Real Estate Frequently Asked Questions
The process of buying or selling a home typically comes with its fair share of questions. Our team of agents at P.A.M.S. understand that and are graduates of how to make this process as smooth as possible. To begin, here is a list of real estate frequently asked questions to help provide some clarity. If you have questions not covered here, our professional team of agents are always available. Please read the following to get an overview of some of the most frequently asked:
Getting pre-approved for a mortgage is the first step of the home buying process. Getting a pre-approval letter from a lender get the ball rolling in the right direction.
First, you need to know how much you can borrow. Knowing how much home you can afford narrows down online home searching to suitable properties, thus no time is wasted considering homes that are not within your budget. (Pre-approvals also help prevent disappointment caused by falling in love unaffordable homes.)
Second, the loan estimate from your lender will show how much money is required for the down payment and closing costs. You may need more time to save up money, liquidate other assets or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.
Finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling their home.
Most real estate agents will require a pre-approval before showing homes – this is especially true at the higher end of the real estate market; sellers of luxury homes will only allow pre-screened (and verified) buyers to view their homes. This is meant to keep out “Looky Lous” and protect the seller’s privacy. What’s more, by limiting who enters their home, sellers are given extra security from potential thieves trying to case the home (like identifying security systems, locating expensive artwork or other high-value personal property).
From start (searching online) to finish (closing escrow), buying a home takes about 10 to 12 weeks. Once a home is selected an the offer is accepted, the average time to complete the escrow period on a home is 30 to 45 days (under normal market conditions). Though, well-prepared home buyers who pay cash have been known to purchase properties faster than that.
Market conditions are a major factor in how fast homes are sold. In hot markets with a lot of sales activity, buying a home may take a little longer than normal. That’s because several parties involved in the transaction get behind when business suddenly picks up. For example, a spike in home sales increases the demand for property appraisals and home inspections, yet there will be no increase in the number of appraisers and inspectors available to do the work. Lender turn-around times for loan underwriting can also slow down. If each party involved in a deal takes a day or two longer to get their work done, the entire process gets extended.
In sellers’ markets, increasing demand for homes drives up prices. Here are some of the drivers of demand:
• Economic factors – the local labor market heats up, bringing an inflow of new residents and pushing up home prices before more inventory can be built.
• Interest rates trending downward – improves home affordability, creating more buyer interest, particularly for first time home buyers who can afford bigger homes as the cost of money goes lower.
• A short-term spike in interest rates – may compel “on the fence” buyers to make a purchase if they believe the upward trend will continue. Buyers want to make a move before their purchasing power (the amount they can borrow) gets eroded.
• Low inventory – fewer homes on the market because of a lack of new construction. Prices for existing homes may go up because there are fewer units available.
A buyer’s market is characterized by declining home prices and reduced demand. Several factors may affect long-term and short-term buyer demand, like: Economic disruption – a big employer shuts down operations, laying off their workforce.
• Interest rates trending higher – the amount of money the people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential buyers in the market. Home prices drop to meet the level of demand and buyers find better deals.
• Short-term drop in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.
• High inventory – a new subdivision and can create downward pressure on prices of older homes nearby, particularly if they lack highly desirable features (modern appliances, etc.)
• Natural disasters – a recent earthquake or flooding can tank property values in the neighborhood where those disruptions occurred.
Most loan programs require a FICO score of 620 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower the down payment requirement and better interest rate. Conversely, home shoppers with lower credit scores may need to bring more money to the table (or accept a higher interest rate) to offset the lender’s risk.
If the built-up equity in your current home will be applied to the down payment on the new home, naturally the former will need to be sold first.
Some home buyers decide to turn their current home into an investment property, renting it out. In that case, the current home will not need to be sold. However, your loan advisor will still need to evaluate your risk profile and credit history to determine whether making a loan on a new home is feasible while retaining title to the old home.
Buyers often have a short time frame to sell their current home when relocating to a new city because of a job transfer. If you are moving but taking a position with the same employer, check to see if they offer relocation assistance to help offset some of the costs.
That’s up to you! For sure, home shopping today is easier today than ever before. The ability to search for homes online and see pictures, even before setting a foot outside the comfort of your living room, has completely changed the home buying process. Convenience is at an all-time high. But, nothing beats visiting a home to see how it looks and ‘feels’ in person. Trust us. Visit your home and see if it ‘feels’ like a good fit before deciding on anything. Your agent will help make sure this is arranged.
When you make an offer on a home, your agent will ask for a check to accompany it (checks are the same as cash, and the deposit is typically 1% to 2% of the purchase price). Earnest money is made in good faith to demonstrate – to the seller – that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you.
The check is deposited in a trust or escrow account for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer.
Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your agent about the ways to protect your earnest money – such as offer contingencies.
Written offers should stipulate the timeframe in which the seller should respond. Giving them 24 to 48 hours should be more than sufficient.
Sellers can flat-out accept or reject an initial offer. But there a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal isn’t dead until it’s dead. So, if a counteroffer is proffered by the seller, you’re still in the game. You and your agent just need to review it determine whether the counteroffer is acceptable. If so, then approving it closes the deal immediately. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual and negotiations are a part of what we do on a daily basis for our buyers and sellers. Each revision should bring both parties closer together on the terms of the deal.
ABSOLUTY AND YES! Home inspections are required if you plan on financing your home with an FHA or VA loan. For other mortgage programs, inspections are not required. However, home inspections are highly recommended because they can reveal defects in the home that are not easily detected. Home inspections bring peace of mind to one of the biggest investments of a lifetime.
It’s not required, but our agents WILL suggest it! Final walk-throughs give buyers a chance to make sure nothing had changed since their first visit. If repairs were requested, as part of the offer, a follow-up visit ensures that everything is squared-away, as expected, per the terms of the contract.
An MLS is an online, computerized listing of homes for sale in an area listed with a REALTOR®. Agents are granted access to the MLS to find houses based on search criteria. Our agents are a part of the NTREIS MLS.
Homeowners associations are commonly found in subdivisions, gated communities and other types of planned developments such as townhouses and condominiums. They typically include a monthly or annual fee. HOAs are in charge of upkeep for communal areas in addition to enforcing set rules all residents are expected to follow.
Being prequalified means you may potentially receive a loan of the amount stated. This may happen assuming that all information you’ve provided the bank is accurate and truthful.
A preapproval means you’ve undergone an extensive financial background check. This check includes your credit history, tax returns and employment verification. It means the lender is willing to give you a loan.
Comparables, otherwise known as comps, are recently sold properties that are similar to your house in size, location and amenities. They help the appraiser determine a fair market value.
The real estate market is typically very strong between March and September. However, selling a home is also influenced by a variety of other factors, not just time of year. Whatever the right time is for you, P.A.M.S. will assist you in obtaining the broadest possible market.
An appraisal is a report created by a qualified individual giving an estimated value of your home. This term is interchangeable for both the report itself and the process by which the estimate is obtained.
If a buyer orders one or more home inspections, it does not obligate the seller to make repairs or changes. Rather, inspection reports are typically used to negotiate repairs of major issues, safety or environmental hazards that may be present. It depends on the contract and negotiations as to who will be responsible.