DROdio Real Estate

This may be the most important FAQ among all our advice. We're going to explain why it's an absolutely terrible, terrible idea to walk into a purchase transaction without having a buyer's agent. You might think that we're just going to fluff you with "marketing speak" but the truth is that walking into home purchase transaction without someone representing you is like walking into a lion's den and not knowing it. Here's why:

The first MAJOR misconception that you need to understand is that 99% of the time, the seller pays the SAME fee to his listing agent regardless of whether you walk in by yourself or with a Realtor. Most people think they can get a better price if they walk in without a Realtor (this applies to new construction and resale home purchases). That is flat-out wrong. Let us repeat this for you: The seller pays the SAME fee to his listing agent regardless of whether you walk in by yourself or with a Realtor (like us) representing you. Don't believe us? Take a look at this page from the standard DC/MD listing agreement (the VA one is almost identical) which states that the seller pays the listing a fee (in this case 6%; very standard) and if the buyer has an agent, the listing agent has to give up 3% of that fee: DROdio - Listing Agreement Payment Page

The big difference is that when you walk into the transaction by yourself, the "helpful" listing agent makes double the commission, because he keeps all of it - usually 6%. So the listing agent will be very happy to help you if you walk in without a Realtor. The only catch is this: The listing agent is there to represent the seller's interests, not yours. As helpful as that listing agent might seem, it's their job to represent the seller. (More on "dual agency & why we hate it below).

So in short, the seller pays our commission, but it's really paid to the listing agent (usually 6%) who then pays it to us if we're involved in the transaction. Again, if you walk in with no agent, the listing agent keeps the entire fee. If you walk in with us, the listing agent splits that fee with us. There is no cost to you, and the seller pays the same fee regardless of whether you walk in by yourself or with us as your agent.

To give you an example, let's say that "Angie" is selling a house, and "Bob" is her Realtor, and "Charlie" is a home buyer. So, Charlie is trying to decide if he should buy a house with or without a Realtor, and Charlie thinks that if he buys a house without a Realtor, he'll be able to get a better deal. But here's what Charlie isn't considering:

It makes no difference to Angie, the seller, if Charlie, the buyer has a Realtor or not, because Angie has to pay Bob the same fee (6%) either way. But it makes a *big* difference to Bob, the Realtor, because Bob stands to make twice as much commission if Charlie buys a home without a Realtor. So, Bob is going to be *very* friendly to Charlie knowing that he will keep the entire commission. He'll offer to show Charlie the house, and he'll offer to help Charlie write the contract up, etc. In fact, he'll be so friendly to Charlie that Charlie might even start thinking that Bob is there to help Charlie. But in fact, Bob's obligation is to his seller, Angie. Bob does not have Charlie's best interests at heart, and in fact, Bob would have a conflict of interst if he tried to represent Charlie (side note - interestingly enough, it's actually not illegal for Bob to be what's known as a "Dual agent", meaning he represents both sides of the transaction. In our firm, we don't allow dual agency because we don't think Bob can truly & accurately represent both sides of the deal).

What Charlie should really be doing is bringing a buyer's agent to the table. By having someone to represent him, Charlie can get unbiased advice that's tailored to Charlie's situation. But oftentimes this doesn't happen, and much of the reason is that buyers like Charlie are lulled into thinking that listing agents like Bob can do a good job representing them. This happens a LOT with new construction properties, where you as a buyer think the sales agent can or will give you advice to fit your situation. But when the agent tells you to buy a certain lot, or get certain upgrades, that agent is more concerned about maximizing his or her commission than serving your needs.

See why so many buyers have bad experiences with Realtors? There is a LOT of room for conflicts of interest and it takes a very careful approach (both as a buyer and a real estate company) not to get yourself into situations where you have conflicts.

A Sample Transaction: Amy wants to sell her home. She hires Bob, a Realtor, to list it. Bob lists her home for $500,000, and in the listing agreement Amy agrees to pay Bob a 6% listing fee. The agreement also states that Bob will give 1/2 of his commission to a Buyer’s Agent (if there is one). Otherwise, Bob gets to keep all 6%— a whopping $30,000.

Scenario One: You buy Amy’s house without a Realtor. Amy pays 6% to Bob, and he keeps all of it. You pay $500,000 for the house and don’t even realize you’ve made Bob a very happy man.

Scenario Two: You buy Amy’s house and use DROdio Real Estate, Inc. to represent you. Amy still pays the same 6% to Bob, but now Bob splits half of it with DROdio Real Estate, Inc. Furthermore, DROdio Realty represents your interests and is able to negotiate a better price for the home, saving you $10,000. You end up paying less for the house and benefit from professional representation.

So please don't make the mistake of walking into a home purchase without a Realtor, thinking you can save money, because the entire system is set up such that you're just making the listing agent a lot of money (and very happy), and the seller still has to pay the entire fee. You end up losing out because you don't have a professional to help you, but the seller does. And if you don't think having a professional representing you is important, you should read this back & forth on a home inspection contingency to see how we saved a buyer from having to accept a house in "as is" condition and got them an extra $3,000 credit in the process.

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The answer to that is a little more involved than on might think. The short answer is close towards the end of the month but not during the very last couple of days and avoid Monday and Friday settlements. The long answer is as follows:

As you might already know, mortgage is paid in arrears, meaning unlike rent, you pay your first mortgage payment after you've lived in your home for that month. The reason why this point is significant to the settlement question is because lenders like to start off the billing with your set monthly payments. So they collect the pro-rated interest from the day you closes to the end of the month so if you close on Aug 20, they'll collect interest from you (at settlement) for Aug 20 - Aug 31. Then you will make your first mortgage payment in Oct 1st. However, if you close before the 5th of the month, some lenders will CREDIT you the money back to the beginning of the month and start collecting regular mortgage payments from you starting the following month. So if you close on Aug 3, you will get a credit from the lender for Aug 1 - Aug 2 and then you will start your regular mortgage payment starting Sept 1. This is true for most, but not all lenders. So, depending on what day you close, the funds you will need to bring to settlement will change.

We like to advise our clients to avoid Monday and Friday settlements. Mondays are not the best days because the previous two days were not working business days for the banks so the chances of incomplete files are greater on Mondays. Friday are generally much busier for settlement companies and if an issue were to arise, you will have to wait 3 days for it to be resolved on Monday.

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Our firm leverages technology in a number of different ways to help our clients.One example is our free GPS loaner which allows you to take your time in your home search, and search at your speed instead of ours. Using the GPS loaner is especially handy in conjunction with our MLS search sites, such as www.TheBestHomeSearchEver.com and www.BirdsEyeSearch.com which give you addresses. You can also use our "most efficient route" tool to calculate the fastest route to visit all the properties, at www.DROdio.com/route.

Another example is our electronic signature form, which allows us to stamp your signatures (with your permission) and keeps you from having to continuously run to a fax machine.In a final example, one of our agents was with a client who had to put a loan application in and was pressed for time. The agent fired up his laptop with a wireless connection and had the client do it in the car! Here's a photo: 

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Hazard insurance (often referred to as homeowner's insurance) is the insurance that covers your house in the event of damage. The lender almost always requires you to buy this insurance as a condition of getting the loan.

Any major insurance provider can offer hazard insurance. You can also contact your auto insurance company, as it's likely they offer hazard insurance and give you a discount for having both.

We also have several insurance agents we trust, and we'll be happy to make a recommendation.

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