself and making informed decisions.
The Hidden Fees and Costs of Buying and Selling Property
Buyers and sellers should consider the closing costs, which cover several expenses related to the transfer of property ownership, including title search, appraisal, and attorney fees. These fees usually range from 2% to 5% of the purchase price, so on a £300,000 home, buyers and sellers could look at up to £15,000 in additional costs.
Similarly, the government assesses transfer taxes when a property changes ownership and varies depending on the property’s location. In some countries, transfer taxes can be as high as 3% of the purchase price, adding another £9,000 to the cost of a £300,000 home.
Agents also typically charge real estate commission fees of around 5% to 6% of the sale price, which is split between the buyer’s and seller’s agents. While the seller technically pays the commission, it’s usually factored into the overall price of the property. This means buyers indirectly pay a portion of the commission, which can be thousands of dollars.
All these fees and costs can quickly add up, forcing you to budget accordingly. Sometimes, you can negotiate these costs or find ways to reduce them, such as by working with a real estate agent who charges a lower commission fee or opting for a less expensive title company.
The Risks of Dual Agency
At first glance, a dual agency seems good. After all, having one agent handling both sides of the transaction is more efficient and can lead to a faster sale. However, potential conflicts of interest can arise when an agent represents both the buyer and the seller.
For example, say you’re a buyer working with the same agent representing the seller. Your agent might push you to make a higher offer because they stand to make a larger commission. On the other hand, if you’re the seller, your agent might push you to accept a lower offer to make a faster sale and earn a commission sooner. In both cases, the agent’s interests don’t align with the best interests of their clients.
Furthermore, in some cases, an agent may withhold information from one party to protect the other party’s interests. For example, if the seller has disclosed a defect in the property, the agent may be reluctant to share that information with the buyer if they represent both parties.
The Limitations of Home Inspections
Home inspections are a critical part of the home-buying process as they identify any major issues with the property that could impact its value or safety. While they‘re very helpful, they’re also inexhaustive. For example, a home inspector may not be able to detect mould, which could be hiding behind walls or in other inaccessible areas.
Buyers can hire additional inspectors for specific areas. For example, if you suspect mould in the house, you could hire a specialised contractor to conduct a separate inspection. Similarly, if you’re concerned about the roof’s condition, you could hire a roofing contractor to take a closer look.
The Importance of Reading and Understanding Contracts
You must read contracts thoroughly because there are often provisions that buyers and sellers might overlook or misunderstand. For example, a contingency clause might allow the buyer to back out of the deal if certain conditions aren’t met, like securing financing or completing a home inspection.
If you sign a contract without understanding the implications of the contingency clause, you could find yourself in a bind if you cannot meet the conditions.
Similarly, disclosure requirements are an important part of real estate contracts. Sellers are typically required to disclose any known issues with the property, such as a leaky roof or a history of flooding. If they fail to do so and the buyer discovers them after closing, it could lead to a legal dispute.
The Price of Silence
Buying or selling a property is a significant investment, and you owe it to yourself to be fully informed about every aspect of the transaction. By shining a light on the hidden details of the industry, you can make informed decisions and avoid potential pitfalls.