Real Estate FAQs
One can only imagine the volume of inquiries that real estate agents deal with daily. The role of a real estate agent is to satisfy the inquisitiveness of their clients and help them navigate the challenging process of buying and selling a home. You could probably also guess that there are some real estate-related questions that are asked more frequently than others. Whether you're a first-time buyer or a seasoned veteran who just needs a refresher, you'll find helpful information below.
1. How do you begin the home buying process?
One of the first things you should do when looking for a house is get pre-approved for a mortgage. The process is sped up by a lender's pre-approval letter.
Finding out your borrowing limit is the first step. Finding a suitable home online is much easier when you have a good idea of your budget beforehand. (Pre-approvals also help avoid heartbreak from falling in love with a house that you can't afford.)
Second, your lender's loan estimate will detail how much you'll need for a down payment and closing costs. You may need additional time to save up the money, sell off assets, or ask family for help with the mortgage in the form of a gift. Whatever the case may be, you will have an accurate picture of the monetary demands.
Having your mortgage pre-approved also shows the seller and your real estate agent that you are a serious buyer.
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, so most real estate agents will require a pre-approval before showing homes. This is done to protect the seller's privacy from prying eyes. Additionally, sellers are protected from potential burglars by limiting access to their home (like identifying security systems, locating expensive artwork or other high-value personal property).
2. How long does it take to buy a home?
The entire home buying process, from initial research online to escrow close, typically takes between 10 and 12 weeks. A typical escrow period lasts between 30 and 45 days from the time an offer is accepted on a home (under normal market conditions). Even so, it is not unheard of for buyers who are well-prepared and have cash on hand to close on a property in less time.
The rate at which homes sell is highly dependent on the state of the market. It could take a little longer to purchase a home in a hot market with lots of buyers. This is because when business picks up unexpectedly, many people involved in the transaction fall behind. For instance, a rise in home sales would drive up demand for property appraisals and home inspections, but there wouldn't be any more people to do them. As a result, lenders may take longer to complete the loan underwriting process. Each delay in completion by any one party in a transaction, even by just a day or two, can cause the whole thing to drag on indefinitely.
3. What is a seller’s market?
House prices rise in sellers' markets because of strong buyer demand. Some of the factors that contribute to rising demand include:
This is due to economic factors, such as a rise in the number of people looking for jobs in the area, which in turn increases demand for housing and drives up prices before more homes can be built.
The current downward trend in interest rates is good news for homebuyers because it makes homes more affordable and increases demand, especially among first-time buyers who will be able to afford larger homes due to the reduction in their monthly mortgage payment.
A temporary rise in interest rates could encourage "on the fence" buyers to pull the trigger if they anticipate the trend will continue. Before their borrowing capacity (how much they can spend) is reduced, buyers want to act quickly.
A lack of new construction has led to a shortage of available homes. Existing home prices could rise as a result of a shortage of available properties.
4. What is a buyer’s market?
When home prices are falling and demand is low, it's a buyer's market. Long-term and short-term buyer demand may be affected by a number of factors, including: A major company goes out of business and lays off a lot of people, causing a ripple effect throughout the economy.
With rising interest rates, fewer people will be able to afford the down payment and closing costs on a home. Prices for homes fall to meet the level of demand, and buyers are able to get better deals as a result.
Reduced interest rates in the short term can give borrowers an advantage by increasing their purchasing power before the market adjusts to the new normal.
Especially if the older homes in the area lack modern conveniences, the influx of inventory from a nearby new subdivision can drive down their prices (modern appliances, etc.)
Recent natural disasters, such as an earthquake or flooding, can have a devastating effect on property values in the area.
5. What is a stratified market?
When supply and demand in the same region vary depending on price, we have a stratified market (typically by city). For instance, while the housing market for properties priced at $1.5 million or more may be brisk (a seller's market), the market for properties priced at $750 thousand or less may be slow (a buyer's market). Foreign investors looking to park their money in the United States occasionally encounter this situation when purchasing luxury real estate in West Coast cities. The market for moderately priced homes, however, may look very different.
6. How much should I pay an agent to buy a home?
Consumers who are looking to buy a home typically pay no or minimal fees to a real estate agent.
Two real estate agents are typically involved in the transaction of a home's sale: one representing the seller and the other the buyer.
For their services in representing the seller and promoting the property, listing brokers receive a commission. Spending on media like radio commercials, newspaper ads, television commercials, and online ads may be considered marketing. Other real estate agents in the area (and beyond) will be able to find the home through a search of the local multiple listing service (MLS).
The listing broker pays the buyer's agent for bringing qualified buyers to the table. There is a split between the listing broker and the buyer's broker when the home is sold. Because of this, purchasers do not have to pay their agents.
7. What's the minimum credit score to buy a home?
Your credit score needs to be at least 620 in order to qualify for most loans. Lenders will typically require less of a down payment and offer a better interest rate to borrowers who have higher credit scores. Homebuyers with lower credit scores, on the other hand, may need to make larger down payments (or agree to a higher interest rate) to compensate for the lender's increased risk.
8. How much do I need for a down payment?
At 11%, down payments are significantly higher than the national norm. However, that total consists of both new and returning customers. Let's investigate this matter in greater detail.
Though the average down payment across all homebuyers is 11%, the typical first-time buyer only puts down 3-5 %. This is due to the fact that many programmes aimed at first-time homebuyers do not necessitate sizable down payments. The down payment on a popular loan programme, the FHA loan, is only 3.5%. Furthermore, some programmes permit gift contributions to be used as a down payment.
Even less is needed for some software. No money down is required for VA and USDA loans. However, the requirements of these programmes are stricter. Servicemembers, both active and retired, are the only people eligible to apply for a VA loan. Purchasers with low to moderate incomes in rural areas that qualify for USDA loans are the only ones eligible for these types of loans.
A twenty percent (20%) down payment was typical for conventional loans for quite some time. Homeowners who were purchasing another property and planning to use the equity in their current home as part of their down payment were the most common borrowers for this type of loan. Newer conventional loan programmes, however, allow for as little as a 3% down payment with PMI (PMI).
9. Should I sell my home first?
In order to use the equity in your current home as a down payment on a new one, you'll need to sell it first.
There are some buyers who choose to use their current residence as an investment property by renting it out. Because of this, selling your current house won't be necessary. Whether or not you can get a loan for a new house while still holding on to the old one depends on an analysis of your risk profile and credit history by your loan advisor.
When moving to a new city due to a job transfer, homebuyers often have a limited amount of time to sell their current residence. If you are relocating but staying on with your current employer, you may be eligible for relocation benefits.
10. How many houses should I see before buying?
This decision is entirely up to you! The convenience of house hunting in modern times is unquestionable. The home-buying process has been revolutionised by the advent of the internet, which allows prospective buyers to conduct extensive online searches and view photos of available properties before ever leaving the comfort of their couches. Nowadays, it's easier than ever to do things quickly and easily. The best way to get a sense of a house's aesthetics and vibe is to visit it in person, though.
11. What is earnest money?
Agents typically require a deposit of between one and two percent of the purchase price in the form of a check when an offer is made on a home. The purpose of the earnest money deposit is to show the seller that the buyer is serious about their offer. With the down payment, you're essentially reserving the house for yourself.
A trust or escrow account is used to hold the check (or cash, in some cases). Earnest money goes toward the down payment and closing costs in the event of a successful transaction. If the transaction does not go through, the buyer receives a refund.
Warning: if a buyer withdraws from a deal after both parties have agreed to the terms, the buyer may not get their earnest money back. Talk to your agent about the various options available to you for safeguarding your earnest money, such as the use of offer contingencies.
12.When will the seller respond to my offer?
Written offers should include a time limit within which the seller is expected to respond to the offer. They should have enough time if you give it to them in twenty-four hours.
13. What if my offer is rejected?
The seller has the option of accepting or rejecting the offer outright. However, a counteroffer presented by the seller is a common third option. Don't forget that a deal isn't over until it's over. If the seller makes a counteroffer, you still have a chance to win the deal. You and your representative need only go over it to decide whether or not to accept the counteroffer. If that's the case, giving the go-ahead would effectively seal the deal right then. Remember that it is not uncommon for there to be multiple rounds of offers and counteroffers, and that Realtors regularly engage in negotiations. The parties' level of agreement on the deal's terms should increase with each iteration.
14. Should I have a home inspection?
Yes! When applying for a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan, a home inspection is required. There is no need for an inspection when applying for certain other types of mortgages. Yet, inspections should not be disregarded because they can uncover hidden flaws in a home. A home is one of the largest purchases most people will ever make, and having it inspected can put your mind at ease.
15.Do I need to conduct a final inspection?
It's not necessary, but it sure is smart! Buyers can rest easy knowing that no changes have been made to the property since their first viewing by participating in a final walk-through inspection. If any fixes were to be done as part of the deal, a check-in would ensure that they were completed as agreed upon.