Loan Shopping Pays Off

One thing we ALWAYS do for our home buyer clients is help them shop for the best lender - by analyzing good faith estimates from different lenders - and helping the buyer pick the lender with the best rates & fees. Lenders hate it - but our buyer clients love it! On average - we save our buyer clients $20,000-$30,000 or more over the life of the loan - just by "shopping the loan." Time consuming? Yes. But it is worth it - for our client's sake.... And in appreciation - they give us a lot of referrals from doing things like this - that traditional agents typically don't do.

Sadly - most Real Estate agents don't even know how to analyze a good faith estimate - to ferret out junk fees.... Some agents may not even know what a "yield spread premium" (YSP) is...

(You may want to ask them when you interview them)

Many agents refer their client to an in-house lender (stating that "it will be convenient for you" - they are right here..) - where perhaps their brokerage gets some benefit from that (rent from the lender or an LLC profit sharing agreement etc.) That isn't being a true fidicuary for the buyer.

Why Option ARMs are Not a Good Idea..

There are lenders out there advertising interest rates as low as 1%. Borrowers beware! This is total nonsense. There's an old saying: "If it sounds too good to be true, it probably is".
The Option ARM is a gimmick loan that is sold in such a way that it takes advantage of the borrower's lack of knowledge.

A few reason's why I think the Option ARM is a bad idea:

1. Negative Amortization - If the borrower pays the minimum payment every month the balance of the loan will increase. The borrower will owe thousands of dollars more on their home in a very short period of time. This is because the interest rate the borrower actually signed up for - is much higher than the teaser rate they think they are paying.

2. Your interest rate is actually higher than what you could have gotten on a conforming loan. The low teaser rate you get - is only a portion of the interest that's actually accruing on the balance of your loan. Typically - Option ARM loans have a combined interest rate of at least 8.25%, but most are even higher than that.

3. Because the loan balance continues to rise over time, the borrower's equity decreases. So - you are left in a worse place financially in the long run.

What is an "As Is" Sale?

With more foreclosure and as-is property coming on the market everyday - it is important for consumers / clients to know what "as is" really means. It means that the seller must disclose all known defects - but that they aren't expecting to pay for any repairs. (However - never rule out that you can STILL negotiate to get credits from a home inspection -- it never hurts to ask. And if there is "no reimbursement" and that would be a deal killer for the buyer - just have them walk away from the transaction.)

With "as is" - the seller isn't making any warranty or representation about the condition of the property.

As-is listings have their positives and negatives for a seller. The negatives are - many buyers wonder "what is hidden... what aren't they telling me about?" -- and they get cold feet. Some sellers do indeed thing that they can get away with selling a home which has a hidden defect that the buyer or a professional inspector won't discover.

They also may sell "as is" because....

They don't have the money to repair the disclosed defects.

They may not have lived in the property (perhaps it was an investment property) and they aren't aware of it's problems.

The seller doesn't want the inconvenience and hassle of making repairs.

Buyers can protect themselves when purchasing as-is properties by hiring a very very good home inspector - that is at a minimum ASHI and/or NAHI certified. You might want to review sample reports from various inspectors - to compare the differences. A good agent will refer you to an agressive inspector -- not one who sugar coats things - so as to not "blow the deal" for the agent.

Though a home warrantee can be helpful - they won't cover pre-existing conditions.

As a Buyer - Why Take the Risk of Hiring a "Buyer Agent" (Dual Agency Possibility) When You Can Have an Exclusive Buyer Agent (No Dual Agency)?

The answer is - you shouldn't take the risk... It's a no-brainer. When you use an Exclusive Buyer Agent (they and their company never list property for sale) - and you are assured of 100% representation - 100% of the time.

Unfortunately - Dual Agency is legal in Illinois because traditional firms lobbied for it - in order to preserve the ability for their agents to obtain "double dip" commission. Never mind that it isn't good for the consumer...

How can a Realtor, in all honesty, work for two Clients on opposing sides of a transaction? How can you place your Client's interest first, when there are two of them, one trying to get the highest price possible and the other trying to get the lowest price possible? You can't.

Unfortunately when consumers meet with a so-called "Buyer Agent" the first time - and there is no contract - over 80% of consumers in Illinois aren't told by their agent that they can get into a "Dual Agency" situation until it happens.... when their buyer client wants to write a contract on their own listing (that they happened to "sell" to their client.) The law says they were supposed to disclose that they could - upon first contact - but it rarely happens. Thus - the home buyer is left in the dark - and doesn't realize the conflicts that can crop up. (Would have never happened - had they used an Exclusive Buyer Agent.)

An Agency relationship creates a fiduciary between the Agent and Principal. Take away the fiduciary and there is no Agency. When entering into Dual Agency relationship, this fiduciary must be modified, to the point of no longer existing, in order to assist both clients equally. A fiduciary is NOT equal. Here lies the problem. Dual Agency, by it's very nature, is not an Agency relationship. Below are some excellent links that delve into the problems with Dual Agency a little further.

http://www.realestatelawyers.com/Dual-agency.cfm

http://www.realestatejournal.com/columnists/housetalk/20031010-barta.html

http://realtytimes.com/rtapages/20050208_dualagency.htm

This is why I've chosen to sacrifice half of my potential income - to only be one "one side of the fence" - that of the buyer. If it was about the money - I'd be like every other agent - working both sides. It is about the ethics to me..

The National Association of Exclusive Buyer Agents (NAEBA)

There is an association for Exclusive Buyer Agents - called The National Association of Exclusive Buyer Agents (NAEBA)

Not all Exclusive Buyer Agents are members however. NAEBA has certain ethical guidelines that it enforces within it's ranks - so that the public can be assured that they are dealing with a true Exclusive Buyer Agent (versus the "fake" variety....someone naming themselves that - when they really aren't....for example - having had a few listings..)

You can read more about the benefits of Exclusive Buyer Agency representation on that web site.

The Difference Between an Exclusive Buyer Agent and a "Buyer Agent"

Unfortunately - most of the general public isn't aware of the distinction...

In the 1990's NAR defined the difference in one of their brochures - but that is the last we've heard from them in terms of the definition. Only two states proactively let the public know that Exclusive Buyer Agency is a choice that they can have when they are purchasing Real Estate -- Ohio and California.



An Exclusive Buyer Agency is a real estate agency employing only agents working with buyers - and never engaging in agency for sellers. They have a fiduciary obligation and service to buyers, independent of all obligations and inducements to adverse interests (example - sellers, other agents, service providers).

An Exclusive Buyer Broker would be the managing broker of such an agency.

An Exclusive Buyer Agent is an agent who represents only buyers and neither accepts listings nor works in an agency which represents sellers or accepts listings. They work for the broker of the Exclusive Buyer Agency. They can never get in a dual-agency conflict of interest situation with their client.

A "Buyer Agent" works for a company who lists property for sale - and they list property for sale themselves. They can get into dual-agency conflict of interest situations with their buyer client - and unfortunately for the consumer - typically disclose that they can when the contract is written - rather than up-front with the consumer - as is typically required by most state laws.

An Exclusive Right to Represent Agreement does not give the right for a Buyer Agent to call themselves an Exclusive Buyer Agent. It only means that their buyer is working exclusively with them - and no other agent. They can still get in dual agency situations for example.

Hawthorn Woods Aquatic Center to Open in June

Enhancing the value of Real Estate in Hawthorn Woods Illinois - the Hawthorn Woods new swimming pool off Midlothian Road is scheduled to open in June!

The Hawthorn Woods Aquatic Center, funded wholly by developer donations, will feature a six-lane, 25-yard competition pool, and a separate diving well having a one and three-meter diving board.

There will be a zero-depth pool with two water slides and various spray features, a separate zero-depth spray area, picnic areas and a bathhouse with a concession stand.

The bathhouse will have a community room which will be available for community groups, private parties and homeowners' associations.

The center will be open seven days a week for open swim, swim lessons, lap swim and swim team practice. The schedule of facility operations, along with sign-up and fees for swim lessons, will be available as the grand opening draws nearer.

Season passes are available for purchase at Village Hall, 2 Lagoon Drive. Applications are also available online at www.vhw.org

Lake County Illinois Real Estate, Golf Courses in Hawthorn Woods, and Lake County Illinois Forest Preserve Golf Courses

If you are thinking about purchasing a home in Lake County Illinois that is near a lot of golf courses - Hawthorn Woods is the place. While
Hawthorn Woods Country Club is in Hawthorn Woods - you can zoom in to see the huge number of golf courses surrounding Hawthorn Woods!

Kemper Lakes Golf Club in Kildeer, Steeple Chase Golf Club (Mundelein Park District), Countryside Golf Club (Mundelein), Ivanhoe Golf Club (Mundelein), Four Winds Golf Club (Mundelein), and Royal Melbourne Country Club in Long Grove - surround Hawthorn Woods.

Would you like a luxury home with a magnificent pond surrounding it - with white swans and herons - and a real USGA spec golf green in the backyard, with sand traps and water hazards for practicing? E-mail me - and I'll fill you in.

The Lake County Forest Preserve district has four different courses that you can golf on.

For more information on Lake County Forest Preserve Golf Courses - check out the following links:

Lake County Forest Preserve Information

Countryside Golf Club

Thunderhawk Golf Club

Brae Loch Golf Club

Ft Sheridan Golf Club

Don't Visit New Construction / Builders Without Representation!

As a consumer - did you know that when you sign into a new construction community by yourself - that you lose your ability to be represented at a later date on that same property (without any cash out of your pocket)? It is a dirty little secret that the builders never tell you about. Of course - they don't. If you sign in on their sign-in sheet without an agent - they get to save 3-4% (what they would have paid out to the agent's brokerage.)

When you sign in to new construction - the builder has you by the yin yang. If you visit again later - with your preferred Real Estate representative - they won't get paid if you purchase in that community. If you have a buyer agency agreement with that rep - you'll have to pay your agent out of pocket - because the builder isn't paying out.

On the other hand - lets say you had a buyer agency agreement for 3% with your agent - and the builder pays out 4%. Guess who gets the extra 1% when you sign in as being represented by that agent? You do - the buyer! That is one great advantage of having a buyer agency agreement. (The other advantage is that it spells out your agent's responsibilities to you in writing. You know if dual agency is possible or not for example.)

Builders LOVE IT when buyers come in unrepresented. That means that they can charge their normal rate for the property - plus save paying out a 3-4% commission for example. They don't discount the property by that - to the unrepresented buyer. So - as a buyer - it is lose/lose proposition.

You also lose out on:

--knowing about extra incentives that you may not have known about - that could have been offered that the agent has seen offered in the past.

-- an agent ensuring that you are getting the best possible price vs. other properties in the community, and analyzing the re-sales there and in nearby areas - to make sure you don't over-pay.

-- an agent helping you through the home inspection phase (there should be at least two inspections for new construction... one before the drywall goes up, and one at the end.)

-- an agent helping you with the many other details that will ensure you get to closing smoothly.

-- If your agent helps you "loan shop" (not many of them do unfortunately) - that is another thing you miss....saving tens of thousands over the life of the loan - and perhaps having lower lender fees.

Press About Exclusive Buyer Agents ./ National Association of Exclusive Buyer Agents

Once again some very reputable publications (in the past, Consumer Reports, the Wall Street Journal, Money, Smart Money, CNN Money etc.) are recommending that consumers use an Exclusive Buyer Agent when they purchase property.

Here is a new article from Kiplingers

Past NAEBA President Leo Berard was interviewed in an article just published in the Novato Advance.

The Nest

Canada.com

More About Dual Agency Conflicts of Interest (What You Get if You Hire a Buyer Agent)

A "Buyer Agent" is an agent that is supposed to be representing the buyer - but can get into Dual Agency conflict of interest situations because they and their company list property for sale. Most of the public is clueless about this fact - and the implications when their "Buyer Agent" turns into a dual agent. (And most don't receive full-disclosure up-front)

An Exclusive Buyer Agent does not list property for sale - nor does their company - ensuring that they are always looking out for their buyer's best interests.

One person e-mailed me today:

I just found this "dual agency" guide on the Internet. Questions You May Want to Ask a So-called "Buyer Agent" Before You Hire Them I'm sorry I didn't know about this guide three years ago. Being a completely uninformed consumer (like the great majority of the public) back then, I became an easy mark for two incompetent, unethical agents who failed to explain or disclose crucial material facts about Company X's (name deleted) representation policy. Now I'm a lot wiser.

The most disturbing aspect is the fact that Company X's is using the absence of a separate written contract with my so-called buyer's agent Ms. X (which she never offered to me, by the way) to argue that she NEVER had a fiduciary duty toward me--although she showed me 8-10 houses over a three-month period, called me several times a week to announce new listings, encouraged me to attend open houses at them, drove me in her car to three of them, and gave me advice on what to bid on my house of choice.

In other words, the Company X management seems to believe that Ms X's statutory violations--failure to provide the mandatory written disclosure form when showing me Company X's properties, to function as a dual agent, or to assign me an intra-company agent if she refused this role---can be grounds for claiming that she was not my buyer's agent at all, even though she openly functioned as such and testified to this effect in two depositions!

Even one of the members of her real estate team wrote in a document that she thought Ms. X was serving as a buyer's agent in the negotiating process, and even the seller of the house of choice believed she was representing me!

The concept of dual agency obviously serves the interest of real estate companies by encouraging the practice of double dipping. It is inherently deceitful and unfair. .

Real Estate Brokerages and Their Agents "Steer" People to Their Affliated Entities - and They Are Now Getting Sued For it...

Was the Realtor you used to purchase you home truly acting as a true fiduciary in protecting your home buying and financial interests?

Click on this link to read about one lawsuit about this.

A lender cannot give a kickback to real estate licensees for referring customer and clients - just as licensee's cannot pay an unlicensed person for a referral.

But apparently - there is a loophole in the (lender (in my personal observation noted below) or title company "affiliates" (in the case of the article)) and Real Estate company relationship - whereby - corporate structures or LLC joint ventures can get around that - by funneling money through the corporate ownership structure.

The article goes on to say... "When real-estate brokers or sales associates knowingly steer clients to higher-cost services that benefit the broker financially, they might violate the fiduciary responsibilities owed to those consumers."

The article states: "Real-estate brokerages increasingly rely on income from their affiliates and often seek to maximize their "capture rates" — the percentage of all home-sale transactions that use the affiliates’ services. They also argue that even if the affiliates’ fees or mortgage rates are not the lowest available, the quality and dependability of the affiliates’ services more than compensate for any price differences."

I've usually heard agents tell their buyers - "Hey - use Joe in our office - it will be more convenient for you." Well - that convenience could cost you thousands! Rather than help you "shop" for the best loan when you buy - most agents steer you to a "preferred lender" - perhaps one in their office.

Relocation Advisors Group helps you "shop" lenders. We analyze their Good Faith Estimates for you - so that you can have a lender that has low rates and fees. We have no hidden ties to any of them.

I was at a traditional Realtor meeting a few months ago - and ran into a "Large Lender" person at lunch who stated that Company X (I won't name them for their sake - but they are large) locally – had done a joint venture with them – creating an LLC – where there will be revenue sharing between Company X and "Large Lender" through the LLC -- with the revenue to Company X going up - if their agents pushed their clients to "Large Lender."

I was shocked. Apparently – that must be legal --- as Company X and "Large Lender" wouldn’t do something that is illegal - would they?

Such an arrangement though - to me - does not seem to be in the consumer's best interest. It puts the Company X's financial interests above that of their client 's financial interests. (Perhaps "Large Lender" would be the best loan in some cases - and in others - perhaps not.)

The article that is linked to above - goes on to say... "In the case of a broker-client relationship, fiduciary duty means that a real estate broker is bound to put a client’s best interests ahead of the broker’s and must not profit from the fiduciary relationship unless the client consents."

The relationship I learned about between mega-broker Company X and "Large Lender" does not appear to do that. I would assume that they have some form of disclosure to each client about the Company X and lender LLC profit sharing relationship - but I wonder about the font size..


Rick Hauser, ABR, GRI, Broker-Owner, Relocation Advisors Group Inc.

Touring a New Home Builder Site - Signing in Yourself? Not a Good Idea.....

ALL home builders have a dirty little secret... And that is - that -- if you as a buyer -- sign in to a new homes development by yourself -- you lose your right to representation by an agent of your choice later. Why? If you procure an agent later to represent you - they won't get paid from that development!

So they won't represent you (unless you have a contract with them - but if you do - the builder won't be paying out to reimburse you - or your fee to your agent - and you'll be on the hook for the fee.)

If you try to represent yourself - the builder doesn't discount your price by the amount that they didn't pay out. They just keep it for themselves!

We specialize in keeping on top of the various "secret incentives" that various developments are offering - that they don't advertise.

We find out about them in various ways.

This is valuable information that you won't typically obtain with other agents. We recently had a developer throw in many extra upgrades for one of our buyer clients - with the total upgrade package being a HUGE dollar amount.

The bottom line is -- don't EVER sign in to a new homes development without an agent of your choice present. That is the worst possible thing you could ever do.