Frequently Asked Questions
What is the first step in buying a home?
There are actually two simultaneous first steps to buying your home. They are: 1a – Finding a good Realtor, and 1b – Finding a good loan officer. These steps take place at the same time because neither a Realtor nor a loan officer can assist you with your home purchase without the help of the other (unless you are paying cash which is why finding a good Realtor is 1a). Some of the most important information for your Realtor to have is the purchase price for which you’re qualified. This amount may be more or less than what you are comfortable spending. If you are qualified for less than you want to spend, then your Realtor can help you determine whether to wait until you can afford what you want, or if you can find something that you want within your price range.
If you already own a home, then your Realtor will help you determine what it is worth and how much money you will net from the sale in order to buy your new home.
What is the first step in selling a home?
The first step to selling your home is to determine its place in the market and the associated market value. This is best done with the help of a professional and experienced Realtor who has helped many people buy and sell homes (so he/she has seen inside of a lot of homes) and who therefore has a good feel for how your home compares to others on the market. If updating and/or renovations are necessary, then your Realtor should be able to determine how those changes will affect the price for which you can sell your home.
What is a short sale? How long does one take?
A short sale is a real estate transaction where the seller of the property owes more on the property than it is worth and is unable to make up the difference between the amount owed to his/her lender (or lenders) and the proceeds from the sale (price minus closing costs) out of his/her own funds. As a result, the seller must negotiate with the lienholder (or lienholders) on the property to request that the bank (or banks) accept an amount less than the actual amount owed and allow the seller to sell the property. Because the lender is being asked to take less than it is owed, this process requires a lot of documentation on the part of the seller (borrower). As a result, it can be a lengthy process. The fastest short sales are usually approved in 4-6 weeks, but can easily take 2-3x that long depending on the bank(s), the experience of the listing agent, the cooperativeness of the seller, whether the property is in the foreclosure process, and many other factors.
What is a REO/foreclosure/bank owned property?
As you might be able to tell from the way that the question is worded, these three things are actually synonymous. “REO” stands for Real Estate Owned (by a bank) and is sometimes abbreviated ORE (Owned Real Estate). Either way, this refers to properties that a bank has had to “take back” via the foreclosure process (and which it now owns as a result). A “foreclosure” property is one that has been foreclosed upon by a bank or other lienholder (lienholders can be banks, credit unions, individuals, corporations, homeowner associations, contractors, and a host of other entities). A bank owned property is self-explanatory; it is a property that is owned by a bank (rather than an individual property owner). Again, all these terms are basically the same thing.
What is included in a home inspection? How much does one cost? Who pays for it?
A home inspection includes a visual, non-invasive inspection of the following systems or components of a home: roof, heating and cooling, electrical, plumbing, exterior cladding (e.g. brick, Hardie board, vinyl, etc.), foundation/crawl space and attic, interior finishes, and appliances. An inspector will note deficiencies (problems) in any of these systems or components, but will generally not mention cosmetic issues (scuffs on walls, mildly stained carpet, etc). A non-invasive inspection means that the inspector is not opening walls to see what is inside. It is generally assumed that if the exterior cladding is in good condition, and the interior wall is in good condition, and there are no signs of problems (stains, wet spots, wood rot, etc.), then the inside of the wall cavity is also in good condition. Inspections of wells and septic tanks are performed separately by other contractors. Radon can be tested for by most home inspectors, but check to make sure that they have the appropriate licensure and are not just using “do-it-yourself” kits from a big box store.
The cost of a home inspection varies based on the age of a home, size of a home, and whether it has a slab foundation or crawl space. Most residential inspections can be done for between $300-600 and are paid for by the buyer. A radon test usually adds around $90-100.
Who pays the real estate commission? How much is it? When is it paid?
Generally, both sides of the real estate commission are paid by the owner/seller of the property. “Both sides” means that the seller is paying the commission for his/her Realtor and the commission for the buyer’s Realtor. That means the buyer is getting the services of his/her Realtor for free. There is no standard real estate commission, though it is most common to see a total commission of between 5-6% of the sales price. That percentage is typically split evenly between the seller’s Realtor (called the “listing agent”) and the buyer’s Realtor (called the “selling agent”).
Even in the case of most FSBOs (pronounced “fizz-bo’s”, i.e. homes that are For Sale By Owner), the seller will cooperate with a buyer’s Realtor and pay that side of the commission. The real estate commission (sometimes referred to as a “brokerage fee”) is paid at the closing of the purchase and sale transaction. This means that there is no up-front or out-of-pocket cost for either the buyer or the seller unless a transaction is consummated (i.e. closed – closing is where the title is transferred from seller to buyer in exchange for funds being transferred from buyer to seller).
How long does it take to close on a home purchase?
The length of time that it takes to go from an accepted contract (where the buyer and seller agree to all the terms) to closing varies based on several factors, namely, what type of transaction it is (traditional arm’s length, short sale, or foreclosure sale) and how the buyer is coming up with the funds to pay for the property (either getting a traditional mortgage loan, seller financing, private financing – like from a relative, or cash).
In a traditional arm’s-length transaction where the buyer is not getting a loan and is “paying cash”, it could take as little as a few days to close (basically, as long as it would take to ensure clear title and do inspections). On the other end of the spectrum, if the seller is having to go through the short-sale process and the buyer is getting a traditional mortgage loan, it could take 3-6 months to get from contract to closing. A typical arm’s-length transaction where the buyer is getting traditional financing usually takes around 45 calendar days (though it can be done more quickly if the buyer has all his/her loan documentation in order at the beginning).