FREQUENTLY ASKED QUESTIONS
Top 15 Real Estate Questions Answered By The Experts
Buyers want to see a clean home with lots of potential and few repairs. Before you sell, consider giving your entire house a deep clean and hiring an inspector to look for possible problems.
You may have heard the term “seller’s market” before. In a seller’s market, demand for homes rises and sellers can get a lot more money for their house. The following factors may contribute to a seller’s market:
- Low inventory
- Low interest rates
- The possibility of interest rates rising in the future
- Other economic factors may contribute to the market. Some cities may experience a seller’s market while other simultaneously experience a buyer’s market. Reach out to a local real estate agent for more information about the current state of the market.
No one wants their house to sit on the market for too long. A house may take anywhere between 30-45 days to sell depending on the market. If a market is hot enough, sellers could find their home off the market within a week. If the market is slow (or the house is overpriced,) the number could reach triple digits. Exposure, negotiations, and the condition of the home will also affect its ability to sell fast.
Whether you are buying or selling, you may find yourself doing some Internet research to see the value of homes in the area. But before you accept the first number, know that not all online calculators are accurate. Everything from new appliances to construction down the street can affect your home’s value.
The best way to figure out your home’s current value is to reach out to local professionals. Real estate agents or professional appraisers can give you an estimate through a consultation or competitive market analysis.
Again, online calculators are just a rough estimate of your home’s value.
Since there are many different metrics that can predict a home’s value, you may see some differences. Homeowners pay property taxes based on their home’s assessed value. But this number is not always accurate compared to the market value. Market values fluctuate more than assessed values. When you are getting ready to buy or sell a house, pay attention to the market value. You will only need to worry about the assessed value when calculating how much you will pay in property taxes.
Absolutely! There is usually a difference between a home’s list price (how much it is on the market for) and the sale price (how much it sells for.) In a seller’s market, buyers who want to negotiate should be careful. High demands leave little wiggle room for negotiation. If you want to negotiate, talk to your real estate agent about what you should offer.
Selling a home comes with a handful of costs. Expect to give up at least 10% of your home’s sale price. These costs include:
- Inspections and repairs
- Staging the house (and keeping the utilities running during open houses)
- Closing costs
- Costs to pay off your mortgage
- Real estate agent commissions
- Of all these costs, the real estate commissions are the highest. They can eat up around 6% of the sale price.
Selling a home comes with a handful of costs. Expect to give up at least 10% of your home’s sale price. These costs include:
- Inspections and repairs
- Staging the house (and keeping the utilities running during open houses)
- Closing costs
- Costs to pay off your mortgage
- Real estate agent commissions
- Of all these costs, the real estate commissions are the highest. They can eat up around 6% of the sale price.
Not all real estate agents offer 6%…but sellers shouldn’t jump at the first discount agent they meet. Discount agents may offer fewer services or list their clients’ houses on fewer services. When sellers have more exposure, they generally get more offers (and more competitive offers.) Talk to a range of different discount and traditional agents before you decide what is best for you.
Or, better yet, reach out to a flat fee listing service that matches buyers and sellers with high-quality agents without high commission fees.
As we mentioned before, the seller’s real estate agent usually gives half of the 6% commission to the buyer’s agent. If you are a buyer and find an agent that offers a home buyer rebate, you could get some of that money.
Homeowners may have different reasons for selling their home. Maybe they are ready for something new or want to downsize. Other homeowners may just want to expand their portfolio or acquire an investment property. If you want to put up a high down payment and secure good interest rates on your next mortgage, selling is encouraged. If you can afford the down payment for your new home and want to wait until the market changes, you don’t have to sell your home. Talk to a real estate agent about your options (or a financial advisor about turning your current home into an investment property.)
Before you even start window shopping, get approved for a mortgage. Buyers may need to look at their credit scores and assess their current financial situation to make sure they qualify for a mortgage and can fit monthly payments into their overall budget.
The list price that you see online is wrapped up in one number, but the reality of buying a house comes with closing costs, a mortgage, and other considerations. Before you begin the searching process, apply for a pre-approved mortgage. This will give you an idea about how much you can afford and what you will have to pay in the next 15, 20, or 30 years. Plus, many sellers may require that buyers are already pre-approved for a mortgage. If you are fighting for the house of your dreams, you will need to do everything you can to get ahead.
The costs of buying a new house can be overwhelming and hit you all at once. But if you back out of buying a house, you’ll have to pay. Buyers with cold feet may have to forfeit around 1-2% of the home’s sale price if they want to rescind their offer.
Real estate agents have the experience, connections, and knowledge to help you sell or buy a house for the right price. If you are selling, a real estate agent can:
- Help you choose the right price (and negotiate down the line)
- Put your house on multiple MLSs and give your listing more exposure
- Stage your house for open houses and answer buyers’ questions
If you are buying a house, a real estate agent can help you:
- Find houses in your price range (and negotiate with the seller)
- Recommend professionals that will help you appraise, inspect, and buy the house
- Offer useful advice about the current housing market and next steps
It is possible to buy or sell a house without an agent, but you can trust that a real estate agent will get you the best deal and save you money down the line.
Have more real estate questions? (We thought you might.) Reach out to a real estate agent in the area who can answer specific questions about the local market and what you should consider before you enter this next step in your life.
Common Mortgage Questions
To begin the mortgage process, you’ll need to meet with a lender and be prepared to provide proof of:
- Where you work
- Your income
- Any debt you have
- Your assets
- How much you plan to put down on your home
It’s likely your lender will approve you for more money than you should borrow. Just because you qualify for a big loan doesn’t mean you can afford it!
A good lender will clearly explain your mortgage options and answer all your questions so you feel confident in your decision. If they don’t, find a new lender. A mortgage is a huge financial commitment, and you should never sign up for something you don’t understand!
The answer is, yes! If you apply for a mortgage without a credit score, you’ll need to go through a process called manual underwriting. Manual underwriting simply means you’ll be asked to provide additional paperwork—like paystubs and bank statements—for the underwriter to review. This is so they can evaluate your ability to repay a loan. Your loan process may take a little longer but buying a home without the strain of extra debt is worth it! Keep in mind, not having a credit score is different than having a low credit score. A low credit score means you have debt but having no credit score means you don’t like debt!
Not every lender offers manual underwriting. Do a little research on the front end to find the ones in your area that will.
A quick conversation with your lender about your income, assets and down payment is all it takes to get prequalified. But if you want to get preapproved, your lender will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight when you’re ready to make an offer on a home.
Buying too much house can quickly turn your home into a liability instead of an asset. That’s why it’s important to know what you can afford before you ever start looking at homes with your real estate agent.
We recommend keeping your mortgage payment to 25% or less of your monthly take-home pay. For example, if you bring home $5,000 a month, your monthly mortgage payment should be no more than $1,250. That means you can afford a $211,000 home on a 15-year fixed-rate loan at a 4% interest rate with a 20% down payment.
We recommend putting at least 10% down on a home, but 20% is even better because you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage.
Saving a big down payment takes hard work and patience, but it’s worth it. Here’s why:
- You’ll have built-in equity when you move into your home.
- You can finance less, which means you’ll have a lower monthly payment.
With so many mortgage options out there, it can be hard to know how each would impact you in the long run. Here are the most common mortgage loan types:
- Adjustable-Rate Mortgage (ARM)
- Federal Housing Administration (FHA) Loan
- Department of Vartan’s Affairs (VA) Loan
- Fixed-Rate Conventional Loan
We recommend choosing a 15-year fixed-rate conventional loan. Why not a 30-year mortgage? Because you’ll pay thousands more in interest if you go with a 30-year mortgage. For a $250,000 loan, that could mean a difference of more than $100,000!
A 15-year loan does come with a higher monthly payment, so you may need to adjust your home-buying budget to get your mortgage payment down to 25% or less of your monthly income.
But the good news is, a 15-year mortgage is actually paid off in 15 years. Why be in debt for 30 years when you can knock out your mortgage in half the time and save six figures in interest? That’s a win-win!
Before you lock in an interest rate, it’s worth knowing that high interest rates bring higher monthly payments and increase the amount of interest you’ll pay over the life of your loan. In contrast, a low interest rate saves you money in both the short and long term.
Here’s what the typical monthly mortgage payment includes:
- Principal
- Interest
- Homeowner’s insurance
- Property taxes
- Private mortgage insurance (PMI), if you put less than 20% down on your home
If you want to pay more on your mortgage, be sure to specify you want any extra money to go toward the principal only, not an advance payment that prepays interest.
Getting preapproved for a mortgage is just the beginning. Once the financial pieces are in place, it’s time to find your perfect home! While it’s one of the most exciting stages of the process, it can also be the most stressful. That’s why it’s important to partner with a buyer’s agent.
A buyer’s agent can guide you through the process of finding a home, negotiating the contract, and closing on your new place. The best part? Working with a buyer’s agent doesn’t cost you a thing! That’s because, in most cases, the seller pays the agent’s commission. Through our Endorsed Local Provider (ELP) program, our team can match you with the top real estate agents we recommend in your area.
Common Mortgage Questions
You can build equity in three ways. First (and easiest) is from market appreciation. Second, when making your monthly mortgage payment, try to send a little bit more. This will go directly to the principal of the loan, rather than the interest. Be sure your lender knows to put the extra toward principal, and not the next month’s payment. Even an extra $50 per month can quickly build equity, as well as knock years off of your loan. The third way to build equity into your house is to make improvements. There are a variety of ways to remodel and make positive changes to the interior and exterior of your home. One of the best ways is to add square footage/living space.
The best answer is “as many as it takes to find a home that works for you”. Purchasing a home will most likely be the single largest investment you will make, so it is important to make sure you find a home that meets your current and future needs. It’s best not to look at just one home, but also not to look at more than 6 or 7 in one day. It’s common to confuse the features if you view too many in one day. Bring a notepad and pen and take notes on your likes and dislikes of each home.
An acre of land is an area of land equal to 43,560 square feet. It is often compared to the size of a football field (without the end zones). One square mile is equal to 640 acres, called a “section”.
MLS stands for Multiple Listing Service. It’s a network of real estate listings in an area, where buyers can (through a Realtor or the Internet) view what is available in their price range, and with the features they are looking for. It is a system usually run and supported by the local Real Estate Board that has details of almost every home, land, and business listed for sale with a real estate agent.
DOM stands for “Days on Market”. This number allows buyers to see how long the property has been for sale. Some people believe that the longer a property has been on the market, the more motivated a seller might be.
A debt-to-income ratio is important to your lender. To figure out where you stand on the ratio, you must first understand the meaning of the figure. Lenders use various ratios, but the most common is 28/36. The first number, (also known as the front-end-ratio) is the percentage of your gross monthly income that you could comfortably afford to spend on your housing payment. This figure includes escrow for taxes and insurance. The second number, (also known as the back-end-ratio) is the percentage of your gross monthly income that should be spent on all long-term monthly debts combined.
Square footage includes finished, heated space, also known as “livable space”. Garages, unfinished basements and attics, for example, are not included when calculating a home’s square footage. Hallways and closets are included when determining a home’s square footage, however.
Lenders look into your credit rating, debt/income ratio, and many other documents to determine how much you can borrow. In addition, loan qualifications have been changing over the last year or so. As a rule of thumb, you’ll need to determine your gross income (before taxes) for all people that will be on the loan (borrower and co-borrower). Multiply this number by 2 to 2.5 This will give you a general idea of what you might qualify for. If you have a large down payment combined with little to no debt, the lender may believe that you can afford a more expensive home than this rule of thumb.
Earnest money is something of value (called “consideration”) that a buyer puts forth to bind an agreement, such as the sale of real estate. Earnest money is forfeited by the buyer if he or she fails to carry out the terms of the contract. It’s up front money from a buyer to show a seller that the buyer is serious about the purchase. The money is usually deposited into an escrow account and is usually applied toward the buyer’s down payment.
Closing costs are expenses incurred by buyers and sellers when the ownership of the property is transferred. These are usually negotiable items as to who will be responsible for their payment. Examples of closing costs include recording fees, documentary fees, real estate commission, taxes prorations, settlement fees, and title insurance.
Contingencies are “what ifs” in a real estate purchase and sale contract. They allow a buyer or seller to void the contract if certain items aren’t met. Examples of real estate contingencies are appraisal, inspection, house sale, and loan approval contingencies.
A loan commitment letter is given by the lender to the borrower stating the terms under which the lender has agreed to the loan. This is often considered “loan approval” which will allow the buyer to proceed with consummation of the real estate purchase.
Title Insurance insures a buyer that he or she is getting clear title to the property without any liens or encumbrances. A title insurance company researches the county records to see what has been recorded on the property. The title commitment will show what loans need to be paid off and what restrictions, if any, are on the property. The cost is determined by the sale price and varies with insurers. Typically, the seller pays for the policy, and any endorsements required by the buyer’s lender are usually a buyer’s responsibility.
Recently sold properties that are similar in size, location, and amenities to the home for sale are considered “comps”. You may hear this word when an appraiser or Realtor is helping to determine the fair market value of a property.
Also known as “hazard insurance”, homeowners insurance covers losses caused by fire, hailstorms, or other casualty on the property. Lenders usually require the buyer to have insurance in an amount equal to or greater than the loan amount. Flood insurance is required by the lender if the property is in a flood hazard area/flood plain. Condominiums and townhomes are somewhat different, as certain items may be covered by the homeowner’s association fees.
A real estate broker is an agent who is authorized to open and run his/her own agency. All real estate offices must, by law, have one principal broker. A seller’s agent is a real estate agent that works solely on behalf of the seller and owes duties to the seller, which include utmost good faith, loyalty, and fidelity. However, the agent must disclose to potential buyers all adverse material facts about the property, which are actually known by the broker. A buyer’s agent is a real estate agent that works solely on behalf of the buyer and owes duties to the buyer, which include the utmost good faith, loyalty and fidelity. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must, however, disclose to potential sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction. A transaction broker is a real estate agent that assists the buyer or seller or both throughout a real estate transaction with communications, advice, negotiation, contracting and closing, without being an agent for either party. When you are talking to a Realtor to help you purchase or sell your home, be sure to discuss the subject of agency.
Mortgage life insurance is optional and is usually term life insurance that is obtained in the amount of the loan on the home. Paid for by the buyer/borrower, it is usually taken out in an amount that will pay the house loan off, if the buyer dies.
Also known as private mortgage insurance (PMI), it is insurance to cover the lender on the mortgagee. This coverage is typically required on loans where the buyer is borrowing more than 80% of the value of the property.
A prepayment penalty is a penalty fee charged to the borrower for paying off a mortgage early, thus allowing banks (or owners, if they do the financing) to still make money off of the loan. Most loans these days do not have prepayment penalties, but it is advisable to check into this before signing any loan paperwork.
Home warranty plans can be purchased at the time a home is bought. They usually cover major items in the home such as the furnace and appliances. It is not a replacement for homeowners insurance but can provide additional coverage for some items.
An appraisal is an estimate of the value of a piece of property by a licensed, trained, and experienced individual called an appraiser. They are usually required by a lender to determine how much the property is worth in ascertaining how much they will loan on the property.
An appraisal is an estimate of the value of a piece of property by a licensed, trained, and experienced individual called an appraiser. They are usually required by a lender to determine how much the property is worth in ascertaining how much they will loan on the property.
The closing is the culmination of everything in a real estate transaction. It’s where the title, known as the deed, transfers from seller to purchaser. Closings may be held at a title company, or at the real estate agent’s office. The title company researches the chain of title to the home. Assuming the title is clear, all inspections are satisfactory, and all contingencies have been met, the title company (closing/escrow agent) will facilitate the closing by providing an explanation of documents to be signed, collection of and disbursement of funds, and a last minute check by the title company to make sure that a clear title to the property will be transferred.
An appraisal is an estimate of the value of a piece of property by a licensed, trained, and experienced individual called an appraiser. They are usually required by a lender to determine how much the property is worth in ascertaining how much they will loan on the property.
The Real Estate Settlement Procedures Act requires the lender to disclose certain information about a loan, including the estimated closings costs and Annual Percentage Rate.
Webster defines a covenant as “a formal binding agreement”. When property is recorded at the county Courthouse, covenants become “deed restrictions” that pass with transfer of ownership of the property. Also known as CC&Rs (covenants, conditions, and restrictions), these documents should be read thoroughly prior to entering into a home or land purchase agreement. That shed, fence, or guest home may not be allowed. When purchasing land, watch for minimum building square footage on proposed homes. However, some people prefer the freedom of having no deed restrictions. Although most newer subdivisions have adopted covenant controls, there are many areas without them. If such controls are objectionable, covenant controlled areas may be places to avoid.
The Real Estate Settlement Procedures Act requires the lender to disclose certain information about a loan, including the estimated closings costs and Annual Percentage Rate.
When you are prequalified, the lender gives you an estimate but does not formally commit to giving you a loan. Sellers often want to see that a buyer is prequalified for a loan, before they agree to accept the buyer’s purchase offer.
The Real Estate Settlement Procedures Act requires the lender to disclose certain information about a loan, including the estimated closings costs and Annual Percentage Rate.
“Realtor” is the symbol of a professional in the real estate business. Many people use the term Realtor synonymously with ‘real estate agent’ or ‘salesperson’. This assumption is incorrect. Not every real estate agent is a Realtor. Realtor is a designation that applies to one who pursues continuing education, abides by a strict Code of Ethics, stands for private property rights, and opposes discrimination in housing. You may be aware that Realtors are required to hold a state real estate license, but there are many other designations that a well-educated Realtor can hold. To become a licensed real estate agent, one must meet minimum requirements outlined by state statutes. To renew a real estate license, the state’s real estate commission requires that an active agent take a required number of continuing education courses every three years. A Realtor organization is based upon a Code of Ethics to which each member agrees to adhere. Within the Code are provisions that govern fair housing, professional conduct, and advertising. Realtors also work as “watchdogs’ for legislation that negatively affects private property, property taxation, and real property rights in relation to buying and selling land and homes. Realtors are the true professionals in real estate.
Making home improvements that add value to your home are a smart investment. But over improving real estate can be like pouring money down the drain. Too often homeowners make improvements that fit them specifically, which narrows down the market for resale. While it’s important to enjoy the amenities of the home in which you live, it’s still essential to think about potential resale of the property. When you improve your home, you get value in two ways—the economic value that comes when you sell the home, and the enjoyment value you get now. You may enjoy a $20,000 walk-through garden, but a new owner may see high maintenance and less time to enjoy boating at the lake.
Some improvements never pay off such as hot tubs, swimming pools, trendy paint colors, elaborate gardens, or high-end fixtures. The more the home is customized for you, the less likely it will be acceptable to a potential buyer. To maximize the salability of your home, stay neutral. Replacing carpet and painting interior and exterior surfaces provide some of the best increases in selling price per dollar invested. Other less expensive projects that provide a good return are cleaning and uncluttering a home, and making sure that the home is light and bright through both natural and artificial light.
When purchasing a home, it is important to perform a thorough assessment of the home’s structure, equipment, and surroundings. Real estate purchase contracts provide appropriate language to protect buyers from purchasing a structurally unsound home, while at the same time protecting sellers from liability. An inspection can be made by an inspection service company, or a buyer may choose to inspect the home him or herself.
The launch of the qualified opportunity zone program means that in return for rolling over profits from the sale of capital assets like real estate or company stock in certain economically designated areas, investors can delay paying capital gain taxes on those profits through 2026. Opportunity zones are similar in some ways to 1031 like-kind exchanges, which permit real estate investors to defer taxes on gains from the sale of a property by reinvesting the proceeds from the sale in another property within 6 months.
