A "red flag" is a term used in the real estate business that refers to a property defect that might be a warning sign of a bigger problem. When you're buying or selling a home, you should be on the lookout for warning signs in every aspect of your real estate experience, not just in the home inspection arena.
For instance, suppose an agent shows up late for appointments, and is lax about returning your phone calls. This is a red flag that indicates you can expect a similar lack of professionalism throughout the course of your working relationship.
As soon as possible, let the agent know what kind of service you expect. If your agent isn't responsive to constructive criticism, find yourself an agent who will provide quality service.
Another red flag is real estate agents who are willing to work outside their area of expertise. This is happening more and more often as Multiple Listing Services combine with one another to create immense entities that can pass lower fees on to their member agents. This doesn't necessarily provide you with better service.
In most cases, it's legal for a real estate agent to represent buyers and sellers anywhere within the state in which they're licensed. However, it's the client who suffers from inadequate representation if agents work so far a field that they aren't aware of such things as local business practices, customs and laws affecting real estate, geological problems and point-of-sale compliance ordinances.
One buyer who was working with an agent from San Francisco decided to buy a house in nearby Oakland, Calif. Rather than refer the buyer to an Oakland agent, the San Francisco agent told his client that he could help him buy the home in Oakland.
Since the San Francisco agent didn't routinely work in Oakland, he didn't know how closing costs were customarily shared between the buyer and seller. He told his client that he needed to offer to split the cost of transfer taxes with the seller on a 50-50 basis. In San Francisco, there is a city tax that is customarily paid by the seller and a county tax of $1.10 per $1,000 of sale price. In Oakland, there is the same county tax that is charged in San Francisco plus the city of Oakland transfer tax of $15 per $1,000.
The custom in Oakland is for the seller to pay all of the country transfer tax, and for the buyer and seller to split the city tax. The buyer didn't know about the hefty city tax before he made his offer, and he ended up paying half of a tax that Oakland sellers normally pay in its entirety.
HOUSE HUNTING TIP: You can put yourself at a disadvantage by working with an out-of-area agent if the market is competitive. Local agents have working relationships with listing agents in the area. They know how the local market works.
In some markets, listings are exposed to the market before the seller entertains offers. In other markets, some listings sell even before they're advertised on the Internet. To be a successful buyer in a high demand market, you need to work with an agent who can keep you well informed.
Recently, an out-of-area agent wrote an offer for buyers who had been trying to buy in the area for over six months. Their offer was the lowest of six offers. The winning offer was from buyers who were represented by a seasoned local agent who had a better idea of how high the price would go.
THE CLOSING: Some agents can cover a broad territory successfully. But, in most cases, it's advisable to ask your agent to refer you to a knowledgeable agent who works in the market where you'd like to buy.
Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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