Top Frequently Asked Questions From Home Buyers
Whether a buyer is purchasing their first home or their fifth home, the home buying process can create many emotions and feelings. One of the best ways to ensure the process is not overwhelming for a buyer is to be well educated and properly prepared for the process.
There are normally many questions that home buyers will have throughout the process. Even an experienced home buyer can forget exactly how the process works and what the proper steps are to ensure the process is relatively smooth.
When buying a home, one of the most important things to understand is that “no question is a dumb question”. If you’re unsure of something when buying a home, ask!
There are many questions that home buyers seem to ask quite often. Some questions are before staring the home buying process, during the home shopping, while writing the purchase offer, or after an offer is accepted. Here are the top frequently asked questions from home buyers.
Questions Asked Before Starting the Home Buying Process
- Should I talk with a bank before looking at homes?
The answer to this question is YES! There are so many reasons why you should talk with a bank and get pre-approved before looking at homes. First and foremost, talking with a hank before looking at homes can help you understand your purchasing power. There is no reason to look at homes the are listed for $250,000 if you can can only afford up to $200,000.
If you’re a first time home buyer, talking with a bank before looking at homes is strongly encouraged, as there are many first time home buyer programs available. These programs can vary from state to state and county to county, so knowing exactly what’s available to you is critical.
Another important reason to talk with a bank before looking at homes is so you understand exactly what costs are associated with buying a home. There are many home buyers who don’t understand the difference between a down payment, pre-paid times, and escrows, which can be thoroughly explained by a mortgage professional. A mortgage professional can give you advice on the type of financing you should be looking to obtain and also whether or not you should request the seller to contribute towards your closing costs, also known as a seller’s concession.
- Should I buy or continue to rent?
Purchasing a home can be a sound investment. This being said, renting can also be a better option for some, depending on the circumstances. The current interest rates are incredible despite the recent increase. A 30-year FHA mortgage can be locked in at a rate of around 4.0%. Since, the interest rates are so low, it actually can be cheaper to pay a mortgage right now than paying rent.
There are questions that you should ask yourself before deciding to purchasing a home. One of the most important things to consider is the length you plan on staying in a home, if you were to purchase. If the answer is only a few years, it’s likely the better decision is to continue renting. Another question to ask yourself if whether you are ready to take on the additional “responsibilities” of owning a home. When owning a home there will be general home maintenance that should be kept, and some might not be ready for that. Buying a home is a great option in many cases, but not always.
- Can I rent-to-own property?
The more appropriate term is “seller” or “owner” financing and this method finances the purchase directly through the person or entity selling it. Owner financing is extremely rare but common in a buyers’ market. They are out there, but there are some things that you need to know before agreeing to a rent-to-own.
When an owner of offering owner financing as a possible financing option, they are taking on a high risk since in most cases, a rent-to-own buyer has a credit score that is less than desirable. Since an owner is taking a higher risk, the terms for an owner financing must be considerably favorable for the owner. This often leads to less than favorable terms for a buyer. When looking at owner financing as an option you can expect to provide a considerable amount of money down and a higher interest rate than what a lender is currently offering.
If you are able to purchase a home by financing through a bank or lender, you will be better off because the terms will be more favorable.
- I own a home, should I buy another before selling my current home?
There is truly no concrete “correct” answer to this question. There are pro’s and con’s to buying a home before selling your current home and the same can be said about selling your current home before buying another.
Buying a home before selling your current home
The biggest benefit to buying a home before selling your current home is that fact that you have a suitable property lined up. This can reduce the stress and pressure of having to find a one once your current home is sold. This however can also crate a disappointment and heartbreak. If you are unable to purchase a new home with our having to sell your current home, you’re purchase offer is going to be contingent upon sale and transfer of title of your current home. If your current home doesn’t sell in a timely manner, this can lead to you getting “bumped” by a non-contingent buyer and you losing out on a the home you’re looking to purchase, which can be disappointing.
Selling your current home before buying a new home
The time it takes to sell your current home is unpredictable. There is no crystal ball that exists that you can tell you exactly how many days it will take. Selling your current home before buying a new home will put you in an ideal position to negotiate on the new home you’re purchasing due to the fact that you are purchasing without the sale contingency of your current home.
One risk of selling your current home without buying a new home first is the chance of not being able to have a place to live. There are options if your current home sellers before buying though. A “lease-back” can sometimes be negotiated with the buyer of your current home. A “lease-back” would allow you to retain possession of your current home for a certain number of days after closing at the expense of paying the buyer’s mortgage. A “lease-back” allows for additional time to find a new home.
- Do I really need a REALTOR® when buying a home?
When buying a home, it’s strongly recommended you have a REALTOR® and not just a “real estate agent”. There are many reasons why you should have a REALTOR® represent your best interests when buying a home. Keep in mind, all REALTORS® are not the same.
The term “REALTOR®” is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and pledged to a strict Code of Ethics and Standards of Practice.
There are a lot of important reasons to hire a buyers agent when purchasing a home. The most obvious is because in almost every scenario the service is at no cost to a buyer. Hiring a top buyers agent can make the entire process of buying a home seem relatively simple. Your buyers agent is there to assist you with securing financing (if needed), help you negotiate the best price and terms, and also to be your trusted advisor throughout the process.
Attempting to buy a home without a REALTOR® can really make the home buying process more difficult. Having a REALTOR® is always recommended when buying home. One thing not to do when buying a home is calling the listing agent because you don’t want to “bother” your REALTOR®. This is one thing that real estate agents hate. When choosing a buyers agent, make sure you know how to properly interview prospective REALTORS® when buying a home.
- Who pays the REALTOR®’s fees when buying a home?
One reason why buyers ask the question about the need of having a REALTOR® when buying a home is because they don’t understand who pays the REALTOR® fees when buying a home. There are no guarantees, however, in most cases the seller pays the REALTOR® fees.
Questions Asked While “Home Shopping”
- What is a short sale?
Before getting involved in a short-sale, it’s important you understand exactly what it is and what to expect from a short sale. The easiest way to understand a short sale is the sale of a home in which the proceeds from the sale are less than the balance of debts secured by lien holders against the property and the home owner cannot afford to pay the liens in full.
Before purchasing a short sale, you should consider things such as the time it can take for a short sale response, the fact that a foreclosure is still possible, and that many short sale properties are in disarray. Short sales are not impossible to buy but you must be patient and be in no immediate rush to move.
- What is a foreclosure?
Believe it or not, foreclosures can actually be a smoother transaction than a short sale. A foreclosure, sometimes referred to as a REO, is a property that is owned by the lender. If you’re considering the purchase of a foreclosure, it’s important to understand that most are sold “as-is”. Foreclosures, if not purchased by an owner occupant, are often purchased by investors, fixed up, “flipped”, and sold to a owner occupant.
- How is the neighborhood/area?
When buying a home, a common question home buyers have is regarding the neighborhood/area. As a real estate professional, there are rules against steering and providing personal insight into specific areas and neighborhoods. This doesn’t mean that your REALTOR® cannot provide you with tips to help you choose the right neighborhood when buying a home. Many buyers wonder about the growth of the local economy, crime statistics, taxes, and local amenities. If you have a top REALTOR® when shopping for a home, you should be able to receive all of the pertinent information to allow you to make an educated decision on the areas and neighborhoods.
- How are the schools?
This is another question that REALTORS® should tread very lightly with. There is no doubt that schools impact property values. Just like tips for selecting neighborhoods, a top REALTOR® should be able to provide you with names or websites where you can find information on the local schools so that you can determine whether or not the schools are acceptable to you or not.
- What are the average utility bills?
When buying a home, it’s important to know what additional costs will be in addition to the monthly mortgage payment. Utility bills are just one of the additional costs to consider when buying a home. Utility bills can be obtained from the home owner and in some cases, from the local utility company, who can provide averages over the past 12 months. Keep in mind, everyone prefers to their home temperatures different, so the average bill could be different if you were to purchase the home.
- What’s the age of the ______ ?
When viewing homes, many buyers want to know the ages of specific items in a home. The most popular items in a home that buyers want to know about the major mechanical items, such as the roof, furnace, water heater, and air conditioning unit. An experienced REALTOR® should be able to find the dates of a furnace, water heater, and air conditioning unit by looking at the serial numbers. The roof age is often known by the home owner. If not, the age usually can be approximately determined by looking at the roof characteristics, such as the sagging areas and the way the shingles are laying.
- How many homes should I look at before submitting a purchase offer?
This question is often asked and is a simple answer. The answer is, there is no specific number of homes you should look at before buying a home. Don’t feel that of you were able to purchase the first home you look at that you’re making a mistake. The same can be said if it takes you looking at 25 homes.
Questions Asked While Submitting a Purchase Offer
- How much should I offer the sellers?
When buying a home, you are the only one who can determine how much you should offer a seller. Certainly it’s suffused you ask for your REALTOR®’s advice and thoughts, but ultimately you are the only person who can determine how much you should offer.
- What is an Earnest Money Deposit?
The earnest money deposit, also known as a “good faith deposit“ is a negotiable amount but typically begins at at least 1% of the asking price. Think of this as a small preliminary down payment. This is paid and made out to the title company or law office administering the owner’s policy of title insurance and and is credited towards the sales price and deducted from your down payment. The primary purpose of this deposit is to show a seller you are serious about purchasing their home. The higher the earnest money, the more serious the buyer.
- How long does the seller have to respond to my offer?
There is no standard answer to this question. Purchase offer will have a “life”. The “life of the offer” can vary from 12 hours to 3 or 4 days. There are many circumstances the can effect the length of the “life of the offer”. Your REALTOR® should know how long a “life” to give your offer. If you’re looking to purchase a home that is newly listed and the possibility of multiple offers exists, a shorter life if recommended. If the home you’re looking to purchase has been on the market for 3 months and the seller is located out of town, a 2-day “life” may be necessary and/or recommended.
- What if my offer is rejected?
When a purchase offer is submitted to the seller there are generally four possible responses. The first is an accepted offer, the second is a counter offer, the third is a rejected offer, and the final is an offer that is not responded to. If your offer is rejected, meaning the seller says no and doesn’t counter, you have the right to place another offer. It’s not very common an offer is rejected or not responded to, unless a seller is offended by a low-ball offer.
- Do I have the option to have any inspections?
When buying a home, you have the option to perform several types to of inspections. The purchase offer you write can be contingent upon a satisfactory home inspection, pest inspection, chimney inspection, radon test, and many other inspections. In most cases, it’s recommended that when buying a home, you a the bare minimum have a home inspection. There are home inspection findings that are more common than others, however, no two homes are alike so it’s a great idea to get the home inspected during your termination option period.
Questions Asked After a Purchase Offer is Accepted
- What’s the next step?
Congratulations! Your offer was accepted, not what? Between contract acceptance and the closing date, there are many things that need to be completed. In a nutshell, after an offer is accepted, generally any inspections will be completed. After inspections, you complete a formal mortgage application and last but not least, the title, abstract, survey, and any miscellaneous paperwork is completed. When buying a home, finding the home is only one part of actually becoming a homeowner. Throughout the mortgage process, you should expect the lender to require documentation, letters, and other items from you to satisfy the bank conditions, so don’t be upset or surprised when this happens.
- Do I need to do a final walk-through?
As a buyer, you have the option to perform a final walk-through. Is a final walk-through a requirement? No. Is a final walk-through necessary? Yes. Generally when buying a home several weeks go by between when you last walked through the home. A lot can change during that time. When doing a final walk through a few things you should check is the furnace is working, the toilets are flushing properly, and that there is hot water.
- When is the closing date?
When buying a home, the excitement level is extremely high. It’s important to understand that the closing date in the purchase offer is a target and not a guarantee. Before you hire the movers and take time off from work, know that the closing date in the contract isn’t necessarily the date you will take procession of your new home. Many buyers will ask their REALTOR® this question, however, it isn’t up to the agents when a closing will be. Ultimately it is the title company that sets the date and closing time.
When buying a home, being prepared and well educated can really make a huge difference. Again, “no question is a dumb question” and if you are unsure of something, ask! The home buying process begins before you ever look at one home and the process continues all the way up to the final walk-through. When buying a home, it’s critical you’re on your A-game, stay organized, and remain focused throughout the entire process. After reading these frequently asked questions,