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What your Realtor Can't tell you

Fair-housing laws prevent agents from talking about neighborhood demographics, and they often don't want to discuss other details, such as crime stats. Luckily, the Web picks up where agents leave off.

By Amy Hoak, MarketWatch

Steve Roddel was walking through a house in Fort Wayne, Ind., when he wondered aloud whether there were any sex offenders living in the neighborhood.

Instead of commenting on her own, the real estate agent showing the home quickly pulled out her cell phone, connected to its Web browser and brought up Family Watchdog, a national sex-offender-registry Web site. Little did she know that she was standing with the site's founder and CEO.

A real estate agent can be a wealth of information about a house. So a homebuyer who asks what crime is like in the neighborhood might be surprised when the agent defers the question, directing a client to the Web or local police instead.

"The Realtor will be the one that has the most contact from beginning to end. Because of that accessibility, the consumer feels that they can give them all the information that they need," said Alex Chaparro, the president of the Chicago Association of Realtors.

But there are some pieces of information that an agent simply can't speak about due to fair-housing laws, including demographic statistics. And they often prefer to leave some characteristics, such as the quality of the school district or crime stats, answered by other sources.

The conservative approach is often taken in order to avoid a lawsuit popping up in response to frank neighborhood talk, said Ralph Holmen, an associate general counsel of the National Association of Realtors. Agents are forbidden from giving information that could be considered "steering," directing a client toward or away from a particular property in a discriminatory manner.

Some of this information will make or break a decision to buy. The quality of school systems, for example, has long been of importance to home-buying families. Fortunately, there are a variety of sources buyers can use to get at the information on their own.

Checking on the schools

Unless a realty agent has hard data at his or her fingertips, the agent may decline to answer school-district questions. Even if the agent is willing to share some information, a prospective buyer might want to do additional fact-finding before deciding on a home or which neighborhoods to consider.

A national database of school demographic information can be found on the National Center for Education Statistics Web site. Click on the "School, College, & Library Search" tab at the top in order to view data including a particular school's student-to-teacher ratio or enrollment by race and ethnicity.

For a snapshot of academic performance and to compare schools, a prospective homeowner might browse the School Matters Web site, a service of Standard & Poor's.

"People who are really attracted to (School Matters) are people who are moving," said Susan Shafer, the director of marketing and communications for Standard & Poor's School Evaluation Services. "It's a good starting point," she said, but it still isn't a substitute for an actual tour.

Another site, GreatSchools, offers similar tools. Some school districts and state departments also post information online. It might be worthwhile to look at an individual school district's site, especially for large systems.

Crime matters

Roddel's Family Watchdog Web site allows users to enter a street address and pull up a map of the area that plots out where sex offenders live. Click on one of the squares that indicate an offender's home, and often an address and a photo are available to view.

Information is updated at least once a day and is culled from state registries, Roddel said.

The idea for the site came about a year and a half ago, after 9-year-old Jessica Lunsford was assaulted and killed by a convicted sex offender in central Florida in 2005, he said.

"(Real estate agents) tell me that their buyers tell them where they do and don't want to look for houses based on the density of sex offenders (in the neighborhood)," Roddel said.

He hopes to create another tool that will help people learn about other neighborhood crimes. In Chicago, there already is such a site: ChicagoCrime.org, which allows visitors to search for crimes by city block.

For now, he suggests that people scout out the neighborhood the old-fashioned way. "Talk to the police department and see if they've got any statistics," Roddel said.

Judging the environment

Another issue that comes up occasionally in a housing search is the environmental characteristics of a neighborhood, said Holmen, of the National Association of Realtors. The association typically advises members not to make judgment calls on the health of an area and to leave that to experts.

The U.S. Environmental Protection Agency's Web site has a tool that allows visitors to search a community by ZIP code for environmental facts about the area, including pollution statistics, the location of hazardous-waste sites and information about the area's watershed.

Another site dedicated to helping the public retrieve information about local environmental health is Scorecard, which generates a pollution report card at the county level, giving information on such topics as air and water quality.

Learning the demographics

If agents don't shy away from any other question, they most likely will when it comes to those regarding demographics -- and for good reason. Fair-housing laws forbid issues of race or ethnicity to be a consideration in the minds of real estate agents, who mustn't steer a client toward or away from a particular area based on the neighborhood's makeup.

When Anne Kennedy, an agent in Austin, Texas, turns down a question about neighborhood demographics, clients "completely understand," she said. She suggests searching the U.S. Census Bureau's Web site for statistics about an area's demographics; the bureau' Quick Facts page breaks down the information easily, by city and county.

"That would also show general socio-economic data," she said.

Walking the neighborhood

Finally, even though there's a wealth of information online, there are some questions best answered by walking around the area and making a note of your observations.

For example, in Chicago, sometimes a client will ask what parking is like on a particular block, Chaparro said. If the showing is at 10 in the morning, when many cars are off the street because their owners are at work, he doesn't have an answer to give them.

Several trips past the home at various points of the day, noting whether there are special parking restrictions marked on the street, will probably provide a more informed answer.

Five Secrets to a Successful Purchase

By Bob Bruss

If your resolutions for 2006 include buying a house or condominium—whether it will be your first home or a move-up residence—today is a great time to plan for your purchase.

Home mortgage interest rates remain remarkably low and affordable. During this slowest time of the year for home sales in most communities, between Thanksgiving and New Year's Day, this is a great time to start your quest for the near-perfect place to live. Here are five secrets to make your purchase easy and profitable:

1. Before looking at homes, get a written mortgage pre-approval by an actual lender. Contrary to popular myth, the first step to buying a home is not to start inspecting residences that interest you. Instead, your first step to a successful home purchase should be to get pre-approved in writing by an actual mortgage lender. Then you will know the maximum mortgage you can obtain.

But don't be misled. Some mortgage brokers advertise "mortgage pre-qualification." That means absolutely nothing.

Worthless pre-qualification means only "based on your information, which we have not verified, it appears you can obtain a home mortgage."

Instead, smart home buyers get a written mortgage pre-approval letter or certificate from an actual mortgage lender, such as a bank or mortgage banker. Mortgage brokers can obtain these pre-approvals after taking your loan application and checking the details, such as verifying your employment and credit report.

With a lender's written mortgage pre-approval letter or certificate, you will be in a strong position to shop for a home and make a purchase offer, confident your mortgage lender has already approved your loan, contingent on a satisfactory appraisal of the home you decide to buy.

2. Take your time buying a home. A special advantage of buying a home during this slow time of the year for home sales, which extends even until Super Bowl Sunday in many towns, is there are usually few other home-buyer competitors.

Buying your home is a major decision so take your time. Don't be rushed.

A good place to start, as do 71 percent of today's home buyers according to a recent survey by the National Association of Realtors, is on the Internet. The most frequently visited Web site for home buyers is www.realtor.com. Savvy real estate agents also have their own Web sites that provide access to local MLS (Multiple Listing Service) listings

Home buyers who are in a hurry often make costly mistakes. The prime example is an out-of-town buyer whose job transfer requires a quick home purchase. These buyers frequently make hasty bad decisions.

Examples of expensive home purchase errors include buying a home in a poor-quality school district, failure to check the local crime rates, locating in a neighborhood with heavy traffic noise or other drawback such as an adjacent railroad, flood area location, inadequate nearby shopping, and long commute time to employment areas.

Equally important, home purchasers who think they have located the "perfect home" should always make purchase offers contingent on their approval of a professional home inspection report. Buyers should always accompany their inspectors to discuss any defects that the seller didn't reveal in his/her written defect disclose report.

3. Always work with a buyer's agent. Every home buyer needs his/her own buyer's agent to look out for the buyer's best interests. But finding a top-quality buyer's agent isn't easy.

Ask friends and business associates for their recommendations of buyer's agents. But beware of any buyer's agent who asks you to sign a buyer's agency contract over 30 days.

A better alternative is to sign a 30-day buyer's agency contract with an understanding you will extend it if the agent hasn't found you a home to buy within 30 days but is doing a good job. The result is you then won't be tied up with a lazy agent.

4. Inquire why the home seller is selling. Home buyers who don't want to overpay can't ask too many questions. A key question to ask your buyer's agent is "Why is the seller selling?"

Your buyer's agent might not know the answer, but he or she can easily find out by asking the listing agent. The answer is very important to you.

For example, if you learn the seller is retiring to another area, if the home is free and clear with no mortgage, that house or condo might be a perfect candidate for easy bargain-interest rate seller financing to provide retirement income for the seller.

Or, if you learn there is a pending foreclosure, you must be able to get the sale closed fast. But you might be able to get a bargain price to give the defaulting seller some equity cash from the sale

A related question to ask your buyer's agent is "How much did the seller pay for this home and when was it purchased?" If you learn the home was purchased many years ago at a price far less than today's market value, then you know the seller has lots of room to negotiate on the sales price and the terms. But a home purchased within the last year or two probably won't have as much negotiation room.

5. Ask your buyer's agent to prepare a comparative market analysis (CMA) before you make your purchase offer. No matter how anxious you might be to buy a specific home, before making a purchase offer insist your buyer's agent prepare a written CMA to help you arrive at a realistic purchase offer.

The CMA form shows recent sales prices of comparable nearby homes, the asking prices of similar neighborhood homes, and the asking prices of recently expired listings, which were comparable but didn't sell. Based on this information, you can then add or subtract value for the pros and cons of the properties to arrive at a reasonable market value purchase offer price.

You can be sure your buyer's agent will use the CMA to justify your purchase offer to the seller and the listing agent. Of course, you might not want to offer the full market value justified by the CMA, but that's up to you. Negotiation is half the fun of buying a home.

Even if you can't reach agreement on a sales price and terms, always keep the door open to future negotiations. Several times I've had my home purchase offers rejected, only to be later accepted several weeks later after the sellers realized my latest offer was pretty good after all.

Summary: This "slow time" of the year for home sales can be a great time to buy a home if you have a plan and know what you are doing. First, get pre-approval in writing by an actual mortgage lender. Next, be aware time is on your side during this "slow season" when there is little buyer competition in most communities.

Before making a purchase offer, always ask why the seller is selling and what the seller's purchase price was. This valuable information can greatly aid your negotiations

The help of a buyer's agent usually doesn't add to your home purchase cost but the agent's services can be invaluable, especially when it comes to preparing the buyer's CMA and negotiating the sale price and terms.

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Ten Tips for Home Buying
by David S. Jones

Buying a home can be complicated and frightening. You acquire a large debt and assume many new responsibilities. And in the back of your mind is that nagging question, "Did I get ripped off?"

The American Homeowners Foundation has prepared a list of ten tips designed to help you make the best home-buying decision possible.

1. Look at the purchase as an investment. Home equity is one of the primary ways Americans save. Tax incentives and the ability to tap into your home equity under certain circumstances make buying a home a prudent financial investment for most.

2. Avoid short-term loss. Most places have slow, steady home appreciation. In some places, average home prices have dropped over the short term in recent years. It is always possible that unforeseen conditions may force you to sell your home in a slow market. You can make the most of your investment by buying in a neighborhood where home values are expected to appreciate.

3. Use a buyer’s agent. A buyer’s agent represents the buyer and is paid by the buyer to represent their interests. In a traditional transaction, the real estate agent represents and is paid by the seller. In such cases, agents must disclose all relevant information to the seller but not to the buyer. If you’re not a skilled negotiator, a buyer’s agent is probably the smart choice.

4. Choose agent wisely. Look for an agent experienced in working with buyers, with knowledgeable of the neighborhood you are considering and without a reputation for being "pushy." Interview at least three agents, and ask for references. A good agent knows you need time to sort out the many factors involved in a purchase decision.

5. Watch interest rates. Experts recommend you buy and sell real estate when interest rates are low -- if you can. The lower the interest rates, the bigger the mortgage a buyer can afford. An asking price may sound too high, but at a lower interest rate, you might be able to qualify for a loan and afford the payments.

6. Carefully inspect the home. Learn as much as possible about evaluating the condition of a home. Avoid making an offer on a home with a major defect. Always have a professional inspection. If problems are uncovered, you may be able to use the estimate for repairs as leverage to get the owner to lower the asking price.

7. Research mortgage options. Sellers normally want buyers to apply for a mortgage quickly. Before you make an offer, get all of your paperwork together and research what kind of mortgage fits you best. Get rate quotes from at least three lenders. Consider getting a loan commitment in advance. If you are able to "lock in" an interest rate, remember that doesn’t last forever, so make certain you’re ready to make a decision.

8. Learn about the seller. There might be mutually beneficial opportunities. For example, a seller who is saving for retirement or a child’s education might be willing to finance all or part of the home purchase at a rate that is lower than you could obtain otherwise and more than they could earn elsewhere.

9. Learn to negotiate. Money is saved or lost in negotiation of just about every transaction. Even if you have a buyer’s agent, you’ll have to make decisions about how much to offer and how much to compromise on a counteroffer.

10. Study, study, study. These tips are only the beginning. You’ll need to know a lot more if you want to make wise decisions. Read articles on home buying, financing, negotiating, home inspection and real estate contracts. Thousands of free pages are available at the Real Estate Center at Texas A&M University. Just log onto http://recenter.tamu.edu. The American Homeowners Foundation can be reached at http://www.AmericanHomeowners.org.

Source: Real Estate Center at Texas A&M University