Assemble Your Real Estate Team Early

Buying or selling real estate is a team project. Who should be on your team depends on the depth of your knowledge and skills. If you come up short in any area, you purchase the missing parts from service providers in the marketplace. Choose wisely and well to increase your chances for a smooth transaction.

You might be an engineer, for instance. Maybe this leaves you feeling comfortable inspecting a residence or small commercial building. Your structural engineering background may leave you scratching your head when it comes to mechanical systems, however. Add to your team a firm that has people who can fill in the gaps of your knowledge.

Line up your team early. You need information about the availability of property. You need the ability to discover the condition of a property. You need information about choices in mortgage financing. In many cases you will need legal, financial and tax advice.

Real estate agents tend to be the repository of property information. If you have a specialized need, consider hiring a specialist. You should at least inquire into the agent’s experience with the type of property you want to buy. That agent is your window on the marketplace. He or she is more likely than you to hear about the better opportunities, the choices that come and go quickly without being marketed in a very public way.

You can ask the agent to represent only you. A buyer’s agent takes his or fees from the sales proceeds. The money usually comes as a split of the fees the seller pays to the seller’s agent. Your agent should also help you consider properties where the seller has not hired professional representation, the “for sale by owner”. Most owners will pay a buyer’s broker who brings an acceptable offer.

When you are focused on property you will find yourself initially calling agents who are marketing properties that catch your eye. They represent sellers. There is nothing wrong with having that listing agent write your offer to purchase that property, if the individual earns your trust and confidence and has the seller’s permission to deal with you. Be sure you have first completed your consideration of all the alternatives, however.

Inspection usually comes after you have your property under contract. Your accepted offer gets it off the market subject to inspection. Where you have a specific concern that might affect value, however, you might bring a specialist into the picture before you make an offer. Your choice of inspector is influenced by what you know about the property and the amount of risk you are willing to assume. If you don’t inspect at all, beyond your own inexpert examination, you take all the risk that the property harbors an unpleasant surprise.

Hiring an inspector transfers some of that risk. Ask how much risk the inspector will assume for the fee you are paying. Some services try to limit their liability to the amount of the fee. You may not be able to collect from an incompetent inspector who has no resources to stand behind his or her work. Ask whether the inspector carries errors and omissions insurance. Know whether the inspector has a professional license.

Sellers must guard against fraud and misrepresentation. It’s not fraud just to sell a bad property, however, if the seller doesn’t know about the defect. Sellers of homes and duplexes limit their liability simply by filling out the Alaska disclosure form in good faith, the Alaska Supreme Court said earlier this year. In a commercial real estate case last year, the same court upheld an as-is clause, on the theory that commercial investment real estate buyers are more sophisticated. The legal trend is swinging back toward “buyer beware”.

Get the lender on your team early, also. Most transactions stand or fall on the say-so of the lender. After all, the lender has more money in the deal than you do, in most cases. You may have to shop some before finding a lender who will support what you want to do.

You have to sell both yourself and the property to the lender. Learn their attitude toward the type of the property you are considering. On the residential side, some properties don’t qualify for all types of financing. In the commercial arena, the condition of the property, and how you intend to use it, will strongly influence the terms and availability of financing a lender may offer you.

Your negotiating strength increases when your financing is pre-approved. You might be a cash buyer with substantial assets, but even then you should expect the seller to require meaningful disclosure of the resources you are going to use before the seller will accept your offer. The same attitude prevails from residential and commercial sellers who get offers that are subject to bank or mortgage company financing. If you have to compete with others for a good property, your chances of getting it increase when you submit a prequalification letter with your offer.

You may also need legal and accounting advice in a real estate transaction. Tax law changes this year will create some once-only situations in the sales of homes and commercial-investment properties.

Whichever advisors you include in the team, hold them to their areas of expertise. The real estate agent, for instance, is going to know enough about financing, property engineering, taxes and the law to be dangerous. He or she may only be able to alert you to an issue that calls for the advice of a specialist. At the same time, the attorney, mortgage lender, CPA or engineer may be ill-equipped to tell you whether a property is a good buy in the marketplace.