There is a common misconception that if you don’t use a Realtor or a real estate agent to buy or sell property California, you can save money. This could not be further from the truth.
As a buyer of property in California, the commission that your real estate agent receives is paid by the seller of the property. Therefore, for all of the work he or she performs in ensuring that the proper forms are all used and completed correctly (and in California there are a huge number of forms used in real estate transactions) and for all of his or her advice and assistance, you pay nothing. There is thus no reason to attempt to purchase property without an agent. And if you think you know what forms need to be used, think again. The forms used by most agents are constantly changing and only agents who keep up with these changes know what forms have been added in recent months.
There is also no reason to allow the seller’s agent act as your agent as well. For an agent to act as the agent to both the buyer and the seller often puts him in an un winnable situation. If there is something wrong with the property, he must disclose it But how hard will he look for things that can spoil the sale if he is losing both sides of a commission and if he has loyalties to both the buyer and the seller of the property? A good agent will disclose everything. But why would you want to put one agent in that situation when you can obtain your own independent agent to advise you, and still not have to pay him a dime since he receives his commission out of escrow from the seller’s proceeds? The answer is, get your own agent.
As the seller of property in California you will likely pay on average, a 6% commission, split in half between your agent and the buyer’s agent on a home, and a 10% commission, on average, split between your agent and the buyer’s agent on land. Here is where the real temptation to a seller lies.
In the effort to save up to half of the commission (since you will still likely have to pay the buyer’s agent half of the normal commission), the frugal seller will try to avoid every cost he or she can. They will not use an escrow agent. They won’t get a title report. They will even try to avoid buying title insurance. And if they manage to talk the buyer into buying the property without an agent as well in return for a discount in the price, you have the situation of the blind leading the blind.
As a real estate lawyer (as well as a realtor), it is no wonder that this is the type of client who calls or comes in for a consultation to our law firm complaining that they sold their property but were never paid, or that they bought property and took out a huge loan and never received clear title, or that their loan isn’t the type of loan that they thought they were getting.
The situations even get worse. Not only do such buyers or sellers not get what they thought they would get out of the transaction, they normally get a bonus. They get sued as well by the other party. And if any of the normal purchase and sale forms are used for the transaction, the form likely provides that the person who prevails in the lawsuit is entitled to his or her attorney’s fees and costs. In a complicated real estate transaction where none of the normal formalities were followed, those attorney’s fees and costs can easily run into the tens of thousands of dollars.
The choice is simple. If you want to save money in a real estate transaction, and sleep well at night, use a Realtor. If you want to run the risk of losing your property and paying an attorney to defend you in a lawsuit, go it alone.
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