Redfin.com's Home Buying Guide I

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Introduction

We've built this guide as a resource for anyone looking to buy a home, with a special emphasis on the first-time buyer. It's filled with useful tips, checklists, sample forms, and interactive features that take the confusion out of the home-buying process.

Picking an Agent

What is an agent? What does an agent do? How do you find a good agent? What makes a Redfin agent different? Should you work with an attorney? We answer these questions, and more.

Finding the Right Home

How do you start your home search? How can Redfin help you search for a home? How do you read the listing details for a home? How do you keep track of your favorite homes on Redfin? What free resources are available to help you in your home search?

Viewing Homes

When and how do you start viewing homes? How do you pick the right neighborhood? How do you view open houses? Can you tour homes with Redfin? What should you look for during your home tours?

Mortgages

Before you start looking for a home, it pays to think about financing. You'll get an accurate idea of your price range and the ability to act quickly when you find the right place.

This is a big topic, so we've divided it into three sections:

    Mortgage Basics: How do you sort out all the mortgage types, rates and options? Check out our Mortgage Basics.
    Mortgage Pre-Approval: What is mortgage pre-approval? Do you need it, and how do you get it? Find the answers in our Mortgage Pre-Approval section.
    Choose a Lender or Broker: Ready to talk about a mortgage, but not sure how to pick the right person for the job? Find the information you need in our Choose a Lender or Broker section.

Making an Offer

What happens when you make an offer? How do you separate hype from reality when it comes to finding a great deal? What's a Comparative Market Analysis, and why is it so important? How does the offer process work in your part of the country? How do you handle negotiations? What happens if your offer is rejected?

Closing the Deal

How do you close the deal on a home? How do you handle inspections, appraisals, and getting a mortgage? How do you make sense of all that paperwork?

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Picking an Agent

Real Estate Agents: An Overview

What is a real estate agent? When do you need to find one? How are they paid? Can you trust them? Do you really need one?

In real estate, as in any other industry, there are the good, the bad, and the ugly. The key is understanding what an agent does, knowing how to find a good agent, and doing your homework to make sure that agent is a good fit for you.

What's the difference between a broker, an agent, or a Realtor?

The difference between broker and agent is a little muddy. In some locations, the terms are used interchangeably. Someone called an agent in one part of the country might have the exact same job as a broker in another part of the country. In areas with brokers and agents, brokers are usually more senior, with additional training and more managerial responsibility at a real estate brokerage. In general, we use the term agent throughout this guide.

A Realtor is an official member of the National Association of Realtors, which is a national organization of real estate agents, brokers, and other real estate professionals. Membership in the NAR is voluntary, and is not required to work as an agent or broker.

What does an agent do?

If you're buying a home, your agent should work on your behalf to get you the right home, at the right price, in a timely manner. An agent should not pressure you into buying a home, try to convince you to spend more than you're comfortable spending, or require you to work with their preferred lender or inspector. Visit our page on Agent Roles for more information.

When should I get an agent?

You're the best judge of the right time to find an agent. For some people, getting an agent will be the first item on the To Do list. This may be especially true of first-time buyers, or buyers who are relocating to a new area. The assistance of an agent early in the process can cut down on confusion and help a buyer organize the sometimes-messy process of shopping for a home.

Other buyers will prefer to do more homework before contacting an agent. These buyers may enjoy the research process, and may be more comfortable viewing open houses, driving through neighborhoods, reading books, and using online resources to narrow down their search before committing to an agent. Some resources we recommend:

Books

    Home Buying for Dummies, by Eric Tyson and Ray Brown
    Buying a Home: The Missing Manual, by Nancy Conner

Websites

    FrontDoor
    US Department of Housing and Urban Development
    MSN Money Home Buying Guide

Choose the approach that's right for you. If you have questions that you want an agent to answer, or you want to tour a specific home or make an offer, it's probably the right time to start interviewing agents.

Do I need an agent?

Actually, no. You don't need an agent.

For the vast majority of buyers, using an agent greatly simplifies the home-buying process. A good agent will be familiar with local real estate rules, regulations, and laws. A good agent will fight hard to get the buyer the best deal. A good agent will have solid connections to lenders, inspectors, and other service providers that a buyer might need in order to close a deal.

But some buyers can and do handle a home purchase without an agent. If you do decide to go this route, we strongly recommend that you find a good real estate attorney to help you deal with contracts and paperwork (some states require an attorney, whether you have an agent or not).

To find out what other Redfin users have to say about working without an agent, visit our forums.

How do I pay an agent? How much do I pay?

You don't. Technically.

When a seller sells their home, they pay a commission to their own agent (the listing agent), and they also pay a commission to the buyer's agent. Usually, the buyer's agent and the listing agent get the same amount.

Of course, the seller has no money at all until the buyer buys the home and hands over the cash. Many people argue that this means the buyer is the one who really pays the agents, since it's the buyer's money.

Either way, buyers who decide to work without an agent are usually motivated by a desire to save money. The listing agent will still get their cut, but the buyer may be able to negotiate with the seller, and save the part of the commission that would normally go to pay the buyer's agent.

What if I don't like my agent? Can I change agents?

Before you sign any paperwork locking you into one agent (known as a buyer's agency agreement), you should make sure that you're comfortable with your choice of agent. It can be difficult to break-up with an agent once you've signed on.

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Agent Roles

During the home-buying process, real estate agents can play one of several different roles. Here are the ones you're most likely to see, as well as important advice about avoiding something called dual agency.

Buyer's (Selling) Agent

When you shop for a home, you usually work with an agent who will give you advice, help you tour, help you make an offer to the seller, and negotiate on your behalf. This is commonly referred to as the buyer's agent, though the technical term within the real estate industry is the selling agent. (We know... this is confusing. You might see the term selling agent on some paperwork, but most of the time, most people just say buyer's agent.)

What does the buyer's agent do?

Though the buyer's agent usually performs most of the tasks listed below, the first duty of a buyer's agent is to always act in the best interest of the buyer.

    Helps you tour homes
    Gives advice on homes
    Performs comparative market analyses (CMA)
    Gives advice on price & crafts your offer

    Negotiates with seller on price and repairs
    Helps you find inspectors, lenders & other service providers.
    Helps you deal with closing and contingencies

How do I choose an agent?

Choosing the right agent involves two steps; finding her, and making sure she's the right fit for your needs. Read our page on finding an agent to learn about both steps.

Seller's (Listing) Agent

Just as the buyer's agent is supposed to act in the best interest of the buyer, the seller's agent (also known as the listing agent) works solely on behalf of the seller.

What does a seller's agent do?

It's the job of the seller's agent to get the best deal for their client. Obviously, getting the most money possible for the sale is one way to measure success, but a good seller's agent will also try to sell the home quickly and with as little trouble as possible. After all, getting full price for a home sale might not seem worth it, if the sale stretches on for two years and involves the stress of half a dozen failed deals.

In general, the seller's agent performs the following roles:

    Gives advice on pricing, including a CMA
    Helps seller find stagers, photographers & other service providers.
    Markets the home to buyers
    Hosts open houses

    Negotiates with buyer on price and repairs
    Communicates with buyer's agents
    Helps seller deal with closing and contingencies

Beware of Dual Agency!

Let's say you're at an open house. The agent showing the home asks if you have an agent, and you say no. The seller's agent says: "No problem! I can represent you and the seller at the same time."

Look out. You've just entered the world of dual agency.

Dual agency is bad news, especially for buyers. Think of it this way: it's the job of the seller's agent to get their client the most money possible for their home. How could that same agent also work to get a buyer the best deal possible? Add in the fact that the seller's agent usually makes a bigger commission when a home sells for more money, and the conflict of interest for a dual agent becomes very clear.

Our advice is simple: avoid dual agency. You should always have an agent who works solely on your behalf.

What if I don't want to work with an agent?

For some buyers, the best agent may be no agent at all. While we recommend that most buyers (especially first-time buyers) work with an experienced agent, only you can decide what's right for you.

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How to Choose an Agent

People say that home buyers don't pay their agents -- agents get paid a commission by the seller. Either way, a home buyer's agent will be paid thousands of dollars to help that buyer find the right home. (Redfin agents don't get a commission, but are paid to delight their customers.) With all of that money paying for such an important service, why do so many buyers latch on to the very first agent they meet?

We've put together some tips to help you find an agent, and some questions you should ask to make sure that agent is the best fit for your needs.

Where do I find an agent?

Here are some common ways buyers find agents:

    Friends & Family: Maybe you have a friend or relative who happens to be a real estate agent. But just because you know the person well, doesn't mean she would be the best agent for you. Does she know the neighborhoods where you want to buy? Is she a tough negotiator? Will you be comfortable expressing your dissatisfaction, or even firing her if she can't get the job done? Hold a friend or relative to the same high standards you'd expect from any agent.
    Referral: Friends and family who recently bought a home can be a good way to find your own agent. Make sure that the agent is familiar with your favorite areas and can handle any special requirements you may have, such as a willingness to tackle short sales or bank-owned homes.
    Internet: Many agents and brokerages have their own websites. In addition, review sites such as Yelp.com can show you what other customers have to say about agents in your area.
    Open Houses: Any time you sign a guest registry for an open house, you're putting yourself on the showing agent's call list. We don't recommend this method for "finding" an agent, but if you do want to work with an agent you meet this way, do your homework (see Important Questions to Ask an Agent, below).
    Shameless Plug: Of course, we're partial to our own Redfin agents and partner agents. We carefully screen, test, and hire only the best agents, and we make sure they always put you first by posting public customer reviews after every single transaction. We pay our agents to delight customers, not close deals.

Don't Sign Too Soon!

There's something in real estate called procuring cause. Basically, it means that a buyer's agent gets paid because the buyer has signed a document that says "this is the agent who made my home purchase possible." That document is called a buyer's agency agreement.

The sooner you sign this agreement, the sooner the agent knows he has your business "locked up." If you change your mind later and want to work with a different agent, it can be very difficult to get a "divorce" from your agent -- especially if you end up buying a home that your ex-agent showed you first.

Most agents will require you to sign a buyer's agency agreement at some point. But before you do:

    Ask that the agent work with you for a short time without an agreement. You should both be clear as to how long this "trial period" will last.
    Find out how long you're bound by the agreement. See if you can shorten this window.
    Ask if there is an "escape clause" that lets you end the agreement if you're unhappy with your agent's service.
    Get everything -- especially changes you've requested -- signed and in writing.
    If you end up buying a home that you saw with an agent during this trial period, we recommend that you make your purchase through that agent.

If you're interested in working with a Redfin agent, we won't ask you to sign an buyer's agency agreement until you make your first offer on a home. If you're ever dissatisfied with our service for any reason, you're free to walk away, no strings attached.

How to Research an Agent

A generation ago, it was hard to find information on an agent without first-hand experience. Aside from personal references and a call to the Better Business Bureau, there wasn't much you could do to get the real scoop on an agent's performance.

Today, you have plenty of ways to research an agent before you even meet her. Here are a few online resources we recommend:

    Yelp.com: Yelp.com lets customers submit reviews and ratings for businesses, such as real estate agents.
    Google: Just enter an agent's name into the Google search engine, and see what the internet has to say.
    LinkedIn: LinkedIn is a networking site for professionals. An agent's LinkedIn profile can give you an idea of their connections to other people in their profession, and may also include testimonials from colleagues or customers.
    State Licensing Board: You can learn about all about an agent from the licensing board in the state in which they operate. The information displayed may vary by location, but should include the agent's license status and number, as well as the name of their real estate agency. Some boards may also display disciplinary action and continuing education credits associated with the agent.

Questions to Ask an Agent

Before you decide to work with any agent, you should make sure he's the right person for you. To help you out, we've put together a list of essential questions to ask an agent before committing to work with him.

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15 Questions to Ask an Agent

Wherever you find an agent, asking a few questions up front can save you a heap of trouble later.

    Is this your full-time gig? How many clients have you served this year?
    Okay, that's two questions. But both get to the heart of the same issue: an active, full-time agent is more likely to be up-to-date on the market and the law.
    How many sales have you handled in my target neighborhoods?
    You want someone who knows the local market, with a few recent deals in your target neighborhoods.
    When clients are unhappy with your service, what has gone wrong?
    Asking why a client has been a bad fit for an agent can help you figure out if you're a good fit.
    Has a client ever filed a complaint against you?
    If you're uncomfortable asking, just check with the state licensing board.
    What's your fee?
    The seller pays the buyer's agent using the money you pay for the house, typically 2-3% of the sales price. Some buyer's agents refund part of this fee -- including Redfin agents. Since the commission amount is set by the seller and can vary from home to home, you should insist that your agent is upfront about his share; you don't want an agent who pressures you into a home based on his chances of landing a fatter commission check.
    What services do you offer beyond negotiations and escrow?
    Make a list of what you'll be paying for. Negotiations, paperwork and contingencies are the minimum.
    When am I committed to working with you?
    Many consumers start touring homes without realizing this can obligate them to work with the agent, contract or no contract.
    How many foreclosure or short-sale transactions have you handled?
    Distressed properties can be great deals, but the paperwork is complicated, and your liability is greater. The best agents have experience closing deals with banks.
    Who else will be working with me?
    An agent is often supported by a team. But the person you hire should do most of the work.
    Am I obligated to work with the lender, inspector, or other service providers you recommend?
    A "yes" here is a big red flag. Though good agents may have solid recommendations for lenders, inspectors, or other service providers, you should never feel pressured to use their recommendation. It's illegal for an agent to force you to use "his" lender or other service provider.
    How quickly can you get me into a home?
    Hot homes move fast. Ask how the agent handles tours on short notice.
    Do you represent buyers and sellers on the same house?
    When one agent represents both the buyer and seller, this is known as dual agency, and it is not a good thing for buyers. If the seller's agent is trying to get the most money for his client's home, how can he also be trying to get you the best deal? Our advice is simple: avoid dual agency.
    What sets you apart from other agents?
    Look for expertise, not just enthusiasm. You want an agent with experience in your favorite neighborhoods, a proven track record of happy customers, and deep knowledge of any special requirements you might have in your home search.
    What if I'm unhappy with your service?
    Most agents get paid when you buy a house, giving them an incentive to close the deal, even if you have doubts. Even if you have complaints after you purchase your home, it may be too late to do anything. Ask your agent if she's willing to guarantee your satisfaction, and what recourse you'll have for a bad experience.
    Can I see reviews of your past deals?
    Every agent has clients he served well. But the best agents consistently deliver excellent service. There's a difference between reading a few hand-picked endorsements and getting the full good, bad, and ugly on your agent. We think a good agent should have nothing to hide; that's why Redfin posts reviews for all agents and partner agents after every deal. While you won't find that for every real estate agency, you can use sites like Yelp.com to view real customer opinions for an agent you're considering.

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Real Estate Attorneys

Do you need a real estate attorney?

Since you're shopping for a home in California, the answer is probably not -- if you're a typical buyer. California is an escrow state. This means that most of the legal paperwork is handled at closing by a title or escrow company, without the need for you to hire your own attorney.

However, if you're not a typical buyer, there may be times when you'll want to contact an attorney to help you with a home purchase. Some of the more common situations may be:

    Buying a home without a real estate agent. If you're not using an agent, you should have an attorney to help you with paperwork and contracts.
    Buying a home that is currently being rented, or includes a rental unit. A lawyer can help you negotiate landlord and tenant issues, including rental contracts.
    Buying a bank-owned
    (REO) home. Banks often use forms that are very different from the paperwork your agent is familiar with.
    When the preliminary title report turns up problems Dealing with complicated liens, encroachments, or easements might require the help of a lawyer.
    You're looking for investment properties. If you're looking for homes to rent out or to re-sell, a lawyer can help you deal with legal issues.
    For condo sales. Some condo buyers may want to have a lawyer review the public offering statement or resale certificate -- these large stacks of paper can be a slog for the average buyer.
    You want extra reassurance. If you just can't sleep at night unless you have a lawyer review your contracts, you can hire one for extra peace of mind.

Finding a Real Estate Attorney

If you decide to use a real estate attorney, you'll still need to find one. Here are a few places to get started:

    Your agent
    Personal references
    CA state online directory

    Your title or escrow company
    Review sites, like Yelp.com
    Avvo.com is an online directory and review site where you can search for real estate attorneys in your area.

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Working without an Agent

While it may not be for everyone, it is possible to buy a home without a real estate agent. With careful research, preparation and planning, you can potentially save thousands of dollars by going it alone. We'll show you what to expect and what to avoid -- including an issue that blindsided Redfin's CEO, Glenn Kelman!
Buying without an Agent: True or False?

Let's start off by looking at some common beliefs about buying without an agent. Are they True, False, or somewhere in between?

    You're not allowed to buy a home without an agent: False, obviously, or this would be a very short article.
    If you work without an agent, you can only buy for-sale-by-owner (FSBO) homes: False. You can make an offer on any home that you could if you were represented by an agent.
    If you buy without an agent, the seller's agent will just keep the extra commission: Tricky. If you're not careful, this can definitely happen. Many listing agents have contracts with their clients that have variable commissions; if the buyer doesn't have an agent, the listing agent automatically gets the "leftover" commission that would normally go to the buyer's agent.
    Even if you don't use an agent, you'll still need an attorney: True. You're dealing with multiple legal contracts and processes when you buy a home, and taking this on without a lawyer is very risky. A lawyer's services will generally cost far less than the commission collected by a buyer's agent. (Also, remember that in some states, a real estate attorney is required even when you have an agent.)
    Sellers won't take you seriously if you don't use an agent: Toss-up. Every seller is different. Some might be happy to work with you, and others may not be interested. If you've done your homework, can offer proof of finances, and have all your paperwork in order, you'll raise your chances of a good reception.
    You don't pay for your agent anyway; the seller does. Working without an agent won't save you any money: False. There's debate as to whose money pays the agents, but for most people, the important part is this: it's the seller who determines what percent of a commission is paid to their own agent and to the buyer's agent. If you can work with the seller to lower the price of the home in exchange for them having to pay nothing to a buyer's agent, then that's money you can save.
    You need an agent to be present for inspections and appraisals: True. Usually, a licensed agent is required to be present for inspections or appraisals, and usually this is the buyer's agent. You may be able to get the listing agent to agree to be there for these tasks, in the interest of closing the deal. Again, everyone is different; some listing agents will be happy to go the extra mile to close the deal, while others will insist on at least a partial cut of what would have been paid to your agent. Time to practice those negotiation skills.

Don't Let it Happen to You!

Before joining Redfin, CEO Glenn Kelman tried to save some money by buying a home without a buyer's agent. He figured he could just pocket the money that would normally go toward his agent's commission. It didn't quite work out that way:

Before Redfin, I hired an attorney to buy a home I had seen courtesy of the home-owner, only to have the listing agent insist that he represented me as well as the seller. He pocketed an extra $23,000 and sent me a dozen red roses when I moved in.

That's one expensive bouquet.

The lesson? Before you sign any deals, make sure you've signed an agreement with the listing agent that plainly states that she is not representing you. Be very clear about the commission -- usually the listing agent receives a percentage of the home's sale price, which she then splits with the buyer's agent. If there's no buyer's agent, the listing agent collects the extra. To keep this money in your pocket, you'll need those terms to be explicit in your contract with the seller.

Make sure all paperwork is reviewed by your attorney, and that your attorney understands exactly what you're trying to accomplish.

How to Buy without an Agent

So if you do want to buy without an agent, how do you do it? Where do you start?

    Search: Start as you would with any home purchase -- by searching for the right home. There are plenty of online resources. We offer free, complete listings for every city in which we operate. (We may ask you to register to see all the information, but this in no way obligates you to work with us.) For for-sale-by-owner homes, Craigslist is a great resource.
    Find an Attorney: Before you get too far down the road, find a good real estate attorney to work with. You'll need her as soon as you start dealing with paperwork. Get her services lined up ahead of time, so you can move quickly on the right home.
    View Homes: Once you find a home online, you should see it in person. You can attend an open house, or call the seller or listing agent to ask for a tour. You should be clear with the listing agent that you are buying a home without an agent. If the listing agent asks you to sign any forms, have them reviewed by your attorney first.
    Get Pre-Approved: Before you make your offer, get pre-approved for a loan. This will reassure the seller that you can back up your offer, and that you're a serious buyer.
    Make & Negotiate an Offer: If you find the right home, you'll want to make an offer. The listing agent may expect to collect the share of the commission that would normally go to your agent. Make sure your offer clearly spells out that you are offering less than the listing price with the expectation that the seller will not need to pay out the buyer's agent's share of the commission. This should be agreed to in writing and reviewed by your attorney. Also be sure that your offer includes all the contingencies that will protect your earnest money if the deal falls through.
    Deal with Inspections and Appraisals: After you make an offer, you'll need to deal with several tasks. Two of the most important are the home inspection and the appraisal. You'll need an agent present during both of these tasks; usually the buyer's agent handles this. Since you don't have a buyer's agent, you'll need to get the listing agent to pick up the extra work. Some may be happy to go the extra mile to close the deal, while others may demand compensation.
    Close the Deal: Closing the home purchase involves plenty of paperwork. This is where your attorney really earns that fee. Make sure she's reviewed all contracts & forms; you could need to sign well over one hundred documents. Once you're done, the ink dries, and the seller receives the purchase funds, the home is yours!

Note: The information on this page is not intended to be legal advice. Before making a home purchase without an agent, you should consult a licensed and qualified real estate attorney.