Frequently Asked Questions

My goal is not only to help you find your perfect home or to sell your current home, it is also to ensure that I help you understand the process you are embarking on.  The purchase or sell of a home is a huge investment and you should be comfortable with the process.

What is the difference between a Realtor® and a Real Estate Agent?

A Real Estate Agent is anyone who is licensed to help people buy and sell commercial or residential property. The agent may do so as a sales professional, an associate broker or a broker.

A Realtor® is a trademarked term that refers to a real estate agent who is an active member of the National Association of Realtors (NAR), the largest trade association in the United States and agree to ascribe to a 'Code of Ethics'. The 'Code of Ethics' consists of 17 Articles, 71 supporting Standards of Practice and 131 explanatory case interpretations.

Members are required to complete periodic training on the Code of Ethics as a condition of continued membership.

What is an Appraisal?

An appraisal is an unbiased professional opinion of a home's value. Appraisals are almost always used in purchase-and-sale transactions and commonly used in refinance transactions. In a purchase-and-sale transaction (buying or selling a home),

An appraisal is used to determine whether the home's contract price is appropriate given the home's condition, location, and features.

Lenders want to make sure that homeowners are not over-borrowing for a property because the home serves as collateral for the mortgage.

What is 'Earnest Money' and what is it for?

If you’re ready to make an offer on a particular home and also want to prove to the home seller that you’re serious about your offer, there’s a way to prove your commitment. This is where earnest money comes into the picture.

Earnest money is an amount of money you put down to show you’re serious about purchasing a home. It’s also known as a good faith deposit.

Earnest money protects the seller if the buyer backs out. It's typically around 1% - 3% of the sale price and is held in an escrow account until the deal is complete. If all goes smoothly, the earnest money is applied to the buyer’s down payment or closing costs.

How much Earnest Money do I need?

You should put down anywhere from 1 percent to 2 percent of the purchase price in earnest money.

It will be held in an escrow and applied to the rest of your down payment at closing. If your offer to purchase is $250,000 your typical earnest money amount would range from $2,500 to $5,000.

In your offer, you specify the amount of earnest money that goes into escrow should the seller accept the offer.

It’s usually due within three days of a signed and accepted offer. The money can be wired to an escrow account, or a cashier’s check can be delivered to the seller’s agent.

What is Private Mortgage Insurance (PMI)?

For homeowners who put less than 20% down, Private Mortgage Insurance or PMI is an added insurance policy for homeowners that protects the lender if you are unable to pay your mortgage.

It is not the same thing as homeowner's insurance. It's a monthly fee, rolled into your mortgage payment, that’s required if you make a down payment less than 20%. While PMI is an initial added cost, it enables you to buy now and begin building equity versus waiting five to 10 years to build enough savings for a 20% down payment.

While the amount you pay for PMI can vary, you can expect to pay approximately between $30 and $70 per month for every $100,000 borrowed.

What is Title insurance?

Title insurance is a form of indemnity insurance that protects lenders and homebuyers from financial loss sustained from defects in a title to a property.

Key Takeways:

- Title insurance protects lenders and buyers from financial loss due to defects in a title to a property.

- The most common claims filed against a title are back taxes, liens, and conflicting wills.

- A one-time fee paid for title insurance covers pricey administrative fees for deep searches of title data to protect against claims for past occurrences.

What is a Seller's market?

A seller’s market arises when demand exceeds supply. In other words, there are many interested buyers, but the real estate inventory is low. Since there are fewer homes available, sellers are at an advantage.

In a seller’s market, homes sell faster, and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can raise their asking prices. Furthermore, the increased interest means that buyers rarely have the power to negotiate and are more willing to accept properties as-is.

Due to the shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for.

What is a Buyer's market?

A buyer’s market occurs when supply exceeds demand. To put it another way, real estate inventory is high, there are plenty of homes for sale, but there’s a shortage of interested buyers.

These conditions give buyers leverage over sellers because when supply is higher and demand lower, the market is forced to respond.In a buyer’s market, real estate prices decrease, and homes linger on the market longer. So, sellers must compete with each other in order to attract buyers.

Typically, sellers will drop their asking prices to gain an advantage in the market. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.

What is Home Warranty?

A home warranty is a service contract that pays to cover the cost to repair or replace your home’s appliances and systems. The items that home warranty companies will cover varies, but here are some typical inclusions:

- Dishwashers,
- Ovens,
- Refrigerators,
- Washers and dryers and other appliances
- Electrical,
- HVAC and plumbing systems
- Septic systems or wells
- Pool and spa equipment
- Roof leaks

As you do with an insurance policy, you pay a premium for your home warranty coverage. If there’s an issue with one of the covered appliances or systems, you’d call your home warranty company to file a claim and have them send out a technician.

Home Warranties offer a buyer a piece of mind that unknown issues, that always happen during home ownership, are not going to break the bank when they do.

What is an Open House and why have one?

An open house is when home buyers and the general public are invited to tour a home for sale. Generally, open houses occur on weekends, are held in the late morning or afternoon, last a few hours and are hosted by the seller’s real estate agent.

The agent will typically market the event with open house advertisement methods like signs, flyers and online listings to attract buyers. The seller benefits from increased exposure during a small period of time and the competitive atmosphere that creates.

Open Houses are a great way for buyers to look at a home without scheduling a viewing. Just remember, the showing agent represents the seller and has their interests at heart. It is always a good idea to have your own representation in the form of a buyer's agent independent from the seller.

If you are working with an agent and are touring opens houses, let the selling agent know that you are already represented.

What is a Contingency and why is it used?

A contingency clause defines a condition or action that must be met for a real estate contract to become binding. A contingency clause defines a condition or action that must be met for a real estate contract to become binding.

Example of possible Contingencies:

- An appraisal contingency protects the buyer and is used to ensure a property is valued at a minimum, specified amount.

- A financing contingency (or a “mortgage contingency”) gives the buyer time to obtain financing for the purchase of the property.

- An inspection contingency or a due diligence contingency gives the buyer the right to have the home inspected within a specified time period.

- A home sale contingency gives the buyer a specified amount of time to sell and settle their existing home in order to finance the new one.

What is the difference between Pre-Qualification and Pre-Approval?

Pre-qualifying is just the first step. It gives you an idea of how large a loan you'll likely qualify for.

Pre-approval is the second step, a conditional commitment to actually grant you the mortgage.

Key Takeaways:

- Pre-qualification is based on data the borrower submits to a lender, which will provide a ballpark estimate of how much they can borrow. The pre-qualified amount isn’t a sure thing, because it's based only on information provided.

- The pre-approval process is more detailed / in-depth and requires proof of all the data provided in the pre-qualifying stage.

Getting pre-qualified and pre-approved for a mortgage also gives potential homebuyers a good idea in advance of how much house they can afford. 

What exactly is Escrow?

Escrow refers to a third-party service that's usually mandatory in a home purchase.

When a buyer and seller initially arrive at a purchase agreement, they select a neutral third party to act as the escrow agent.

The 'escrow agent' collects what is known as "earnest money" from the buyer: a deposit that is equal to a small percentage of the sale price.

In exchange, the seller takes the property off the market. Until the final exchange is completed, both the buyer's deposit and the seller's property are said to be in 'escrow'.

What is an Appraisal Gap?

An appraisal gap is where the buyer offers to bring the difference between the contract price and the appraised value in cash. If the house appraises for list price but the buyer is in contract for $10,000 over list price the buyer has offered to pay up to $10,000 over the appraised value if necessary. They will cover difference but put a limit at $10,000.

This strategy is very attractive to sellers. Offering over appraised value when the standard real estate purchase contract states that the contract is voidable if the home does not appraise at list price. The seller likes the offer where the buyer has offered to cover the appraisal gap.

What’s the difference between Interest Rate and APR?

The interest rate is the amount a lender charges you for a loan, expressed as a percentage of the total loan amount. APR (annual percentage rate) expresses how much you’re paying in total for your borrowing, including interest payments, upfront costs, and continuing loan costs spread over the life of the loan.

While it might seem like an inconsequential distinction, knowing the difference between interest rate and APR can help you make smarter borrowing decisions and save you a ton of money over your lifetime. And the same principles apply to all your borrowing. APR is generally the better guide to the actual cost of any loan.

What does “Due Diligence” mean?

In short, due diligence is the time period for the buyer to do their property investigations, including a home inspection, termite inspection, radon inspection, A/C inspection, getting an appraisal or financing in order, etc.

Typically, the buyer writes the seller a non-refundable check for the right to do all of these property inspections. But, it also gives the buyer the right to back out of the contract for any reason whatsoever.

Assuming everything goes well and the transaction goes to closing, any due diligence fees or earnest money funds are credited to the buyer.

Have More Questions?

The most enjoyable part of my job, outside of being able to find a client their perfect home or to get the most out of the home they are selling, is to educate people on the Real Estate Process.  Always feel free to call me with any questions you have, even if you are not ready to buy or sell a home, I would love to help you understand the process so you are educated when you are ready.

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