You're considering buying a home; great! This is a great endeavor and a worthy investment that will probably pay off depending on how long you keep the home and the investments you make to the property. Homeownership is not for everyone. If you move a lot, prefer someone else to take care of the maintenance and landscaping, or you simply don't want the responsibility of the house of your own, homeownership may not be right for you, and that's okay. Renting might be the best option for you but for those that desire to have a little piece of land to themselves, settle down, raise a family or lifestyle and prefer the maintenance and upkeep themselves, homeownership is ideal.
In my several dozen years in the real estate professional, I have answered hundreds of questions when it comes to buying real estate. I want my homebuyers to be educated and informed with some of the more common questions that I get asked. Here's a list of some of the top questions that I've been asked and I've asked a few of my real estate associate to give me their response as well as the most common questions they often get asked from first-time homebuyers.
#1. How do I get started?
This question encompasses a lot of different information. It all depends on where you are starting from. If you are currently renting you are probably used to paying a monthly housing expense. This can get rolled right into a mortgage and if you are comfortable paying monthly for your housing expenses, a mortgage payment should be all that different. One of the first things that you should do is to talk to a lender before looking at property. I know that it can be really fun to browse real estate websites (like my own) and daydream about the house you could afford. But that's just it, you don't know how much you can afford. The last thing I want is for you to fall in love with the property only to discover your current budget or finances cannot support the monthly payment for it. I always recommend all of my real estate buyers talk to a lender first, that is if they are planning to finance the property. Those that plan on paying in cash will simply need to keep their budget a little less than the amount they have on hand to cover closing costs and any additional fees. A lender will go over your entire financial situation and determine your interest rate, how much you can afford in a monthly payment, and will give you a good range of pricing that you can afford up to the maximum value.
Note: try not to max out your budget so that you have a little left over for home repairs or improvements once you move in.
#2. How much money do we need to make an offer?
Not only will you need to know how much in total you will need to buy the house regardless of financing for cash, but you will need some initial funds for an earnest money deposit, inspection and possibly an appraisal. Your lender will help you out with all of these details but it's important to have at least .5% to 3% of the purchase price of the home in liquid cash as an earnest money deposit. This earnest money is submitted with the offer to essentially "hold" the property against any other potential buyers. You are willing to put this amount of money down in order to hold the property through the purchase and sale agreement. If for some reason the seller should back out of the transaction or a contingency does not go through, you will be able to get your earnest money deposit back, but, if you simply back out of the deal without using a contingency or any valid reason, you could forfeit your earnest money deposit to the seller. The seller will have to relist the property and start the process all over. This earnest money deposit will make up for the loss of time.
Note: it is very rare that buyers do not receive the earnest money back. A good buyers agent can negotiate through just about any situation.
You may also need funds for an inspection. I recommend that all of my homebuyers get a professional inspection completed on their home. The only reason I would suggest waiving the inspection is in a hot real estate market with multiple offers and you are certain you will buy the home regardless of the inspection outcome. This is very uncommon and should be considered very carefully before submitting a waived home inspection contingency.
Home inspections tend to run anywhere from about $300-$800 depending on the type of inspection and the size of the home. Inspectors have a broad knowledge of just about everything on a home but if they should suggest an additional inspection to the roof, septic or sewer system, pest inspection or foundation, it is recommended to do this in order to save you thousands of dollars in repairs in the future. Additional inspections can range from about $500 to over $1000. It is rare and uncommon but it is something to consider and keep in mind.
#3. Do I have to pay my agent?
This is somewhat of a two-part question and a popular one sent in by and Irvine California real estate agent asking about the role of the buyer's agent and if the buyer has to compensate their agent for the use of their time.
The two-part question begins with homebuyers realizing that they need their own agent. Most first-time buyers have no idea that there are usually two real estate agents involved in a real estate transaction. They simply call at the listing agent of a home they want to see and use that agent to facilitate either that transaction on that home or any future transaction. Homebuyers usually have no idea on how real estate agents get paid.
When a seller lists a property with the listing agent the seller agrees to a certain percentage of the sale price to go to the agent involved in facilitating the transaction. This is usually 6%. If the same listing agent also represents the buyers, meaning that there are no other agents involved in the transaction, that listing agent will receive the full 6% commission. However, if the buyer brings their own agent, the commission percentage is usually split in half. You can see why the listing agent would really want to be the buyer's agent on the same property as they receive the full commission. But, this is a sticky situation and that the agent is working for the seller of that property first, which means their due diligence and fiduciary duties to the seller first and then to the buyer. If the buyer has their own agent, that agent's sole responsibility would be to the buyer, not the seller. It helps to have someone on your side during the transaction rather than the agent that is just trying to sell the property.
As a buyer, it is important to have your own representation during a purchase and sale agreement. The agent will receive half the commission from whatever home the buyer chooses but that agent is representing the buyer in the transaction and putting the buyer's needs, budget and negotiations first before the seller's needs. This is imperative so that a buyer can get what they want, the terms and price they need, and their confidential negotiation strategies are kept private.
At no point does the buyer actually pay their agent directly for their services.
#4. Should I buy a fixer-upper?
In today's society of HGTV shows like Fixer Upper, and Flip or Flop, many first-time homebuyers are drawn to these types of homes thinking they can score a deal and work on fixing up the home. The problem with this is that many of these homes have so many issues that starting out in the real estate world with a fixer-upper might be more of a tragedy than a benefit. If you've never fixed up a home or remodel the property before, this is probably not the best way to start your real estate career. Many of these fixer homes need serious work such as thousands of dollars to the foundation, mold or mildew issues that have damaged larger parts of the house, a $5000 roof replacement, new siding, or replacement of all the appliances costing over $10,000. With a real estate agent marks property as a "fixer-upper" it usually needs a lot more work than some paint on the walls and maybe a new light fixture. Fixer homes are best left to professional investors that are familiar with the type of property and how to get their money's worth out of repairs and replacements. Now, I'm not saying that you can't go for home that need some work. I've helped a lot first-time homebuyers that are very handy themselves or even their own construction company and can do a lot of the work themselves. Is this the case, you might be saving thousands of dollars by doing the work yourself, but, if you're planning on financing the property, many FHA or USDA loans require the home to be in certain livable conditions before they will even loan money on the property.
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All in all, be very careful when choosing an investment type of home. It may be a good option for you but as your first purchase, it may be more trouble than it's worth.
#5. What if I can't find anything I like?
This is a funny question but a valid one which comes to us from our associate in the Tri-Valley area. Dale Corpus had a client this month that was frustrated they couldn't find anything they liked. This is actually something you shouldn't be too concerned about.There are a lot of homes out there and even though inventory is down in a lot of markets across the US, but chances are you'll find something within the next six months is very likely. Don't worry about loving every single home you come across. If you have specific ideas, features and items you want in a home, don't settle for something that you're going to be disappointed with later.
[Read More: How to buy your dream home if you weren't ready]
Some things that I urge my clients to focus on is the area in which they want to buy. Are they looking at getting into a specific school district? Do they want to be a certain distance away from work? Do they want to be close to modern conveniences were community amenities? Are they looking for a home within a community with homeowners associations and community perks? When you narrow down some of the logistics of the location, you might be surprised to find that there are several homes within that locale that work better for your situation. But again, don't be discouraged if you're not finding a home you love right away. You may be in a time crunch and you may not be. Talk to your real estate agent about looking past the aesthetics of a home to the real reason in which you're buying. We want all of our customers to be satisfied not just with their initial purchase but several years down the line as well.
These are probably the top questions I get asked on a regular basis. Do you have a question about real estate that we could add here? Feel free to fill out the comment section below or contact our office today for all homes, real estate purchases and properties throughout Palm Beach County Florida.