Buying or Selling a Home/don't understand contract

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Question
Hi,
   My wife and I are looking to buy a retirement home.  We have picked a couple of areas, one out of state.  We have had 3 agents show us homes in different areas.  One of the agents keeps handing us a contract and tells us we have to sign.  The contract says she is our exclusive agent and something about a 3 1/2 commission that we would help pay if the sellers agent doesn't give that much.  I said "You are not going to show us houses out of state or far away."  She said "Don't worry I would let you out of the contract if you bought far away."   
  We feel uncomfortable because if we buy in one of the other areas from another agent what does that mean? We would have signed that she is our only agent. Can we just tell her that we don't want to sign the contract or that we will sign when she finds us the right house?
   Also when we find the right house we are to put down money.  How much should we put down and what happens if the deal falls through, do we get our money back?

Answer
Hi Dan - These are excellent questions that all buyers should have the answers to.

First, The Buyer Broker Exclusive Employment Agreement (Called different names by state) is a contractual agreement between you and the Broker stating you will work exclusively with one agent who will represent you throughout your purchasing endeavor, for an agreed fee, for an agreed period of time. Should you purchase anything during the effective dates of the agreement you would owe that broker the commission indicated on the form. If you desire any additional terms you may add them either onto the Agreement itself if there are lines for Additional Terms, or attach a separate sheet of paper identifying the additional terms you desire. For instance, "should the Buyer purchase a home outside of anytown USA, this contract shall become automatically cancelled and no commission is due the broker indicated on line..."  Also note, the commission is negotiable if you do not feel comfortable at the rate quoted. My comments do not indicate that I feel the amount identified in your question is unreasonable, that is totally between you and the REALTOR you select. Make certain to add that there is an "attached addendum" above the signature line of the original Agreement.

Please note that whether a REALTOR is subject to an exclusive agreement or not, All REALTORS agree to provide services in compliance with the National Association of REALTORS Code of Ethics (http://www.realtor.org/governance/governing-documents/the-code-of-ethics), You should definately check it out, it answers many questions about how the process and standards of care.

Next, "Money Down"... there are two types of money needed in most real estate transactions. Earnest Money and Down Payment money. These are totally different. Earnest Money is what you 'pledge' to provide to the seller if you do not act in good faith (aka breach the contract). There is no amount of earnest money that is 'standard' or 'required' by industry standards and is totally negotiable, so start on the conservative side... the seller can always ask for more. REmember, you may lose earnest money pending the terms of the contract. 2. Down Payment is the difference between the sales price and the loan amount and is typically determined by the loan guidelines that you select. FHA has some low down payment loans as well as other conventional loan products. You will want to deal with a highly recommended loan originator who performs more than a few loans per month. This way the individual is more seasoned than other originators.

If you complete a loan application after October 3rd, 2015 the CFPB has some additional requirements on lenders, so you will want to learn more should you complete the application after that date. You should do your finance research before locating a home. In many markets today there is low inventory causing higher prices and less seller negotiation so consult a few trusted sources, including your REALTOR about whats going on in your market. If you are in a market with low inventory, expect less negotiation and higher prices. The seller may want to take a cash offer over your finance offer because many sellers think cash is better which is not always the case. A finance buyer who has already performed their due diligence in selecting their lender and loan type, and has already been working with a lender to get the process out of the way, is many times a better risk for the seller than a cash buyer. So be ready to submit the loan pre-qual form once you have decided on which property to buy. A full application requires an address before it can go to underwriting however many lenders have underwriting or at least have processors in-house. This expedites the finance process.

I hope this helps in your home buying process. Please remember this is not legal information as I am a REALTOR not an attorney. The information provided herein should be able to be provided by any experienced and professional REALTOR. Don't hesitate to seek legal counsel should you have any legal questions. Recommendations are to seek counsel from those professionals having an area of specialty affiliated with real estate such as mold, inspection, home warranty, pools, roof, etc.

If you are in need of any additional questions please don't hesitate to respond. - Todd

Buying or Selling a Home

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Todd C. Menard, GRI, rCRMS, REALTOR, BROKER

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation (addenda) as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011, 2012) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-2013), Arizona Association of REALTORS Professional Standards Committee (2008-2012), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President (2012) Southeast Valley Regional Association of REALTORS Board of Directors (2008-2013), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-2010), Southeast Valley Regional Association of REALTORS Education Committee (2007-09), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), Southeast Valley Regional Association of REALTORS "SEVRAR Magazine", Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- Certified NAR Code of Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

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