The following audio is from an interview on The Money Show on Boston Herald Radio on June 4, 2015. Rich Rosa, co-founder and co-owner of Buyers Brokers Only, LLC, discussed a variety of home-buying topics, including using an exclusive buyer agent, how buyer agents get paid, the Greater Boston real estate market, what to consider when making an offer on a home, the importance of retaining an experienced real estate lawyer, why your buyer agent should be acting as a buffer between you and the listing agent and home buyers not getting overly emotional about homes, with The Money Show host Rick Shaffer. Listen to more real estate talk.
Recording: Because human genius has now destroyed the impediment of the terrestrial radio. This is Boston Herald Radio. It’s The Money Show with Rick Shaffer and Susan Kaplan.
Rick: Welcome back, hour number two of today’s version of The Best Money Show on radio or as John Sapochetti likes to call it The Real Money Show Hour. Joining me today as I’ve been promising you all week is Rich Rosa who is an attorney and one of the founders of Buyers Brokers Only LLC. He’s also a buyer’s broker at Buyers Brokers Only LLC. In the interest of full disclosure I should mention that Buyers Brokers Only LLC is an advertiser here on Boston Herald Radio. We’re very happy to have them as such. Rich, we’ll get into specifics about Buyers Brokers in a bit, but quickly give us an overview of your career and how you came to be, to find Buyers Brokers Only LLC.
Rich: Sure, as you said I am a lawyer. My undergraduate degree is from Northeastern University. I graduated from the School of Journalism in 1991. I graduated from law school in 1995, from New England School of Law. I’m admitted to practice law in the State of Massachusetts and the State of New Hampshire, and I practiced law for about 10 years mainly in trial work and I founded Buyers Brokers Only in 2005.
Rick: Did you do a lot of real estate trial work or did you just decide to make a total change?
Rich: It was a total change. I did do some real estate. I represented some buyers and sellers, never for banks, but I did do a little bit of real estate, but it was a pretty big change, yeah.
Rick: Explain what a buyer’s broker is because although … As I told you I used to not be a big fan of them, now I am a big fan of buyer’s broker, of hiring a buyer’s broker, especially exclusive buyer’s broker. A lot of people when they go to a sell a home they at least think about getting a broker, but a lot of people when they go to buy a home don’t think about getting a buyer’s broker. Explain what they are and we’ll go into this in greater detail later, but why it’s so important to have one.
Rich: Sure, the seller is going to have a listing agent, the seller’s broker. That listing agent is going to look out for the best interests of the seller. A buyer wants to have somebody in their corner, someone who’s got their back, someone who’s going to represent their best interests when it comes to buying the house, so it’s really important to have someone who’s going to do that for you.
Rick: Also, somebody who knows the process.
Rich: Certainly, knows the process, knows how to price houses. There’s lots of things to know that a buyer broker could help you with. The old saying is it’s not what you don’t know, it’s what you don’t know you don’t know. There’s a lot of that in buying real estate.
Rick: In the past a lot of people have been hesitant to hire buyer’s brokers because there was confusion as to how they got paid. How do buyer’s brokers or buyer’s agents who represent a buyer get paid and has it just become the way business is done or is there an actual law that says how they get paid?
Rich: What happens is if someone wants to sell their house they contact a listing agent. That listing agent and the seller agree on a commission. In Massachusetts it’s almost always four or five percent. When that house is listed for sale on the MLS there’s what’s called a cooperating commission. It’s usually half although it doesn’t have to be. Sometimes the commission might be five percent and the selling agent is only offering two percent, but in any event …
Rick: Only offering two percent to another broker?
Rich: Two percent to the buyer broker, correct. In any event, that is already predetermined as soon as the house goes on the market. Really negotiation of commissions isn’t something that has to take place when you use a buyer agent. I think a lot of people are concerned that maybe the commission’s being negotiated along with the price of the house and that’s almost never the case.
Rick: Now can a buyer’s agent legally charge the client a fee over and above the commission that they’re going to get?
Rich: Absolutely. In fact, some buyer agents will say that they’ll have their buyer sign a contract that says that they’re going to get two and a half percent, so if that house that that buyer purchases is only two percent that buyer agent is going to require that buyer to pay the half percent difference. Now that’s how some people do it. At our company we take whatever cooperating commission is offered. We never charge our clients any money.
Rick: I’m going to … This is not really a devil’s advocate. I agree with you 100%. If I were a buyer and went to a … Not Buyers Brokers Only, but went to a buyer broker and they said they wouldn’t take whatever they’re going to get and the buyer had to pay anything, I’d walk out the door and say goodbye. I don’t think that’s … That was my big problem with buyer’s brokers in the past, but I would take it 90 to 95% of buyer’s brokers and I’ll do it the way that you guys do.
Rich: Actually, I can’t say for sure, but I do know that certainly some people are doing it the way we do it, some people want that percentage. I’ve even heard of some people ask for a retainer upfront, so if the buyers didn’t buy a house they would get something. Like I said we don’t do any of that. We represent people and whatever we get as a cooperating commission that’s what we get.
Rick: Same as with the seller’s agent. If the seller puts it on the market and doesn’t sell and the contract runs out then that’s the way the business is.
Rick: There’s a difference between a designated buyer’s agent and an exclusive buyer agent. I know you guys are exclusive buyer agents. Explain what the difference is and why it’s so important and I agree with you on this, that if you’re going to get a buyer’s broker, which I think you should, you should get an exclusive buyer’s broker.
Rich: In Massachusetts there’s two types of buyer agents. Like you said there’s a designated buyer agent and an exclusive buyer agent. A designated buyer agent works at a real estate firm that also takes listings. For instance, that buyer agent could also have listings of his or her own or certainly there could be listings in the company that he or she works for. The issue with that is if you’re working with a designated buyer agent and you like a house that that agent is listing that agent is going to become a dual agent. They’re going to represent both you and the seller for the purchase of that house and obviously there’s inherent conflicts of interest that go along with that.
Further, even if the listing you like isn’t being listed by your particular designated buyer agent, someone in their firm, their brokerage may be listing that property. Again you have a conflict of interest. In some cases firms are providing additional compensation or bonuses of some sort to designate buyer agents who are selling properties that are being listed inhouse. There’s certainly some conflict of interest that goes along with that. With exclusive buyer agents like our firm we don’t list any property. I don’t allow my brokers to list any property, so there’s never an issue of us trying to get our clients to buy something that I’m listing or that someone in my firm is listing because we have no listings.
Rick: Do you know offhand and if you don’t that’s fine, but do you know offhand either nationally or at least in New England or Massachusetts what percentage of buyers now hire buyer’s agents?
Rich: I suspect that in Massachusetts it’s probably about 80%.
Rich: However, those are mostly designated buyer agents.
Rick: Oh, okay.
Rich: There’s probably less than 100 exclusive buyer agents in the whole state.
Rick: Do you see that growing because frankly I think that’s the way it should go.
Rich: Our company’s growing, but I agree with you, I think it is the way to go. Quite frankly, I’m surprised that someone hasn’t come along and done a seller only company and just represent sellers.
Rick: Everything’s getting more specialized these days, so I agree with you on that. Give us a couple of more reasons why people would want to get a buyer’s broker. For example, you’ve talked about … We’ve talked about when a buyer goes to an open house how a buyer’s broker can be of lots of help to them.
Rich: Sure, first and foremost, a buffer between the agent who’s at the open house who represents the seller and who has a fiduciary responsibility to the seller. What a lot of people don’t understand is when they go to these open houses on their own and they start engaging in what seems like innocent conversation with the agent who’s at the open house that agent represents the seller. When you start saying things like oh, my spouse’s job is relocating to Massachusetts and we really got to get into a house in the next 60 days you’re giving that agent information that they have an obligation to pass onto the seller, which is going to make your negotiations harder. There’s lots of ways for …
Rick: Just if you showed … If you were excited about it then the listing broker is going to know that and is going to tell the seller which will mean the seller might be more … wouldn’t be as flexible in negotiation.
Rich: Absolutely, and also a good buyer’s agent really knows about houses and so is going to be there with you, explaining to you the good, the bad, and the ugly as I like to say when it comes to houses. People walk into a house and they get caught up in what the kitchen looks like and what the bathroom looks like, but I like to spend time looking at the roof and looking at the heating system and does the place have gutters and how’s the chimney look and the siding and what about the windows and things like that.
Rick: Whereas you’re not going to tell somebody definitively don’t make an offer. You may say, well, you may want to consider these things, so someone may not make an offer where they would have. Basically, you’re saving them the hassle and the money of hiring an inspector and then having to back out of the deal because they didn’t spot things that were major red flags, but you did spot them.
Rich: Right, and like you said you want to take these things into consideration when you make an offer because people have this idea sometimes that after the home inspection they’re just going to give the seller a list of things that was wrong with the house. The seller’s either going to fix them or give them money and that’s typically not the case unless it …
Rick: It doesn’t work that way.
Rich: It doesn’t work that way and so you want to go into the making your offer having some good idea of what are some of the things that need to be changed. As a matter of fact, sometimes I do tell people don’t buy this house, sometimes it is that bad.
Rick: We have to take a break. When we come back we’re going to talk about Buyers Brokers Only specifically and some other information that you’ve prepared which is going to be very valuable to our listeners. You’re listening to the second hour of today’s version of The Best Money Show on radio, The Real Money Show hour right here on Boston Herald Radio.
Recording: You look at the bike lanes, criss-cross haphazardly through traffic in Kenmore Square and you’re rightfully bewildered and maybe a little upset. Stay calm, we’ll figure it out. We are The Boston Herald. Now The Money Show with Rick Shaffer and Susan Kaplan.
Rick: Welcome back to hour number two of the … Actually, we’re in the middle of hour number two of today’s version of The Best Money Show on radio. My guest today is Rich Rosa who is the founder and one of the brokers at Buyers Brokers Only LLC. Let’s talk about Buyers Brokers Only LLC in particular. When was it established and give us a little history of how it got established and then grew.
Rich: Sure, we started the company in 2005, myself and my business partner, Dave Kres. Dave was actually a law clerk of mine when he was in law school and when he graduated I suggested to him that he might want to get his real estate broker’s license and he did and he did quite well actually the first year. We started talking about starting a company to just represent homebuyers and so the way the conversation went is we just felt the industry was very seller-focused and we wanted to try to level the playing field for homebuyers and that’s how the idea was born. We started …
Rick: What year was that?
Rich: Two thousand and five.
Rick: Okay, so you’ve gone through the difficult times as well.
Rich: Yes, we started in November 2005, so shortly after we started the market started to disintegrate.
Rick: Yeah, right. That’s a good word for it.
Rich: Then about, I don’t know, maybe about six or seven years ago we brought on our first broker and as of right now we have about 24 of us altogether.
Rick: What geographic areas did you cover?
Rich: We cover the whole greater Boston area. As a matter of fact, this week we’re adding a broker who’s in Falmouth, so we’re going to cover the Upper Cape, all of the South Shore all the way out to Wister County and up to Southern New Hampshire.
Rick: You have some brokers who are licensed in New Hampshire as well?
Rich: Yes, three of them, yeah. One is in Port Smith. My business partner, Dave, is licensed there and another broker who’s in Dunstable who covers Nashua and that area.
Rick: From your answer I assume that … If somebody comes to your office to you, for example, but they want to buy in Southern New Hampshire you’re going to refer them to the broker who works that area and is most knowledgeable in that area?
Rich: Sure, and most people, that’s how it works. They contact the office and depending on where they tell us they’re looking for a home we put them in touch with that particular broker.
Rick: All of the brokers at Buyers Brokers LLC are attorneys which I think is a great idea, but how did you come up with that decision that only attorneys could work as brokers for Buyers Brokers Only LLC?
Rich: When we first started the company Dave and I were obviously both attorneys and so when we decided to start adding brokers to the company we thought that it would be a good idea to just keep it as attorneys only and try to keep a high level of professionalism and people that … Real estate’s an industry where it’s good to have someone who dots the i’s and crosses the t’s and that’s kind of what lawyers do.
Rick: Along those lines two questions. If you want to join Buyers Brokers you have to be an attorney? Do you a) have to be an attorney in Massachusetts, b) do you have to be an attorney who specialized in real estate or you just have to be an attorney?
Rich: You just have to be an attorney. All of our attorneys are either licensed in Massachusetts or New Hampshire, but technically you wouldn't have to be licensed in either one of those states as long as you were an attorney because we’re not practicing law.
Rick: Like yourself you don’t … The attorney doesn’t necessarily have to be specialized in real estate, they can be specialized in an area.
Rich: That’s correct and we give our new brokers training and that sort of thing.
Rick: We were talking earlier about the fact that you don’t charge any … You get paid out of the commission that the seller’s paying. You take it a step further, you actually offset the cost of the buyer’s hiring their own real estate attorney, is that correct?
Rich: That’s true. We provide a small rebate after closing. It’s based on the price of the house. It’s either 200, 350 or $500 and we do that because we think it is so important that buyers get an attorney to represent them and so that’s why we do that.
Rick: I couldn’t agree with you more and I’m not just saying that because you’re an advertiser, I’ve been saying that for the 25 years I’ve been doing The Money Show. To me buying a home is for 90% of people the biggest expense, the biggest purchase they’re going to make. To not have an attorney represent you when you’re going to be spending a quarter or a half, three-quarters of a million dollars, just it’s so pennywise and dollar foolish it makes no sense to me.
Rich: Going back to what we were just talking about. It’s always been a seller-focused industry and the documents that are used, what’s referred to as the standard Purchase and Sale Agreement is very slanted towards the seller, it’s slanted towards getting the deal done. A good real estate attorney is going to add an addendum to that or sometimes it’s called a rider to that document, that Purchase and Sale Agreement. Sometimes that’s a four or five-page addendum with 20, 25 additional paragraphs.
Rick: My addendum is often times longer than the boilerplate Purchase and Sale Agreement.
Rich: Absolutely, and it’s vital. You know there’s so many paragraphs that need to be altered to protect the buyer’s best interest.
Rick: It’s almost a joke at this point because a lot of attorneys will represent both buyers and sellers and when I deal … I usually represent buyers when I’m representing someone and I’ll call the seller’s attorney and they’ve already made changes to half of the paragraph because they … For example, if the buyer defaults then the only recourse the seller usually has is to retain the deposit. The document, the boilerplate you’re talking about doesn’t read that way, but every seller’s attorney in the world agrees to that.
It’s gotten to the point of being absurd, they should just change the document so that it’s for both buyers and sellers. There is another reason why someone really should have a buyer’s broker. In fact, I assume you not only refund money for people to get a good real estate attorney, but you also refer … If they want you refer people to good real estate attorneys, property inspectors, and the like.
Rich: We actually right at the beginning of the process … We actually give them a list of about seven or eight attorneys right from the beginning and say when you get to that point here are seven or eight attorneys that we recommend. They’re not requires to use those attorneys obviously, but typically people want recommendations, so we provide that. Same with home inspectors. In fact, what we do for our clients is when an offer is accepted we immediately send out an email and that email has a link in it to a webpage that we’ve created that has lots and lots and lots of information about home inspections, videos, links to different state sites to get different information about home inspections. At the bottom of that page we recommend about 8 or 10 different home inspectors.
Rick: You’re really not only representing the buyer, but you’re trying to educate them on the process?
Rich: Absolutely, absolutely.
Rick: Because the more knowledge they have the better they’re going to do and also they’re going to make better choices and feel more comfortable about it. Most buyers are very … Especially first time homebuyers are very nervous.
Rich: Yes, and that’s really what our … That’s really the client that we get anyway is the type of person who does a lot of research and wants to learn and that’s how they end up finding us to begin with.
Rick: Buyers Brokers Only has a free homes for sale email alert. Explain what that is.
Rich: Yeah, sure, anyone can come to our website and request a customized MLS account and that account gets the feed directly from the actual MLS in Massachusetts which is based out of Shrewsbury, so it’s updated every 24 hours and they’ll get an email every morning telling them not only new properties that come on the market that meet their specific search criteria, but also when prices drop on any market that meets their specific search criteria.
Rick: Now this is not only for clients, but for anybody? Is that correct?
Rich: This is for anybody who wants it. In fact, what’s important about this is there’s a lot of national websites out there that aren’t associated with any MLS that provide listings. The issue with some of these websites is they’re very good about putting houses on the market. They’re not really good about taking them off when they’re sold, so a lot of times if you’re looking at these national sites you’re getting information that’s outdated. For example, with the MLS in Massachusetts a house is either active or contingent or under agreement. When it goes under agreement it’s completely removed from the MLS, but when it’s contingent you can still see it, but it’s basically off the market.
Rick: It’s kind of a waste of your time.
Rich: It’s off the market. They’re probably not even going to show it at this point. These national websites have no mechanism by which to remove those contingent properties, so many times you’re looking at properties that already have accepted offers.
Rick: What a lot of people don’t realize is one of the difficulties of buying a home or selling a home, but certainly buying a home is the time. The buyer, even if they hire and again I think they should hire Buyers Broker, they’re going to have to spend a lot of time certainly going to look at properties. One of the things I’m assuming you can do is cut that time down by you go through the different documents and the different places online where you can figure out what’s on the market and what the buyers should go look at and what’s really going to be a waste of their time.
Rich: Sure, and every situation’s different and every buyer’s a little bit different. What I typically tell people is we could sit and talk for hours about what they want, but until I actually go see a couple of houses with them then I get a much better idea of what they’re really looking for and then I could really help them narrow it down. One thing I do tell people sometimes is if they can anyway they should try to narrow down to two or three cities or towns that they’re looking in because then they really get to know those areas well. When something hits the market they’ll know just like me that hey, this is something I really want to go see. If you’re looking in 10 or 12 places you never really get a good grasp of that particular market.
Rich: I would assume in some cases, too, you take a buyer to three or four places and you say no, this isn’t good enough, this isn’t good enough and you have to sit them down and say if you want what you consider good enough you’re going to have to spend more money.
Rich: Right, and …
Rick: Or consider a different geographic area.
Rich: Especially with first time homebuyers, they’re quite surprised what a small move in price range will do to change the house. For example, if you’re in a $350,000 price range let’s say, houses that are 375 are quite frankly going to be quite nicer than 350 or 340 and people are surprised by that. Certainly if you’re up around $800,000 then 30 or 40 or 50 grand doesn’t make that much difference, but when you get down below $400,000 for a house, $25,000 sometimes can make a big difference in what you’re going to get for a house.
Rick: We have to take another break. We’ll come back with our conversation with Rich Rosa. When we come back we’re going to talk about the market in general in the greater Boston area. Right here on The Best Money Show on radio on Boston Herald Radio.
Recording: At the BU Bridge a boat can sail under a train, driving under a car, driving under an airplane and, of course, you can get your Herald in print online, video, and radio stream and on air. Synergy, kind of. Now The Money Show with Rick Shaffer and Susan Kaplan.
Rick: Welcome back to The Money Show. My guest this hour is Rich Rosa who’s the founder and one of the agents at Buyers Brokers Only LLC. We’re going to talk a little bit about the real estate market and the one thing that most people realize is that demand is far outrunning supply, but a lot of people don’t realize how much that is. What’s the state of the real estate market today in the greater Boston area?
Rich: In Massachusetts as a whole, the latest statistics came out for the April market on May 27th and according to the Massachusetts Association of Realtors sales were down 5.9% and that’s attributed to the lack of inventory. Of course, since demand outstrips supply prices have gone up and they went up 2.3% in April and this is for single family houses. Inventory’s been dropping quite a bit. For single family houses it’s declined 39 straight months and for condos 54 straight months.
Rick: Because there’s such a high demand people are buying properties, but other properties aren’t coming on the market to take their place, correct?
Rich: Exactly, it’s a catch-22. There are some sellers out there that would like to sell their property, but they’re hearing about how tight inventory is and they’re afraid that their house is going to sell in a few days and they’re not going to be able to find something quick enough to move.
Rick: I would assume in this market you would advise people to buy a home first and then put your house on the market. Chances are you’re going to be able to sell it pretty quickly.
Rich: Or at least have it on the market because in this market very few sellers are going to accept an offer from someone who needs to sell a house and doesn’t even have it on the market.
Rick: Right, how much has inventory actually declined?
Rich: What I did was I put together some statistics for you for today and what I did was I compared today’s inventory to four years ago, so on June 4th, 2011, let’s just take condominiums in Summerville. There were 148 listings on June 4th, 2011. There are only 29 today. In Jamaica Plain it was 147 condos, only 41 today and in Arlington there was 73 four years ago today and only 15 today. Single family is not much different. In Hanover which is on the South Shore 78 listings is down to 40, Acton 105 down to 49 and in Melrose there were 84 four years ago and only 32 today.
Rick: Two questions and I don’t know if you know the answer to the first. Is this demand far outreaching the supply a greater Boston or Massachusetts phenomena or have you looked to see if that’s the phenomena across the country or in lots of other markets around the country?
Rich: I’m hearing in certain states it is. For example, from what I’ve read it doesn’t appear that Connecticut’s real estate market is nearly as hot as Massachusetts, but I have heard that in places like … some places in California and in certain places in Texas, Southern Florida, South Florida it’s the same situation.
Rick: My feeling is … People keep saying the real estate market’s coming back and it’s very healthy. I don’t think that this is the sign of a healthy market. It’s a hotter market, but to me unless the demand and supply are relatively in sync, they’re never always equal, but when they’re relatively in sync that’s when you have the best real estate market. When prices are where they should be and properties are selling relatively quickly, but not the day after they go on the market.
Rich: That was 2012. In my opinion the bottom of the market was probably the second half of 2011 and what you just described was exactly what 2012 was like. Prices went up very, very little, but there was plenty of houses on the market, plenty of buyers and it wasn’t until 2013 we started getting into this shortage of inventory. The industry feels that about six months of inventory is the balance. In 2009, 2010 there was cities and towns that had 9, 10, 11 months of inventory, so clearly it was a buyer’s market. There are some neighborhoods in Boston now where there is less than one month of inventory, so it’s clear …
Rick: It’s definitely a seller’s market.
Rich: It is clearly a seller’s market.
Rick: Give us some of the problems or situations that’s come out of this low inventory. I assume bidding wars are one of them.
Rich: Bidding wars are quite common. I would say in the last 2.5 years or so 70% of the offers that I make are multiple offer situations. There’s a lot of advice you have to give homebuyers when they’re in that situation. No one wants to be in a bidding war. Obviously, if there’s more than one offer chances are that someone’s going to pay more than they would have paid if they were the only one making the offer.
What’s important for people to know is that when you are in those situations very often you’re only going to get one shot. There’s not going to be a negotiation. Many times what’s happening today, if a listing agent knows that they have a listing in a hot neighborhood and they’re going to get a lot of activity they might put the house on the market on a Thursday, have open houses on Saturday and Sunday and tell everyone they’re going to review offers at 5:00 on Monday.
Rick: On the other hand doesn’t it create situations where buyers, especially if they’ve been looking for a while, start getting … They start making offers on houses they really shouldn’t be because they’re getting nervous.
Rich: I couldn’t agree more. I think that they get caught up in the emotion of it. They’ve been outbid several times. They feel they just have to go way over asking and maybe sometimes it’s justified, but what I always tell my clients is if you like the house let’s do a comparative market analysis, let’s do some research, let’s see what it’s worth and then make an offer based on that. I think what’s happening and this is not something that a lot of people are talking about. I see it more and more is a lot of these houses are coming on the market, they’re getting multiple offers, they’re selling right away and then low and behold a couple of weeks later they’re back on the market.
The listing agents will say things like the home inspection went well, but the buyers were making unreasonable demands or something like that. What I think is really happening is they jumped into this too quickly. They made an offer well over asking price and after stepping back and looking at what they did they realized they overpaid and I think they’re using the home inspection as an excuse to get out. That’s why it’s important to have a buyer’s agent who’s going to really say to you, okay, let’s think rationally about this and what this house is really worth.
Rick: Or if the buyer … You’ve obviously talked to the buyers about what they can afford and the buyer says … They say I’ll make an offer of 30, $40,000 more than I had set my limit at and you have to bring them back down to earth and say can you really afford that? Can you afford the extra down payment, can you afford the extra amount that you’re going to have to pay per month and so on and so forth.
Rich: Is the house going to appraise for that.
Rich: Because depending on how much of a down payment they’re putting, if the house doesn’t appraise that might be the end of the loan.
Rich: The less you’re putting down the more likely the appraisal’s going to have an impact and I’ll give you an interesting situation, a situation where I had a feeling the buyers who got the house were going to back out. I had a client who is looking to relocate from out of state. This particular client liked the house that was on the North Shore and this client had cash to pay for the house. We got to the house and as soon as we got there I get a text message from the listing agent, it’s been sold. The house needed quite a bit of work, but my client was not worried about that. My client was prepared to do that work.
I’m not a big fan of backup offers, but I told my client, I said this house needs a lot of work and it’s not really priced all that competitively. I think we should make the cash backup offer at a price that you think is reasonable based on the work you’re going to have to do because I got a feeling this is going to come back on the market. Low and behold I got an email just two days ago, 11 days after we made the backup offer, those buyers did back out and my client got the property.
Rick: We’ve got about four minutes before I take another break, but I know you wanted to touch on this. Give some tips to people, homebuyers who want to purchase new construction. I’m not talking about people who are going to buy the land and construct themselves because I frankly think people are crazy to do that, but there are tips for people who are going to buy a property that’s being built by a contractor now.
Rich: Absolutely, when you negotiate new construction it’s a little bit different from negotiating an existing home. If a developer is building an 8, 10, 12 house subdivision somewhere they’re going to be less likely to negotiate on price especially if there’s a number of houses left to be sold because once they negotiate down with you that’s going to be the ceiling for the next buyer that comes along. You really want to negotiate on upgrades with developers on new construction because they can give you these upgrades and no one has to know about it. They can tell the next buyer I got full price for the house. They’re not necessarily going to know that the developer gave you more hardwood floor or upgraded appliances or a larger lighting allowance, but the important thing …
Rick: Plus if you make the … Excuse me, but if you make the upgrades after you’ve agreed on a price any change orders usually cost you a lot more.
Rich: Absolutely, absolutely. What’s important and this is the mistake I think a lot of people make with new construction is they go in, they go see a place, they talk to the builder. They say they’d like this, this, this, and this and the builder says yes, I’ll do all of that, but they’ve never found out from the builder what his intentions were to begin with. He’s giving you upgraded appliances, he’s giving you a larger lighting allowance, but now what he’s doing is he’s giving you a lower grade window, maybe the 96% efficient heating system’s now becoming a 90% efficient. It’s really important that you know the very specifics of what that builder’s going to do prior to your negotiations.
Another thing that’s important is what builders tend to skip. People get caught up in what the countertop’s going to be like, what are the cabinets going to be like. Builders are famous for leaving off gutters. They’re not even that expensive, but I just had a client buy new construction and I made sure I put gutters in the offer and the builder agreed to do it. When we were at the final walkthrough the other day we were looking around the neighborhood and there was only about … A subdivision that had about 40 houses only about maybe a quarter of them had gutters.
Rick: Very quickly, explain the importance of having two inspections basically on new construction.
Rich: Sure, if you’re buying new construction and they’re at the very early stages let’s say pouring the foundation.
Rick: The foundation.
Rich: You might want to have the home inspector inspect it when the studs are up and then inspect it again when it’s done because that’s the chance for the home inspectors to see behind the walls, something they could never do within an existing house.
Rick: You always have to do a walkthrough because contractors never finish everything by … There’s always going to be a punch list.
Rich: There’s always a punch list.
Rick: Which if people [inaudible 00:36:00] in real estate it’s a list of things that you agree and often times the buyer can hold back money in escrow that the seller, contractor, doesn’t get paid until they’ve finished everything that they haven’t done. Especially if they’re doing 20 houses they’ll leave stuff in your house that you want done.
Rich: What I tend to do with clients in new construction is not only have the home inspection and the final walkthrough, but I like to do a preliminary final walkthrough about a week before the closing to go through that punch list. Hopefully, to get it done for the closing.
Rich: Right, exactly.
Rich: Because you know how it gets at the closing table. The builder doesn’t want money held back, the buyer wants money held back.
Rich: If you can try to get that stuff done then you save everybody the headache.
Rick: We have to take a break. We’ll come back and finish up with our guest, Rich Rosa, from Buyers Brokers Only LLC right here on The Best Money Show on radio on Boston Herald Radio.
Recording: Now The Money Show with Rick Shaffer and Susan Kaplan.
Rick: Welcome back. My guest this hour is Rich Rosa who is founder and one of the agents at Buyers Brokers Only LLC. What type of feedback have you guys gotten from places like Angie’s List and the like?
Rich: We have more than 85 five star reviews on Yelp and on Angie’s List we’ve earned the Super Service Award 2010, ’12, ’13, and ’14.
Rick: You guys are doing well. The thing that’s most impressive to me is that you started the business just before the market fell off a cliff and you’ve not only survived that, but expanded from two brokers to … How many brokers do you have now?
Rich: Soon we’ll have 26.
Rick: Which is if you can do it through the hard times and this is a hard time now, too, because you get buyers, but finding them a property to buy is not easy because the supply is so low. How long in the contract … If someone signs a contract with Buyers Brokers Only LLC how long is the contract for?
Rich: In fact, we don’t require a contract.
Rick: They can walk any time they want.
Rich: Our philosophy has always been that those contracts are there basically to lock people into work with someone for a certain amount of time. Our feeling is is that we give every client 110%, but if they don’t feel it’s a good fit they should be free to go and they shouldn’t have to feel they owe us anything after the fact.
Rick: They don’t have to sign a contract for your loyalty. You basically earn their loyalty?
Rich: Absolutely. There are a few things that have to be signed, the state requires a disclosure form to be signed telling the consumer what kind of real estate agent you are. Then we have an internal disclosure that simply says hey, we’re all attorneys, but we’re not giving you legal advice.
Rick: In the past some seller’s brokers have been hesitant to deal with buyer’s brokers for any number of reasons. Do you find that at all anymore?
Rich: Not at all, not at all. The reason is is because so many of the firms have listing agents who are also designated by our agents and they’re all working together, so it’s become the norm.
Rick: Explain again or bring home the reason why if somebody’s going to hire a buyer’s broker they really should get an exclusive buyer’s broker.
Rich: To put it simply it’s all about 100% loyalty. As exclusive buyer’s agents we’re 100% loyal 100% of the time. We’re never dual agents, we’re never designated agents, we’re never going to put you in a situation where you want to buy a house that either I’m listing or someone in my firm is listing because we don’t list property for sale, so we avoid those conflicts of interest.
Rick: Give us some of the questions that buyers should be asking and that they can depend on a good buyer agent to remind them to ask. Things like days that the property’s been on the market and loan commitment dates and things like that.
Rich: Sure, there’s a number of questions that I ask for clients especially when they’re interested in a property, you ask certain types of questions. If you’re looking at a single family home you ask different questions, if you’re looking at a condominium. Typically, with any home I’m asking the listing agent first do they have a seller’s disclosure. In Massachusetts it’s not required that a seller fill out a disclosure form about the property, so I always ask if there’s one. If it’s not readily available I’m always asking what’s the age of the roof, what’s the age of the heating system, if things were upgraded or remodeled. I ask when it was done, were there permits pulled, things like that.
Rick: Talk about the importance and … Actually, talk about the assessed value versus the appraised value of a property because a lot of people get confused about that. Some people make an offer based on what the town assesses it at which is a big mistake.
Rich: It is. The assessed value has really zero relationship to the market value. Sometimes the assessed value is over what a property’s listed for, sometimes it’s under. What people need to understand is the assessed value is the price that the city or town is using to tax that piece of property. It’s funny because real estate agents really do know that there’s no correlation between market value and assessed value. Very often listing agents will put a house on the market and if for some reason the assessed value is over their listing price they’ll be touting it as oh, price below the assessed value. They know that there’s really no correlation.
Rick: In 200 … Actually, I say 200 words, but in as many words as you want, but we have about five minutes. I wanted you to get in your phone number and everything. Tell people why if they’re hiring a buyer’s agent if they’re buying a home which I totally agree they should and they should hire an exclusive buyer agent, why they should go to Buyers Brokers Only LLC.
Rich: We have a philosophy at the company and I tell all the brokers that start with me, the way to succeed is to do what’s in the best interest of your client every time even if it means more work and less money. It pays off. That’s how we’ve grown the business, that’s how we’ve gotten more five star reviews on Yelp than any other real estate company in the state. It’s why we’ve won the Angie’s List Super Service Award four times. It’s why our past clients come back to us, it’s why they refer their friends and family. We just do what’s right. We treat everyone the same whether they’re buying an $800,000 house or an $80,000 one bedroom condo. It’s just really doing what’s best for our clients. It’s how we operate.
Rick: Where do you find $80,000 one bedroom condos?
Rich: Not near Boston.
Rick: Right, that’s what I meant.
Rich: I have found people condos under $100,000. Not any time recently, but back when the market was disintegrating as we described earlier.
Rick: Right, you have to go pretty far outside of Boston to find one.
Rich: You sure do, yeah.
Rick: Certainly, especially if you want a place that’s over let’s say 200 square feet.
Rick: Give people your phone number and your website and how best to get in contact with you guys.
Rich: Sure, they can call 978-835-5906, 978-835-5906. Our website is BuyersBrokersOnly.com. On the website they could click on our brokers right at the top of the page and they can see all the brokers that we have, the locations that they cover. They could get their email addresses, their phone numbers. Again that’s BuyersBrokersOnly.com. They could also find us on Facebook, they could follow me on Twitter @RichRosa and yeah, that’s how they could find us.
Rick: Give us the phone number again.
Rick: I’m going to quickly remind everybody that the wise consumers, the informed consumers, so before buying, selling, renting, refinancing, or signing any real estate related agreement or before making any major money decision whatsoever it’s always best to speak with and take the advice of a qualified attorney, accountant and/or you can find a good one or a great one [inaudible 00:44:39] my co-host Susan Kaplan, a financial planner. I don’t have time to give you all the information, but if you don’t follow Susan and I on Twitter you should. My Twitter address is @RShaffer1, S-h-a-f-f-e-r and Susan’s is @SKaplan, K-a-p-l-a-n111 and give your Twitter address again.
Rich: It’s @RichRosa, R-o-s-a.
Rick: I want to thank Christian Burgoyne for doing a great job and John Sapochetti in the sports and money hour of The Money Show. Before we end for the day give us all the contact information one more time.
Rich: Sure, phone number for Buyers Brokers Only LLC is 978-835-5906.
Rick: One more time.
Rich: 978-835-5906 and our website is BuyersBrokersOnly.com.
Rick: Okay, that’s BuyersBrokersOnly.com. Rich Rosa, a pleasure to speak with you. As always you’re a wealth of information. We love having you here …
Rich: Thank you.
Rick: … as an advertiser because I get to talk to you about real estate and you just are a wealth of information on that. You’ll be back again. I’ll be back tomorrow at 4:00 with John Sapochetti. Again our thanks to Christian Burgoyne. For John Sapochetti, myself Rick Shaffer, Rich Rosa and Christian Bregoin you’ve been listening to The Best Money Show on radio, on Boston Herald radio. The Money Show is sponsored in part by Buyers Brokers Only LLC, Dream Smile Dental and Poli Mortgage.
Recording: Because human genius has now destroyed the impediment of the terrestrial radio.