What homebuyers should know about shopping online
Today's homebuyer has online access to much more real estate information than in the past. Websites such as Craigslist and eBay have democratized the buying process, according to Tupper Briggs, a broker who heads the Re/Max office in Evergreen, Colo.
"People can investigate the market on their own further than they could before -- certainly further than in the old days, when Realtors had the MLS books and someone had to contact a Realtor to see what was inside those books," Briggs says.
Whether a homebuyer works with an agent or not, here are four things buyers should know about shopping for a home online.
Save on the commission -- maybe
Far and away, one of the biggest draws of an online search is to avoid a real estate commission, says Hunter Phoenix, a Los Angeles life coach and actress who bought her last home three years ago on Craigslist without using a real estate agent.
Phoenix says she saved about 2 percent to 3 percent of the purchase price by working without an agent. (Who pays the broker and how much varies by transaction and location.) Phoenix had to do it all herself, including negotiating over price. Researching other properties online helped her understand the market, but that route may not be for everyone, Briggs says.
"For most folks, it's still one of the largest transactions they'll ever make, and I suspect they're reluctant to go it alone," Briggs says. "(Most) people need someone to actually show them property, pose any questions that they may have for the sellers, write up an offer, and see the transaction through to closing."
Find creative terms
For homebuyers seeking creative terms, online is the place to look, says Rich Urban, a real estate investor in Miami Beach, Fla., and founder of SouthFloridaInvestors.com. Creative terms can run the gamut and include cash discounts, owner financing or taking over an existing mortgage. Those options are available with any seller who is flexible, but you're more likely to find adaptable sellers online, says Urban, who adds that Craigslist is the best place to find those kinds of deals.
Other sites, such as eBay, can work, too. But the inventory is usually better on Craigslist, Urban says. Specialized real estate listings websites have a lot of properties to choose from, but they tend to be dominated by brokers who might be reluctant about creative terms.
Watch the price
Online searches can affect how the buyer understands prices. Websites that aggregate local listings can provide buyers with a lot of data, but that's just a starting point, according to Urban.
Listing prices can be just plain unrealistic, Urban says: "Buyers are going to encounter a good percentage of sellers who aren't working with an agent because their price was originally too high."
But sometimes online markets help stubborn sellers see the light on price. For a buyer, that's a real opportunity, Urban says, because the longer a property remains listed at a high price, the more likely the seller is to make a downward adjustment. Most online marketplaces let you track a property and get alerts when there's a price drop.
While some of the best real estate deals can be found online, it's important for buyers to know who they're dealing with, says Ben Yonge, a real estate broker and president of Equity First Realty in Orlando, Fla.
"Buyers need to verify that the seller is who they say they are in order to avoid scams," Yonge says. "Buyers should submit all escrow money deposits to licensed title companies and not directly to the seller."
Even when dealing with a legitimate seller, proceed with caution.
"You are talking about signing a legal document that could put you on the hook for hundreds of thousands to millions of dollars," says Adam Stone, a New York real estate lawyer with Regosin, Edwards, Stone & Feder. "It certainly makes sense to pay an attorney a few thousand dollars to review the contract, explain the terms, and negotiate any changes that could protect the client and minimize the risks involved."
Lawyers often handle real estate transactions for a flat fee or hourly rate that's less than a broker's commission. But Stone cautions, a "lawyer provides legal advice," whereas brokers have sales expertise. "Hiring one doesn't necessarily exclude the need for the other."