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If you're moving to a new place or buying it out, what personal financial details are you allowed to reveal and what facts are you to hold back? Let’s find out. Image Credit: Shutterstock

When house hunting, you may have found a house you liked but you may also have been bombarded by the real estate agent walking you through the details of a prospective house. What personal financial details are you allowed to reveal and what facts should you hold back? Let’s find out.

“The first thing to keep in mind is that most real estate brokers are essentially a seller's agent, not the buyer’s. This individual is paid to represent the best interests of the people selling the home — not yours,” said Andrew Bailey, a real estate and mortgage consultant currently working out of Abu Dhabi.

What is the difference between a seller and buyer’s agent?
In short, the key difference between a buyer's and a seller's agent is who they represent. A buyers' agent works exclusively for the buyer to help them buy a property with the least stress, whereas the selling agent works for the vendor to help them sell their property for the best price.

“If you say too much, you run the risk of inadvertently providing them with information that can be used against you if you make an offer and eventually enter negotiations to buy their client's home.” So what shouldn’t you say to a seller's agent? Here are three conversation topics to avoid when house hunting.

1. How much you're willing to spend

“You likely have an upper limit for how much you can afford to spend on a home. Keep that limit to yourself,” added Bailey. “Absolutely never share it with a seller's agent.”

Let’s say you can afford to spend up to Dh300,000 on a home. Don't reveal personal details to the agent that you're excited the house is listing for Dh290,000 because it's Dh10,000 under your budget.

You likely have an upper limit for how much you can afford to spend on a home. Keep that limit to yourself

- Andrew Bailey

“If the sellers know that you can afford to spend more, they may not be as willing to lower their asking price during negotiations. Share your budget with the agent representing you — your buyer's agent. But make sure it's a secret that the seller's agent never learns,” explained Bailey.

While your agent need not know the particulars of your finances, he or she should know, for example, that you are looking for a Dh300,000 home and can afford a loan between Dh240,000 and Dh260,000 at today’s interest rates.

That level of detail lets the agent know that you are looking at homes in that price range. Your agent can also tell the listing agent that you have talked with a lender and have been prequalified for a home in that price range.

“The only money-related detail worth disclosing is your affordability, both when it comes to the house and the loan amount. But this won’t mean that you’ll pay a specific amount; you’ll still pay what you want to pay, and the seller will still want to get as much from you as possible,” said Bailey.

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You want sellers to view you as a serious buyer.

2. Any financial problems you're having

You want sellers to view you as a serious buyer. If you share financial struggles with the seller's agent — a past bankruptcy, a low credit score, mounds of credit card debt — you might do the opposite.

“If the home's sellers think you have financial problems that might prevent you from qualifying for a mortgage (assuming you haven't prequalified), they'll be less willing to enter into serious negotiations with you,” said Pankaj Bhatia, vice president of a Dubai-based real estate research firm.

“If you've had financial hiccups in the past, keep them to yourself. You don't want sellers to think they'll be wasting their time by accepting an offer from you.”

Revealing a high debt-to-income ratio is another key problem when you're buying a home. As the name suggests, this ratio compares your monthly debt obligations with your gross monthly income.

“If your debt-to-income ratio is too high, you'll struggle to qualify for a mortgage. Lenders will worry that adding a mortgage payment to your already high debt obligations will boost the chances that you'll fall behind on your home-loan payments,” added Bhatia.

If you've had financial hiccups in the past, keep them to yourself

- Pankaj Bhatia

3. How soon you need to move

Never let a seller's agent know that you're getting desperate to find a home. This, too, can give an agent inside information that could be used against you.

“If you tell an agent that you absolutely need to move in the next month, that agent might tell his or her clients that they should hold out for a higher final sales price. After all, you're desperate to move,” added Bailey.

The seller's agent might rightly assume that you'll be more likely to accept a higher sales price if it means getting into a new home quickly.”

Though there is some risk involved, a potential buyer who is keen on negotiating the rates in a sluggish market should avoid showing urgency while buying a house.

You could use the time to collect more cash to buy the house. “A buyer with ready cash always has an edge over the other buyers when it comes to negotiating the price,” said Bailey.

"The seller may be more willing to lower the price if he is guaranteed an immediate cash flow rather than having to settle for a deferred payment plan," he added.

Home
If the house is being sold because the owners are unhappy with its condition, in need for repairs, or the feel of the neighbourhood, you want to know.

So what questions do you ask a seller?

According to Bhatia, here are some questions you can ask to get an idea of the overall condition of the house and area.

• What's the reason for the sale?

If the house is being sold because the owners are unhappy with its condition, in need for repairs, or the feel of the neighbourhood, you want to know. Your goal is to understand if the reason for the sale is personal or due to an issue with the house or area.

• What are the biggest problems with the house?

This is the time to find out what the problems are. The listing agent wants to sell the property, but they want the sale to be a satisfactory one. Asking for more information will help you determine if the issues have been resolved or would require additional repair or maintenance.

If you want to save money, you could search for such houses put up for sale directly by the seller

- Pankaj Bhatia

• What are the average utility costs?

Older houses tend to be less energy efficient, and can come with heftier utility bills than you'd expect. The listing agent will be able to find out, the average monthly cost for utilities. It's a good idea to ask for a typical monthly cost in the winter and in the summer, so you can compare how much the energy use might fluctuate seasonally.

• Has the price changed at all?

The listing agent will know the history of the house, if the listing price has dropped or increased, and the reasons for any change in price. A lower listing price can be great news for you, but multiple drops in price should be a red flag. Was the house listed much too high for the area? Or are there major issues that are keeping buyers away?

According to Bailey, you can ask these questions to get an idea of the urgency of the sellers when finalising on the price:

• How long has the house been on the market?

• Have there been other offers on the house?

• Are the sellers eager to negotiate?

• Are the sellers in a hurry to sell?

“You may not get direct answers to these, but they're still worth asking. If you are genuinely interested in the property, talking with the agent can give you insight on what matters most to the sellers. If they're in a hurry to move, for example, they might accept a lower offer with a rushed closing date,” said Bailey.

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Don't worry too much about what the seller thinks. The bigger issue is how you play the negotiation game.

Bottom line?

“A widely-known fact to remember is that sellers usually hike the price by 15-20 per cent compared to that of similar properties in the neighbourhood, while some property agents also hike the cost of a house since they know that buyers will negotiate,” he added.

As they charge a commission, which is a percentage of the sale value, the higher the sale price, the more their gains. This is also the reason owners who sell their houses privately can offer a lower price since they don't have to pay the broker's fee.

“If you want to save money, you could search for such houses put up for sale directly by the seller,” said Bhatia, while pacifying that a home buyer shouldn’t stress even if such houses are hard to find.

“Don't worry too much about what the seller thinks. The bigger issue is how you play the negotiation game. In a seller's market, sellers get the upper hand and have more influence in pricing, and in a buyer's market, buyers have more control over pricing and typically pay less.”