FAQ
Frequently Asked Questions
As you might imagine, real estate agents field quite a few questions every day. People are naturally curious, and it’s an agent’s job to guide folks through the often-complex world of home buying and selling. You might also imagine that some questions about real estate come up more often than others. Whether you’re a first time buyer or repeat buyer who could use a refresher on how deals get done, here’s are some answers to the questions that come up most often.
Home shoppers pay little or no fees to an agent to buy a home.
Here’s why:
For most home sales, there are two real estate agents involved in the deal: one that represents the seller and another who represents the buyer.
Listing brokers represent sellers and charge a fee to represent them and market the property. Marketing may include advertising expenses such as radio spots, print ads, television and internet ads. The property will also be placed in the local multiple listing service (MLS), where other agents in the area (and nationally) will be able to search and find the home for sale.
Agents who represent buyers (a.k.a. buyer’s agent) are compensated by the listing broker for bringing home buyers to the table. When the home is sold, the listing broker splits the listing fee with the buyer’s agent. Thus, buyers don’t pay their agents.
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.
Here’s why:
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).
The national average for down payments is 11%. But that figure includes first time and repeat buyers. Let’s take a closer look.
While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military servicemembers. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).
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.
Do you know the questions you should be asking a Realtor? If you are selling your home, chances are you have some questions. If you didn’t, you would be very unusual. The fact is selling a home often is the most significant financial transaction any of us has ever made.
There is a lot of money involved, which means you don’t want to mess anything up if you can avoid it. As a long-term Realtor, I have fielded my fair share of questions from sellers.
Here are some of the most common questions Realtors get along with the answers.
One of the most popular questions a seller will ask a Realtor pertains to pricing and negotiating room.
Leaving room for negotiations is one of the biggest home pricing myths in real estate. There is a lot of unnecessary risks that come from pricing a home too high.
While you may think that you are giving yourself room to negotiate, too high a price is more likely to drive off potential buyers.
The longer you have the home on the market due to a high price, the more stigma that home develops.
If the price is too high, you may not get any offers and be forced to relist the house for a lower price. When this happens, your home will certainly be viewed as a problem home by many buyers. Why else did you have to lower the price?
Instead of pricing high, price right. Work with your agent to find the perfect price.
Both appraisers and real estate agents use comparable sales or “comps” to determine fair market value. Real Estate agents will perform what’s called a comparative market analysis.
More than likely, the report generated will include the following:
- Closest homes in similarity that have sold close to the property.
- Similar homes are currently under contract but haven’t closed yet.
- Competing properties that are currently for sale in the general price point.
The most important data is what has sold. The least important is what is currently for sale. The price for these homes can change at a moment’s notice. You never want to hang your hat on what someone thinks their home is worth.
The analysis that your real estate agent performs will compare your house to other properties that have sold. The evaluation will include the following points of interest.
- The size of the home, or more commonly what’s referred to as the square footage. While size is a crucial variable, unskilled agents will use this as the end all be all in comping properties. Using square footage to value properties is a sure-fire recipe for disaster.
- The style of the home – for example, is it a colonial, contemporary, or a raised ranch.
- The number of bedrooms.
- The number of bathrooms.
- The condition of the property.
- The amenities such as central air, central vac, alarm system, sprinkler system, and a whole host of others that affect value.
- The age of the house.
- Ages of mechanical and structural components such as roof, heating, and cooling systems.
- The desirability of the lot.
- The appeal of the neighborhood or school district.
6. How Are List Price and Sale Price Different?
The list price is the price you list the home for sale. It is the reasonable goal you set for your sale, one you hope to get close to as you make the transaction. The sale price is the price that you actually sell the home for after negotiations. A terrific agent should be able to help you set a price that will be close to the sale price.
A word of caution – many less desirable real estate agents will present their market analysis to sellers without giving a seller a list and sale price. Your real estate agent should be setting proper expectations from day one.
The best agents will suggest you list at X with a probable sale price of Y. One of the essential skills of a real estate agent is accurate pricing. Agents who are worth their salt will be on the money with the price.
It is essential for you to find out what real estate commission the agents you’re interviewing will be charging. You might be thinking that it would be great if you can find an agent who will charge a lower rate than everyone else.
Unfortunately, the commission split really matters when you are selling a home. It is imperative that a buyer’s agent wants to sell your house!
If all the homes you’re competing against have higher commission splits, guess what happens? Fewer agents will want to sell your house. The bottom line is you will NOT save money. Instead, you will probably net less. Don’t make this foolish home selling mistake.
Your agent is the best-qualified person to help you identify what needs to be done before you sell. Keep in mind that every home is different, so the advice you get for your home might be different than the information another seller would get.
That being said, there are some things that almost every seller needs to do. These include:
- Clean things up. No one wants to buy a dirty house. Or, in reality, only bargain seekers are going to be highly interested in a cluttered, messy home because they assume they can get a great deal from an as-is seller. If you want reasonable offers, you need to remove clutter and clean it thoroughly.
- Declutter and rent storage if necessary. When selling a home, first impressions and appearance can make or break how much you’ll put in your pocket. It’s wise to declutter your home as much as possible. A few great ways to do that are having a donation pick-up or renting a storage pod or storage unit.
- Make needed repairs. Broken door handles, missing tiles, stained carpets—there are probably several little jobs that need to be done around your house before you list it. The more of these small, cheap fixes you make, the more desirable your home will be. Proper home maintenance shows you care for your property. There may also be big jobs that need to be done. Wait to talk to your agent before you invest in any major repairs to be sure that doing so will benefit your sale as you expect. Doing your part before the home is listed for sale is also a side benefit for being ready for the house inspection.
- Take great pictures. The photos on your listing are the first thing that most buyers are going to see. You want them to be good, and it takes talent and practice to produce those kinds of pictures. Your agent should either be skilled at taking real estate pictures or know someone who is. That way, your listing looks as good as possible and shows the best side of your home. See some great tips for shooting your real estate photos.