10 Common Questions People Ask in Real Estate
1. What is the first step in buying a home
The first thing you should do when beginning the home buying process to get things going in the right direction is to get a pre-approval for a mortgage.
The pre-approval will let you know how much you can borrow. By knowing how much you can borrow you will be able to figure out what homes in the market you can afford. This will save you a lot of time as your search is narrowed down to only the suitable properties for you.
The loan estimate that the lender gives you will also show you how much money is required for the down payment and closing costs. Sometimes you may find that you need to save up some money, liquidate other assets, or get gift funds from friends or family.
Getting a pre-approval for a mortgage will show everyone involved in a real estate transaction that you are a serious buyer. Most real estate agents require a pre-approval before showing homes to ensure the home sellers that those that are coming into their house are not coming in just to look around or do anything else.
2. How long does it take to buy a home?
On average the process from starting to look at homes through online sources to finishing by closing escrow takes about 10 to 12 weeks. Once the buyer gets an offer accepted on a house they selected the average time to close the escrow period is 30 to 45 days, though cash buyers have been known to purchase properties faster than that. There will be times when the market is hot and during these times buying a home might take a little longer than usual. The reason for this is that the parties involved in a transaction have to deal with an increased demand for their services. For instance, if a home needs an appraisal the appraiser can be booked up for some time as there is an increase in the demand for appraisals throughout the area but no increase in the supply of appraisers to meet that extra demand.
3. How much do I have to pay an agent to help me buy a house?
Home buyers pay little to no fees to an agent for helping them buy a home. In most home sales there are two agents involved, one that represents the seller and one that represents the buyer. Listing brokers represent sellers and charge a fee to represent them and market their property. The listing broker will also enter the property into the Multiple Listing Service (MLS) where other agents will be able to search and find homes for sale for their buyers. Agents who represent the buyers are compensated by the listing broker for bringing buyers to purchase the property. Upon selling the home the listing broker will split the listing fee with the buyer’s agent. Thus, buyers don’t pay the agent that represents them .
4. How much do I need for a down payment?
The national average for a down payment is 11%, which includes first time and repeat buyers. First time home buyers usually only need to put down 3 to 5 percent on a home. This is because there are several first-time home buyer programs which don’t require bigger down payments. The FHA loan only requires buyers to put 3% down. Further, some programs allow down payment contributions from relatives in the form of a gift.
Some programs require even less such as the VA loan which can be made with zero down. The VA loan is only made to former or current military service members.
For years, conventional loans required a 20% down payment. These types of loans were taken out by those that were typically repeat home buyers who could use the equity from their existing home to fund their down payment. Some newer conventional loans, however, are available with 3% down if the borrower carries private mortgage insurance.
5. Should I sell my current home before buying a new one?
There are pros and cons to buying a home before selling your current home and the same can be said about selling your current home before buying another.
The biggest benefit to buying a home before selling your current home is that you will have a suitable property lined up. This will reduce the stress of having to find a home once your current home is sold. However this also can create disappointment if you are unable to purchase a new home without having to sell your current home. In this situation your offer is going to be contingent upon sale and transfer of title of your current home. If your current home does not sell in a timely manner this can lead to another offer from a non-contingent buyer to be favored and you will lose out on the home you’re looking to purchase.
Likewise, there is no telling how long it could take to sell your current home. Selling your current home before buying a new home will put you in an ideal position to negotiate on the new home you are purchasing since you are purchasing without the sale contingency of your current home. The risk that comes from selling your current home without buying a new home is the chance that you will not have a place to live. In the event that this happens you could have a “rent-back” which would allow you to retain possession of your current home for a certain number of days after closing at the expense of paying the buyer a certain amount.
6. What is earnest money?
When an offer is made on a home a buyer will write a check to accompany it. This check is called earnest money which is made in good faith to demonstrate that the offer being made is genuine. This check is deposited in a trust or escrow account for safekeeping and if a deal is made the earnest money is applied to the down payment and closing costs. If the deal falls through the money is returned to the buyer. If a buyer backs out of a deal after the terms have already been agreed upon by both parties the earnest money may not be returned to the buyer. There are certain ways to protect your earnest money, such as by using contingencies in the offer.
11. How much is my home worth and how do you determine that value?
Home owners always want to stay up to date with the value of their home. Owning a home allows the owners to make changes to the home to make it their own and improve it in any way they would like. Finding out the value of your home is not something that should be done without talking to a local Realtor. There are a handful of ways real estate agents determine the value of a home. Most commonly a CMA will be performed which will provide an in-depth evaluation of recently sold homes (comparables) in the past several months. A CMA takes into account several factors of the area and neighborhood including square footage, # of bedrooms, # of bathrooms, upgrades in the kitchen, age, features, location, residence style, and flooring.
8. Is there a best time to put my house on the market?
Going beyond the supply and demand of houses in the market, the time of year that the seller chooses to sell can have an impact on the length of time it takes to sell the home as well as the ultimate selling price.
Usually the real estate market picks up around February, continues to be strong through late May and June, and in July and August the market will taper off. The summer months are usually the busiest time of the year as school is out and families are looking to get their children in school before the new school year begins. September through November generally has a rally that is not as strong as late winter and spring and is followed by a slowdown from Thanksgiving through the New Year holiday period.
Every real estate market is different and every buyer and seller is different too therefore the best time to sell a home might be different for different people. You should always talk about the timing of your home sale as there are several factors in different times of the year, including competition, supply, and demand, that can play a role in selling a home
9. Why should I use a real estate agent?
A real estate agent is more than just a salesperson. A real estate agent will provide you with advice and guidance when buying or selling a home. Due to the constant changing of the market information available on listings is not always accurate and there are times when you will need the most current information about what has sold or is for sale, and the only way to get that is with a real estate agent.
Many people prefer to use an agent due to the complexities of modern real estate transactions since they usually incorporate legal and financial attributes. When using a real estate agent to sell your home, your listing will be added to the Multiple Listing Service so that large numbers of buyers will have access to information on the property. Real estate agents also do a great deal of advertising, marketing, and screening of potential buyers.
10. What are disadvantages of pricing my home on the high end?
There are several that can happen when a seller lists their home too high, including:
Helping sell similar homes that are priced lower.
Your home may be on the market longer.
You could lose market interest and qualified buyers.
You might create a negative impression of the property.
You could lose money as a result of making extra mortgage payments while incurring taxes, insurance and unplanned maintenance costs.
You may have to accept less money.
A potential buyer may face appraisal and financing problems resulting from the inflated price.
Taking all these possible situations into account it is not recommended to sell your home any higher than the appraised value.