Welcome to the second post in a series of 7 posts covering the more important issues about buying a home in Northern Nevada.
Whether you’ve owned a Northern Nevada home before, or you are a first time Northern Nevada home buyer, having a Buyer’s Guide can be a very helpful tool before, during, and even after the homebuying process.
Since most people don’t buy and sell homes every month, let alone every year, we have put together a fantastic 36-page “Just For Buyers” Guide.
In this post, we’ll be covering “Real Estate Commissions Explained” and “Steps to Prepare for Home Ownership”.
Real Estate Commissions Explained
Northern Nevada real estate agents are paid on a commission basis. Most often, the listing agent and the buyerâ€™s agent are paid a commission by the Seller based on the selling price of the home. The amount of the commission varies depending on what the seller offers.
Every Northern Nevada real estate agent sets his or her own commission fees. In fact, it is illegal to discuss what rates are â€œtypicalâ€ in the market or for agents to discuss commissions rates amongst themselves. The industry considers this â€œmarket collusionâ€ and an agent can lose their license if they are caught discussing commission rates.
Sometimes, the public has a perception that Northern Nevada real estate agents make a lot of money for not very much effort. What they public doesnâ€™t realize is that real estate agents are not employees â€“ they are independent contractors. While each agent may be affiliated with a broker â€“ like RE/MAX or some other firm â€“ the agent is in business for themselves. They have expenses to cover that are quite expensive, such as annual dues to the national and local real estate boards, license renewal fees every two years â€“ for each state they are licensed in, quarterly fees to access the MLS (multiple listing service), quarterly expenses to have a lock box key, errors & omissions insurance (to protect the agent and clients from mistakes), and continuing education classes to continue to hold licenses. This typically costs several thousand dollars per year. This does not even include the marketing expenses associated with selling a listing, or the amount of time and expense to show a buyer properties. Plus â€“ agents must share each commission earned with their broker â€“ with the percentage of that commission split varying depending on the agreement the agent has with the broker.
The good news is, as a buyer, the cost for you to have an Northern Nevada agent representing your best interests is virtually free to you. Since the seller pays the buyerâ€™s agent a commission for finding the buyer, you get great expertise for free! What a deal!
7 Steps To Prepare For Home Ownership
- Decide how much home you can afford. Generally, you can afford a home equal in value to between two and three times your gross income (your salary or earnings before any deductions). In order to be certain, get pre-qualified with a Northern Nevada lender and discuss beforehand the type of mortgage to plan to use to purchase your home. That way you can develop a budget and help keep yourself on track financially and not be tempted to overspend.
- Develop a wish list of what youâ€™d like your Northern Nevada home to have. Then prioritize the features on your list. Keep in mind that features are â€˜essentialsâ€™ and bells & whistles are â€˜nice to have but not necessaryâ€™. We will refer to this list often while viewing homes to help make sure the home is right for you.
- Determine if you have enough saved to cover your down payment and closing costs. Closing costs, including taxes, attorneyâ€™s fees, and transfer taxes average between 2 and 7 percent of the home price.
- Get your credit in order. Obtain a copy of your credit report.
- Think like a Northern Nevada lender: Organize all the documentation a lender will need to pre-approve you for a loan.
- Do research to determine if you qualify for any special Northern Nevada mortgage or down payment assistance programs. One common program used in rural Northern Nevada is the USDA Rural Housing Development Loan Program.
- Find an experienced Northern Nevada REALTORÂ® who can help you through the process.
In the third post in this series, we’ll discuss your New Northern Nevada Home Wish List and Tips for Finding the Perfect Northern Nevada Neighborhood. If you’d like a FREE copy of our complete 36 page Northern Nevada “Just for Buyers Guide” just let us know. We’re happy to provide you with one to assist you on your road to home ownership.