Home Buying: The People Involved

Real estate agents sell by advertising and showing homes. Most agents represent sellers, but many also represent prospective buyers. They generally make their money when a deal on the home closes. The first thing you should do is ask the agent who they represent. Unless you specifically retained the agent, you should presume they represent the seller.

Regardless of how you pay for the home, it is important to have the home professionally appraised and inspected. These professionals should be independent of the lender or real estate agent and should give you a candid assessment of the condition and value of the property. Be wary of anyone who insists you use "their" appraiser or inspector.

You may also want to hire an independent surveyor to perform a topographic survey on the property. Surveyors can trace the legal history of the property, including property lines, platting restrictions, and zoning regulations.

The title company researches the legal status of the property and issues title insurance. Title companies ensure that the seller is the legitimate owner or representative of the property and will tell you if anyone else has legal claims (liens) on the property, such as for unpaid taxes or an unpaid mortgage by a previous owner. It is essential that you involve an independent title company since you could be held liable for many unresolved debts by a previous owner. Do not trust a seller or agent who insists that you avoid using a title company. You will have to pay for the title insurance, but it can often be rolled into the loan.

Some consumers use mortgage agents, also known as brokers, to help them find a loan. The broker does not issue the loan. Instead, they get a commission once you agree to accept a loan from one of the mortgage companies they represent.

You should determine whether you want to use a broker, or if you would rather contact lenders yourself. Avoid mortgage brokers who charge hefty up-front fees and "guarantee" they will find you a loan. Make sure the broker is licensed, and avoid them if they do not give you a fee disclosure form. Ask if they will be paid a "yield spread premium"—this will likely increase your costs.

Mortgage companies provide loans to buy real estate. However, commercial banks and sometimes credit unions also issue home loans. A mortgage company or bank often "sells" the debt to another institution meaning where you pay your monthly payments can change.

Attorneys and accountants who represent you can help conduct real estate transactions. They conduct basic document reviews and can provide you with an explanation of the purchasing process and your long-term rights and obligations. Their fees can be worth it if they find terms that will cost you down the road.