Frequently Asked Real Estate Questions
Your home is more then likely the biggest purchase that you will ever make, so it is important make sure that you understand the process and that the house you are buying is the right one for you. In addition, since most people will only buy a few different houses over their lifetime, the home buying and selling process is not something that most people become experts on. Because of this, Realtors get a lot of questions about the process of buying or selling a home or about the terminology involved. Since a lot of people tend to do research online these days to be better informed I have made this section of some of the most frequently asked real estate questions. If you have any questions that I haven’t answered here or you would like to know more, feel free to contact me and I will help you out.
Frequently Asked Real Estate Questions by Home Buyers
How does the home buying process work?
This is a common question, especially for first time home buyers. Since the answer to this question is rather long and involved I have dedicated a whole page to this one. You can find the answer here: The Home Buying Process.
How long does the home buying process take?
Once you find a house and have your offer accepted the process usually takes around 30 days. The main reasons it takes so long is the process of getting a loan takes awhile, plus you have the inspection period that gives you around 10 business days to have the property inspected. If you are paying all cash for the house then it can take as little as a few days to purchase your home. On the other hand, if you are getting a FHA loan or using an online lender then it may take closer to 45 days for the loan process, and if you are using a VA loan then it usually takes about 60 days.
What is a home inspection?
As part of the home buying process, when your Realtor writes up your offer for the purchase of the home you are buying they will include a home inspection contingency. This will typically give you about 10 business days to have a home inspection done on the house. Although you can inspect the house yourself, the home inspection is usually done by a professional home inspector whose job it is to assess the condition of the house and find out any problems with the house before you buy it. Depending on the size of the house the inspection usually takes 2 to 3 hours. At the end of the inspection the home inspector will review any issues they found with you if you are present for the inspection, otherwise everything will be in their report. The report will seem a little scary because there will be a lot of stuff listed that the inspector found a problem with, but most of issues will probably be normal wear and tear stuff. Your Realtor will go over the report with you and discuss any issues that came up during the inspection.
What are CC&Rs?
CC&Rs stand for Covenants, Conditions & Restrictions. The easiest way to think of CC&Rs is to think of them as rules of the neighborhood. They are designed and in place to help protect the look and property values of the neighborhood. The CC&Rs are usually drafted by the neighborhood’s developer and then turned over to the Home Owners Association who enforces the CC&Rs after the developer is gone. Typical things that may be covered by the neighborhood’s CC&Rs are items like prohibiting parking an RV or trailer in the driveway, leaving trash cans out too long, painting your home extreme colors, or what kind of fence you can build.
Not all neighborhoods and homes have CC&Rs. Master planned communities almost always do and a lot of new construction homes in new developments also have them. If you are looking at a home that has CC&Rs, it is important to have your Realtor get you a copy of these so you can make sure that they don’t prohibit you from doing something that you plan to do or have at your new home.
What is a HOA?
HOA stands for Home Owner’s Association. HOAs are common in condominiums and planned communities where the HOA takes care of a common area or facilities for everyone living in the community to use. Usually you will pay a HOA fee monthly or quarterly to cover expenses for this up keep. HOAs are also in charge of enforcing CC&Rs for the neighborhood or building. Your Realtor should let you know if a house you are looking at has HOAs and what the fees are and what they go toward.
When will I get the keys to my new house?
After both the home seller and the home buyer sign all the documents at the escrow office, the paperwork is sent to your lender to fund the loan for the house. It usually takes about half a day to a day for the loan to fund. Once the loan funds the home sale is recorded with the county recorder and then transaction is completed. The escrow officer will let you know when they think this will happen when you sign documents.
Is the closing date on my contract guaranteed?
No, the closing date on your contract is an estimate of when it should close by. The wording in the contract says that the sale of the home is to be completed by the closing date that is listed on the contract. However so you can close sooner if everything goes smooth and quickly. Alternatively, sometimes things happen that cause a delay in the process and your Realtor will need to do an extension to give you more time which would push your closing date back.
How much earnest money do I need to put down?
The amount you should put down is somewhat flexible and negotiable. I usually recommend around 1% of the sales price of the home. This is enough to show you are serious about the purchase, but not too much for you to have to come up with at the beginning of the process. Sometimes home sellers will ask for a certain amount down, but this isn’t too common. Regardless of how much you put down, this earnest money will be applied to the down payment on the home.
What happens to my earnest money?
After your offer is accepted your earnest money gets deposited in an escrow account with the title company that was listed in your contract. The amount of the earnest money is then deducted from the amount of money you need to bring to the table at closing. If something does wrong with the deal such as the inspection turns up something bad or there is a problem and your loan doesn’t go through, you will get your earnest money back. For the most part the only time you would need to forfeit your earnest money is if you walk away from the deal without a valid reason or if the contract specified that the earnest money was non-refundable.
How much in cash do I need to buy a house?
How much cash you need to have on hand depends on the loan you are getting. To avoid having to pay some sort of mortgage insurance you would need to put down 20% of the cost of the home. Though most of the time it is fairly common for people to put down 10% and pay mortgage insurance until the have acquired 20% equity of the house. There are also loan programs out there that will allow you to put down as little as 3% to 5%. If you are a veteran you may even qualify for a no down payment loan. To find out what loan programs you qualify for, and what down payments these loans require, you should talk with a local mortgage broker.
Outside of the down payment percentage your lender requires, you will need to come up with an earnest money check for around 1% of the offer amount when you make your offer. This is deducted from your down payment at closing. You will also need money for a home inspection and an appraisal. The cost of these vary but may be around $400 to $500 each. At closing, in addition to the percentage of the loan you are putting down, there will also be some closing fees to pay the escrow company for various charges for the transaction. Your escrow officer will break these expenses down for you.
Do I really need to hire a home inspector?
It isn’t required for you to hire a home inspector but it is strongly recommended. In fact if you choose not to hire a home inspector, your Realtor will probably make you sign some paperwork saying you were advised to hire an inspector but are choosing not to. The main reason you are hiring an inspector is because they are experts at finding problems with homes. If you bought a home without an inspection and later found out your foundation was cracked or sinking, you would have an huge expense that wasn’t factored into the home price. With a home inspector, they would find this problem and you would have the option to walk away or renegotiate the price to include what it is going to cost to repair that issue.
What happens if the appraisal comes in lower than what I am buying the house for?
In hot markets where home prices are rising fast or getting bid up this is an issue that can come up. Your lender will only give you a loan for what the house actually appraises for regardless of what you offered to buy the house for. So if the appraised price is lower then your offer you have several options. The first and most common option is to present the appraisal to the home seller and their Realtor and ask them to reduce the sales price to what the home appraised for since that amount is the current market value of the house. If the seller refuses to reduce the price, you can either take your earnest money back and walk away or come up with the difference between the sales price and the appraised value in cash and bring that additional amount to closing.
Should I get a home warranty?
It all depends on your risk tolerance and how tight your budget is. If it is an older home with older appliances it might be a good idea. A home warranty will cost you probably around $400 to $600, but if anything that is covered breaks you just have to pay a service fee, usually around $70 and they will fix or replace the issue. So if something like your furnace or air conditioning breaks the warranty can easily pay for itself. The warranty is like an insurance policy for the mechanical stuff around your house, so it depends on how likely you think things are to break in the first year you own that house.
Frequently Asked Real Estate Questions by Home Sellers
What is the home selling process?
This is a common question, especially for first time home sellers. Since the answer to this question is rather long and involved I have dedicated a whole page to this one. You can find the answer here: The Home Selling Process.
What should I do to get my home ready to sell?
Here are my minimum recommendations if you are going to be selling your home. Repair all the small things around your house that you have been putting off. Stuff like a missing knob on a drawer, burnt out light bulb, hole in the wall, or a leaky faucet. In addition you will want to clean your house really well and de-clutter most of the rooms to make the house seem like it has more space. The better the condition of your home the easier it is to sell. If you want more recommendations on getting your home ready to sell check out my page on Staging Your Home To Sell.
When do I need to be out of my house?
Unless you have made prior arraignments with the home buyer you need to be out of the house by the closing date on your contract. The house also needs to be clean and in the same condition it was when the buyer previewed the house.
What do I do if someone knocks on my door to see the house?
If you are using a Realtor to sell your home and someone contacts you directly to see your home you should give them the name and number of your Realtor and have them contact them to set up a time to view the house. The main reason I don’t recommend showing people your home yourself is because you don’t know who this person is and it could be a safety issue. The other reason is that you are paying your Realtor to sell your house for you and they are the experts at showing homes to prospective buyers. It is possible you could say something that scares the buyer off or leads them to believe something that may not be accurate.
Is the closing date on the contract guaranteed?
No, the closing date on your contract is an estimate of when it should close by. The wording in the contract basically says that the sale of the home is to be completed by the closing date that is listed on the contract. However you can close sooner if everything goes smooth and quickly with the buyer and their loan. Alternatively, sometimes things happen that cause a delay in the process and the buyer may need to do an extension to give them more time which would push your closing date back.
What happens if the appraisal comes in lower than what I am selling the house for?
In hot markets where home prices are rising fast or getting bid up this is an issue that can come up. Lenders will only provide a loan for what the house actually appraises for regardless of what the sales price on the contract is. So if the appraised price comes in lower then the offer price, several things could happen. The first and most common thing that happens in this situations is for the buyer’s Realtor to ask you to reduce the sales price to what the home appraised for. If you are willing to drop the price then the sale will continue. If you don’t want to reduce the price, then the buyer will have the option to either take their earnest money back and walk away, or to come up with the difference between the sales price and the appraised value in cash and bring that additional amount to closing.
Do I get to keep the earnest money if the sale doesn’t go through?
Most of the time, no. There are several contingencies listed in the contract that if the sale fails because of those items the buyer is allowed to back out and keep their earnest money. The two main reasons sales fail is either the home inspection turns up something the buyer doesn’t like or there is a problem with them getting their loan. Both of these items are contingency items. Typically the only way the buyer forfeits their earnest money is if they just change their mind and walk away with no valid reason.