Frequently Asked Questions
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Seriously– what’s the difference between a REALTOR® and a real estate agent?
Anyone who earns a real estate license can be called a real estate agent.
REALTORS® are licensed real estate agents AND members of the National Association of REALTORS®. Members are required to adhere to its strict code of ethics and additional standards that go beyond state regulation. They have access to additional industry training, legal resources, technology, and market insights.
How much cash do I need to purchase a home?
The cash needed to close on a home typically consists of:
Your down payment (equity) + closing costs (cost of borrowing money)
The minimum down payment needed for an FHA loan is 3.5% of the purchase price. Conventional loans are offered with as low as 3% down. VA loans for military service men and women are offered at 0% down. Example: For a $200,000 home, an average home buyer could need as little as $6,000-$7,000 for their down payment.
Closing costs can be estimated at roughly 3-4% of the purchase price. See What are closing costs? for more information. Some of these costs are set by the state, and others are charged by various companies that perform services to help you purchase the home. Example: For a $200,000 home, estimated closing costs are between $6,000-$8,000.
These are general estimates, and numerous factors affect them positively or negatively. Each situation is unique. It is also important to note there are other out of pocket costs along the way for things like home inspections and wiring transfer fees.
What are the closing costs for me as a buyer?
Think of closing costs as the fees or costs incurred to purchase the home. These are COSTS, not your equity (ownership) in the home, and it is not part of the down payment.
Closing costs + down payment = cash needed to close
Closing costs consist of, but not limited to:
- Loan processing fees
- Underwriting fees
- Appraisal fees
- Title search & insurance fees
- Homeowner’s insurance premiums
- State recording fees
- Florida documentary state taxes
These fees vary so it’s impossible to give an exact number. Remember, a safe rule of thumb is to expect 3-4% of the purchase price in closing costs. Once you are pre-approved and working with a mortgage lender, all parties can better estimate your closing costs to within a few dollars.
Can the seller pay my closing costs?
YES, anything is negotiable. Let’s take a look at how this works for the seller:
Consider this: someone has to pay for the costs of your closing. You or the seller.
Let’s assume your closing costs are $5,000 and you want the seller to pay for them.
This $5,000 comes out of their net proceeds from the sale of the house.
If they owned their home outright and were selling it for $100,000 they are now making $95,000. Follow?
All things equal, this is equivalent to an offer of $95,000 without paying any closing costs.
This is a common way to help offset the cash necessary to close.
On the other side, can you see why a seller may not be as interested in this offer?
Sometimes a seller will consider paying closing costs, and others they will not. Each seller’s situation is unique and Richard will negotiate them any time it is advantageous.
Are there down payment assistance programs?
Yes. The State of Florida offers down payment assistance for first time home buyers in the form of a 0% interest-deferred loan. Depending on your county, you may be eligible for $7,500 or $15,000. Availability is based on certain criteria such as income levels, credit scores, and property type.
When do I need to start preparing to buy a home?
According to the National Association of Realtors 2017 Home Buyer and Seller Generation Trends Report, Twenty-four percent of buyers 36 years and younger saved for more than two years.
If you want to own a home, it’s never too early to start the conversation. Speaking with trusted professionals like a REALTOR®, mortgage lender, financial planner, and other home owners will help you understand where to begin.
Knowing how much money you want to save is a good start. However, most buyers also need to prepare other areas of their finances and living situations. Preparing tax documents & returns, knowing how your employment is classified, understanding your credit scores, and determining the stipulations for your current lease or rental situation are just a few areas that likely need addressing.
Many prospective buyers with stable income and credit scores do not expect to have an issue, however, unexpected factors like those mentioned above can have a profound impact.
Therefore, each buyer’s preparation time and research varies. Start by talking to a professional. The good ones will work with you for years to come in order to help make the dream a reality!
Should I get pre-approved before looking at houses?
What’s the best strategy for writing an offer?
How we approach your offer depends on a few things: the pace of the market, the home’s value, the buyer’s motivation, and the seller’s needs.
Let’s look at a couple scenarios…
Scenario 1: A seller is relocating for work and can’t carry two mortgages. They’ve been commuting an hour a day until they can sell their home and move. Their home has been on the market for 4 months with no offers. You like the home, but a comparative market analysis shows the home is over-priced and needs quite a bit of updating and maintenance relative to the other homes in the neighborhood that sold for less.
Possible offer strategy: Write an offer that factors in the extra maintenance and the previous home sales from the neighborhood. Explain your position to the other agent or owner with a detailed analysis that explains why your offer is lower than the sales price.
Scenario 2: You’ve been searching for a home for months. You’ve made numerous offers but you keep losing out to others for various reasons, none at the fault of you or your REALTOR®. A new property just came up that is perfect for your and your family. You know the area, and know the prices. This one seems to be priced below what you would be willing to pay for it or think another buyer would pay. A comparative market analysis (CMA) supports your theory and shows it is worth at least $5,000-$10,000 more. The other agent says she has 5 other showings, so she’ll try to get you in before 7pm that day.
Possible offer strategy: Are you tired of the home search? Fed up with wasted time writing and signing offers only to have them rejected? Is this the home you can see yourself in for years to come? Does it meet most of your wants/needs? Than make the offer for $5,000-$10,000 over asking price. If the true MARKET VALUE of the home warrants paying more than the asking price, you should feel confident in your decision.
These are two vastly different, but common, scenarios. Our offer strategy is tailored to your buying wants, needs, and timelines with the ultimate goal of writing a fair offer that meets the needs of both buyer and seller.
How long does the seller have to respond to an offer?
However long we write into the contract. It is common courtesy to give a seller at least 1-2 nights to review the offer. Many sellers have varying schedules with their spouse, have little communication while at work, and/or need time to ask questions or make arrangements to allow certain terms of the contract to work before being able to agree to it.
Unless instructed by the seller’s real estate agent, at a minimum we will give the sellers until the end of the next business day to respond.
What happens after my offer is accepted?
Congratulations! It is time to get to work processing the transaction.
After your offer is accepted and all parties are notified, a slew of people and companies get moving to ensure a proper transaction. This can be a confusing and overwhelming time if you’re not prepared for it.
This is a general outline of what happens next. Keep in mind all transactions are different and some of these steps can be done interchangeably and simultaneously.
- Offer accepted! All parties have signed, dated and initialed all required forms and each party has received copies.
- Make the initial deposit, sometimes referred to as the escrow deposit or earnest money deposit (EMD). Usually around 1% of the purchase price. For example: A $200,000 house commonly has a $2,000 deposit that is applied towards your down payment at closing.
- Formally complete the full loan application with the lender
- Order and review the inspection results within the contractual timeframe
- Submit all required documents to lender
- Apply for homeowner’s insurance
- Wait on results of appraisal
- Finalize any conditions from the lender/underwriting
- Receive the clear to close
- Close on your new home!
What should I look for during the inspection?
Let’s start here… there is no such thing as a perfect house. News flash: Every home inspection is going to uncover areas that need attention.
First, our job as REALTORS® is to help you understand as much as possible about the home before we get to inspections. We research permits, check sellers’ disclosures, and follow up with the other agent to get key information so there are as few surprises as possible.
As a rule of thumb, the four major areas of a home that buyers should be concerned with most are heating, ventilation and air conditioning (HVAC), roof, plumbing, and electric. Along with these, water intrusion, wood-destroying organisms (such as termites), and major appliances should be checked and working as intended.
We also want to ensure other “big ticket” items that are unique to each home such as pools, additions, enclosures, septic tanks, etc. are functioning properly or easily repairable.
It’s important not to make a mountain out of a mole hill. Clogged dryer vents, lack of caulking, missing shingles, rotting wood, loose faucets, settling cracks, and overgrown vegetation come up frequently. These may look scary on an inspection report, but the reality is that most minor things can be repaired rather inexpensively.
One thing to remember is just about everything is either a) repairable or b) negotiable. So it is important not to panic or get angry if something does come up. In most cases, if the sellers are honest, they didn’t know about the problem prior to the inspection. Since they usually want/need to sell the home, a good REALTOR® can show them how working with the buyer to come to an agreement is in their best interest.
What’s the appraisal and why is it important?
The appraisal is ordered by your mortgage lender to help determine the true market value of the home you want to purchase. The certified appraiser is sent to the home during the loan process, usually after inspections have been completed, to verify the amount of money the lender is lending is in line with your loan to value ratio.
If the appraisal is higher than the purchase price, nothing happens and the buyer makes instant equity when they close on the home. Awesome job, you’re paying less for a home worth more!
If the appraisal is lower than the purchase price, additional funding or negotiating will need to take place in order to continue with the sale. With open lines of communication and reasonable buyers/sellers, appraisal discrepancies are usually worked through.
What happens if the appraisal comes in low?
Step 1, don’t panic or get angry. Both the buyer and seller have options.
- A buyer can make up the difference in cash, and/or
- The seller can lower the price.
- Challenge the appraisal.
- Order a second appraisal.
- Seller can carry a second mortgage.
- Start over with a new mortgage company.
- Cancel the transaction.
These are the most common solutions, but certainly not the only ones. Each transaction is unique and carries different challenges and opportunities to handle a low appraisal.
Why do I need title insurance?
Before we get into why, it’s important to know commercial lenders or banks require you to obtain title insurance.
Title insurance insures that the buyer and lender that are protected from loss resulting in title defects. Unlike most insurance, title insurance covers you from situations that have already occurred- like an illegal transfer of the deed to a previous owner, a wrongly recorded deed that never conveyed ownership, or a child or grandchild that forges a signature to convey title over to themselves.
Defects occur from a variety of instances, either based on fundamental wrongdoings, or legal errors such as indexing, misfiling, or failure to comply with local recording requirements. Therefore, it is important to obtain title insurance to insure you are protected from the intended, unintended, known or unknown defects in title.
Can I rent to own?
Not ready to buy but know it’s in the future? Many would-be buyers do not want to purchase a home yet. Either they’re still saving, not sure if their job will keep them local, recently moved and want to learn the area, etc. Whatever the reason, renting the house they might want to own in the future has its advantages.
Since most private investors want to continue renting the home to make money for years to come, it’s challenging to find a home you can buy if you’ve been renting.
Visit our Home Partners of America section to see how you can RENT a home currently FOR SALE with the option to purchase it at any point in the future.
I heard interest rates are going up, should I wait to buy?
Rising interest rates by themselves are not enough reason to wait. Why?
According to Freddie Mac, rates would have to reach 9.1%, more than double today’s average 4% rate, for renting to be cheaper than buying.
This doesn’t mean waiting comes without consequence. As interest rates increase, your purchasing power decreases. Purchasing power is essentially the amount of home you can afford. As your cost to borrow money increases (rates rising), the less home you can afford.
For Example: A $250,000 house purchased with a 3.25% interest rate carries a mortgage payment of $1,088 with principal and interest. The same house purchased with a 4.25% interest rate is a $1,230 mortgage payment.
To wait, or not to wait…?
Do I have to sell my home before I can buy another?
Some don’t, the majority do. The answer to this largely depends on what each individual home buyer qualifies for. Since the average homebuyer can’t afford two homes simultaneously, most will need to sell before they buy.
What are some steps to make this work?
- In an ideal situation, we’re able to find and close on your new home at the same time we’re closing on your old house.
- We negotiate a longer closing date to give you time to find your next home.
- We negotiate a leaseback period. This period allows you to close on the home, but rent it back from your buyers at a pre-negotiated rate. This period can last several days to several months. The challenge is that it has to fit with both the buyers’ and sellers’ timelines.
- Stay with a relative, in-law, or friend. This is a tough decision and involves moving twice. However, a few months of discomfort is a small price to pay for purchasing the wrong home.
- Find a month-to-month rental home or apartment. Most apartments require at least a 7-month lease. There are some that offer less. Some also allow you to break a lease with minor penalties if buying a home.
- Put your stuff in storage, and stay in a hotel or long-term stay.
Buyers and sellers have known to get creative. Feel free to talk through any ideas or solutions you have and we can help make it work.
Why do I need a REALTOR® when buying a home?
When is the best time of year to sell a home?
This is tricky. The home buying and selling “season” is traditionally Spring and Summer, aligning closely with school schedules.
There are pros and cons to selling during Spring and Summer vs waiting until Fall or Winter. In Fall and Winter, there are less homes for sale on the market giving you less competition. Since serious buyers want and need to move year round, it makes sense that a well-priced home can sell quicker in Fall and Winter then it does in Spring or Summer.
During the Spring and Summer, a larger buyer pool gives sellers a competitive advantage. It also opens the door for competition, which can drive prices higher. Unfortunately, this leads some sellers to over-price their home, causing it to sit on the market unsold. A larger buyer pool makes it challenging since more buyers are vying for the same number of houses. And in today’s market with low inventory, this can make it tiresome and frustrating.
Overall, this answer should be a direct response to the question: when is the best time of year FOR YOU to sell your home? A customized marketing plan and valuation strategy by Richard, a Pricing Strategy Advisor®, can help ensure you don’t run into the many pitfalls of selling a home.
My neighbor sold his home for $_____, can I get that for mine?
Maybe. You might be able to get more, you might get less. There are a lot of differences between homes in the same neighborhood even if they are production homes by a national builder instead of custom homes.
Everything from floor plans, upgrades, lot location, and size of the home are affecting the price.
It’s important to stay in touch with your neighbors’ values, but it doesn’t necessarily determine yours!
Zillow’s “Zestimate” says my home is worth $_____, why are you telling me it may be different?
To answer this, we have to dig a little deeper.
This “Zestimate” is actually an automated valuation model, or AVM. Many real estate websites use them to perform estimates. The key word in any home value estimated by an AVM is automated. These computer algorithms can only systematically analyze raw data.
What’s that mean?
It means they can only value a home from metrics and measurements submitted to the model. It can NOT take into account things like condition of the home, special features, upgrades, proximity to nuisances, favored locations, etc. because they vary from one house to the next. Often times, this causes a distortion in the estimate and true value.
In a valuation model…. two 3-bedroom, 2-bathroom homes next door to each other with 1,800 square feet on a ¼ acre lot are identical. The difference being one might be upgraded with a new roof, air conditioning unit, granite counter tops, hardwood floors, new interior paint, carpet, appliances and on a corner lot, while the other is in its original condition and backs up to another home.
Well guess what?
AVMs can NOT account for these differences and it will value them similarly. On the market, we know that the updated home is worth considerably more than the original. Therefore, home values may drastically vary from what appears as an estimate. This is just one reason why it’s important to have a REALTOR® perform a Comparative Market Analysis (CMA) to help determine the true market value.
Do open houses work to sell the home?
Hosting an open house DOES help sell your house. While it is unlikely the future buyer of your home comes through the open house, the feedback received from buyers provides valuable insight into what buyers like or don’t like about the house. And a well-executed open house can receive lots of feedback in a short period of time.
Since the buyers walking through an open house represent the current home buying marketplace, it’s important to listen to their feedback. From here, we can make changes to the home, price, or marketing based on what others are saying. On occasions, buyers DO come through open houses. So why not increase the likelihood of getting an offer AND getting loads of useful feedback?