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Buying and Selling Real Estate Frequently Asked Questions (FAQ)

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Selling and buying your home is a big decision. There are many factors that should be considered here: current market conditions, the equity you have, current interest rates and financing options, your emotional motivation as well. If you have decided to jump into the market, this guide will help the seller and buyer navigate through some of the frequently asked questions that arise.

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									Contents
General FAQ in Buying Real Estate ........................................................................................... 2
   Why should I buy instead of rent? .............................................................................................. 2
   Will bad credit hurt my chances of buying a home? .................................................................. 2
   Are there special homeownership grants or programs for single parents? ................................. 3
   How do I know if I can get a loan? ............................................................................................. 3
   How do I find a lender? .............................................................................................................. 3
   In addition to the mortgage payment, what other costs do I need to consider? .......................... 3
   When I find a home I want, how much should I offer? .............................................................. 4
   What if my offer is rejected? ...................................................................................................... 4
   What is a house “closing”? ......................................................................................................... 4
   How does seller financing work?................................................................................................ 4
   What will happen at closing? ...................................................................................................... 5
   How much time should I spend viewing houses? ....................................................................... 5
   How much can I afford? ............................................................................................................. 5
   How do I go about finding open houses? ................................................................................... 5
   How long should a closing take? ................................................................................................ 5
   What are bidding wars? .............................................................................................................. 6
   What will the lender look at when I apply for a mortgage? ....................................................... 6
   What does it mean to get pre-approved? .................................................................................... 6
   What is the minimum down payment I can make on a home? ................................................... 6
   Should I pay discount points? ..................................................................................................... 7
   Should I lock in my rate? ............................................................................................................ 7
   What will my mortgage payments include? ............................................................................... 7
General FAQ for Selling Real Estate .......................................................................................... 8
   How early should I accept an offer? ........................................................................................... 8
   Should I be at the house when the real estate agent shows people around? ............................... 8
   When should I sell my house? .................................................................................................... 8
   How do I set the selling price for my house? ............................................................................. 8
   Do I need a real estate agent or attorney to sell my house? ........................................................ 9
   Will I owe taxes when I sell my house? ..................................................................................... 9
   Can I finance the sale for the buyer? .......................................................................................... 9
   Do I have to accept an offer made on my home? ....................................................................... 9
   Can I stay in the house longer than the date stated on the purchase agreement? ..................... 10
   What is a listing agreement? ..................................................................................................... 10
   The purchaser asked for an extension to secure financing. Do I have to agree? ..................... 10

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General FAQ in Buying Real Estate

                                   Why should I buy instead of rent?


It is a proven fact that according to the Federal Reserve and their Survey of Consumer Finances
that the wealth accumulated by homeowners far exceeds that of renters. Ownership builds
wealth because it is forced savings in the down payment and the appreciation.                Further,
homeowners can tap into that equity and use if for improving the home or debt consolidation.
There are usually substantial tax benefits for homeowners as well.


When renting, there is no cumulative benefit to paying rent every month. Some consider it
“flushing money down the toilet”. On the upside however, a renter does not have property taxes,
or is held responsible for repairs and maintenance of the property.


                        Will bad credit hurt my chances of buying a home?


While it is possible to purchase a home with bad credit, you will more than likely end up paying
more than someone who has good credit. It also depends on just how bad your credit is. If you
have filed bankruptcy, it will show on your credit report for ten years. To obtain a better rate, the
general rule is to wait four years after filing bankruptcy to get a home loan. There are lenders
who will finance a loan right after a bankruptcy, however these types of loans require a 20-35%
down payment, and the interest rate will be very high.


Even if you do not have a bankruptcy or foreclosure on your credit report, but for other reasons
still have a low fico score, you can obtain a home loan. You will more than likely be offered a
loan that is not as attractive as one for someone with stellar credit.


If you have bad credit, you may be a candidate for a federal mortgage program. Contact a HUD
housing counseling agency in your area to help you determine what you are eligible for.




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           Are there special homeownership grants or programs for single parents?


There are special programs out there, but you will have to do your research. Try contacting your
local housing authority, and HUD (Housing and Urban Development). You might find special
programs, and they can assist you with things like financial planning and securing a loan.


                                   How do I know if I can get a loan?


A prospective buyer will need to do their homework before hand to make sure they can obtain a
home loan. Speaking directly to a mortgage lender is highly recommended. Also there are a lot
of homeownership guides and worksheets that can be accessed through the internet, HUD, and
Ginnie Mae that can help the buyer determine if they would qualify.




                                         How do I find a lender?


Once you have done your research and have a pretty good idea that you can qualify for a loan,
the next step is to find a lender. The buyer should shop around and familiarize themselves with
the types of lenders out there, such as commercial banks, thrift institutions, commercial banks,
etc. Another avenue is to seek out a mortgage broker. A broker can arrange a transaction with
other lenders for you. Another option is to go the bank where you hold your checking and
savings accounts and speak to their loan officer. The HUD website has an approved list of
lenders that can be searched by location as well.




        In addition to the mortgage payment, what other costs do I need to consider?


There are many costs associated with owning a home. You will have to factor in maintenance of
the property, as well as utilities and homeowners fees, if applicable. One significant cost is
property taxes. Your real estate agent can help give you an estimate as to what these costs will
be prior to obtaining your loan so you are not caught by surprise.




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                       When I find a home I want, how much should I offer?


There are several things to consider in calculating your offer. The condition of the home is
important. Will it require repairs soon? Be sure that your agent requests a home inspection so
there are no surprises down the road. The asking price of the home should be researched in
relation to other homes in the area. Is it in line with other homes recently sold in the area? How
long has the home been on the market? If the home has been on the market for awhile, a seller
would be more apt to accept an offer lower than asking price. If you retained an agent, they
should help you arrive at a fair offer price that you and the seller both can agree to.


                                      What if my offer is rejected?


Offers are almost always rejected. This is where the art of negotiation comes in. Offers and
counter offers can go back and forth many times before a fair price is reached. You may have to
concede to a higher price but you can ask for other allowances, such as the seller fixing
something in the house prior to the sale, or paying your closing costs. This is an area that will
show your agent’s expertise in finessing the deal so everyone comes away with what they want.


                                       What is a house “closing”?


A closing is a meeting between the buyer and their agent, the seller and their agent, and a closing
agent. The closing agent provides all the paperwork to be signed by both parties to finalize the
sale.
                                    How does seller financing work?


Seller financing is used when a buyer has been denied a conventional mortgage due to poor
credit. In this instance, the buyer may have enough money for a down payment but not enough
to obtain a regular mortgage. The seller can take the down payment and hold the mortgage for
the buyer. The seller would hold a second on the property for the down payment or a portion of
the mortgage. Down the line when the buyer is in a better position, he can refinance the loan.
The buyer is at an advantage here because it is easier to refinance an existing loan than obtain a
loan for the very first time.


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                                      What will happen at closing?


The closing agent will have stacks of papers for the parties to sign. Your agent should help
explain what you are signing and why. Your lender is required to give you a booklet prior to
closing that will explain all of the closing costs and an estimate of how much money you will be
required to pay at the closing. Make sure that you have reviewed all anticipated costs and what
you will be expected to pay prior to attending the closing.


                          How much time should I spend viewing houses?


As much as it takes to feel that you are making an educated decision when you finally decide to
make an offer. By looking at lot of houses in different neighborhoods you will get a better feel
for what you can get for the price.


                                         How much can I afford?


In considering how much house you can afford, you will need to take a close look at your
monthly income, your monthly expenses, how much down payment will be required, and the
interest rate you will be paying. There are calculators for this on HUD website to help you
determine how much you can afford to pay. Your lender should be able to work with you as well.


                               How do I go about finding open houses?


Depending on your area, there are a lot of different ways to find the open houses. The best
resource is your agent. You can also check online listings such as Realtor.com and Multiple
Listing Services. Usually open houses are also published in your local news paper.


                                    How long should a closing take?


The actual legal transfer of the property varies, but most sales are completed in one month. This
time frame is sometimes changed at the request of the buyer or seller, who request a longer
closing (60 or 90 days).



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                                         What are bidding wars?


A bidding war is where there are multiple offers for one piece of property. This occurs when the
supply of homes is small and the demand is large. Multiple offers tend to drive up the price of
the home and can create a stressful buying experience.


                    What will the lender look at when I apply for a mortgage?


The lender will look at all income, debt and assets held by the buyer. They will often request
that you bring the following documentation to the first meeting:


        a) all credit cards and balance due
        b) payroll stubs from the past 6 months
        c) last two years worth of tax returns
        d) list of all assets, including bank accounts, other properties, securities, retirement
            accounts
        e) copies of divorce decrees, bankruptcies, alimony and child support obligations
        f) a list of all employment within the last two years


                               What does it mean to get pre-approved?


Being pre-approved means that the mortgage company commits to giving you a loan before you
find a property to purchase. The financial review has already been completed. This also makes
the buyer look more attractive to a seller. It tells the seller that you are sincere, and it gives
added assurance that the transaction would not fall out of escrow due to lending problems.


                  What is the minimum down payment I can make on a home?


There are no minimum down payment requirements; it depends on the individual transaction. In
the past, a 20% down was fairly standard. However that has changed, and some homes can be
purchased for little or no down payment.




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                                     Should I pay discount points?


Discount points are prepaid interest that you can pay to your lender in exchange for a lower
interest rate. Each point is equal to 1% and is called “buying down” your interest rate.




Whether on not it is a good idea to pay these points varies from buyer to buyer. The buyer will
need to determine how long they plan to stay in the home, and calculate how much money they
will save over a period of time.


                                        Should I lock in my rate?


Locking in your interest rate means that the lender can not change your interest rate even if the
market rate changes before the closing of your loan. Whether or not to lock in your rate depends
on if you expect the rates to increase or fall before closing. This is a bit of a guessing game. It’s
always wise to pay attention to the announcements of the Federal Reserve Board, which will
affect your interest rate if they make a move before your house closes.


                             What will my mortgage payments include?


Most mortgage payments include principal, interest, taxes, and insurance.




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General FAQ for Selling Real Estate

                                  How early should I accept an offer?


Accepting an offer is often the trickiest part of the home selling process. When you accept an
offer depends completely on the integrity of the offer you receive. A rule of thumb is that a good
offer should be within 3-5% of your asking price, come from a buyer that is pre-qualified, and
the offer does not have a lot of contingencies.


           Should I be at the house when the real estate agent shows people around?


The general rule of thumb is houses show better when the seller is not home. If the seller is
there, the buyer and their agent will not feel as free to look around the home and discuss it.


                                     When should I sell my house?


This is a big question with no quick answer. There are a lot of factors to consider. However if
you can choose when to sell, it is best to wait until the market is “hot” and it’s a “seller’s
market.” Consulting with your agent and markets trends will help you gauge the market. Other
things to look for are low interest rates, a positive economic climate, and trends in buying
activity. There is usually a jump in activity in spring, for instance.


                             How do I set the selling price for my house?


Your real estate agent will have access to local sales data and can give you a good idea of what
your home is worth. There are some great websites out there that can also help you arrive at a
number, such as www.Zillow.com and www.Domainia.com. Keep in mind when using websites
that the number you get will not necessarily take into account anything special you have done to
your home to increase its value.




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                    Do I need a real estate agent or attorney to sell my house?


There are a few states where the seller is required to have an attorney at their closing, so check
with your particular state. But generally speaking you do not need either a lawyer to sell your
home.


                                Will I owe taxes when I sell my house?


It used to be that the sale of a home triggered a tax event for the seller. However, because of
something called the Tax Payer Relief Act of 1997, many sellers will not longer owe taxes on a
sale. A married couple may retain the first $500,000. made on a home sale, provided they lived
in it for two of the five past years. It’s always a good idea to run your situation by your
accountant so you are aware of your particular tax consequences before you sell.


                                 Can I finance the sale for the buyer?


There are to ways to accomplish this. The seller can take back the mortgage on the house. The
buyer signs a promissory note and either a mortgage or a deed of trust (so the seller can foreclose
if necessary). The seller transfers title to the buyer, but the buyer sends the payments to you
instead of a mortgage company.


The other option is signing a contract between the buyer and the seller. The seller keeps title to
the property until the buyer has completed paid off the loan.


                          Do I have to accept an offer made on my home?


You are under no obligation to accept any offer on your home that does not meet your
requirements. However if the offer is exactly what you have in your listing agreement it is
possible that you could be obligated to the agent for their commission.




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       Can I stay in the house longer than the date stated on the purchase agreement?


The only way you could extend your stay in the home after the date stated in the purchase
agreement would be to get an agreement in writing with the buyer. The buyer has the right to
close the property as scheduled and move in on the specified date.


                                      What is a listing agreement?


A listing agreement is between you as the seller, and a real estate agent. The agreement will set
forth how the agent will help you sell your home, their commission, length of time the agreement
covers, sales price of the home, and their expected marketing efforts.


        The purchaser asked for an extension to secure financing. Do I have to agree?


Usually a purchase agreement will have a contingency with regard to financing. If there is not
that contingency in place, the seller can force the sale and retain the buyer’s earnest money
deposit.




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“All forms and documents from DocStoc are provided “as is” without warranty of any kind,
express or implied. DocStoc does not provide any legal advice, and assumes no responsibility
for the enforceability or effectiveness of its documents. Users should consult with a lawyer if
there is any question as to the appropriateness of the documents for their particular situation.”




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be obligated to the agent for their commission.




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       Can I stay in the house longer than the date stated on the purchase agreement?


The only way you could extend your stay in the home after the date stated in the purchase
agreement would be to get an agreement in writing with the buyer. The buyer has the right to
close the property as scheduled and move in on the specified date.


                                      What is a listing agreement?


A listing agreement is between you as the seller, and a real estate agent. The agreement will set
forth how the agent will help you sell your home, their commission, length of time the agreement
covers, sales price of the home, and their expected marketing efforts.


        The purchaser asked for an extension to secure financing. Do I have to agree?


Usually a purchase agreement will have a contingency with regard to financing. If there is not
that contingency in place, the seller can force the sale and retain the buyer’s earnest money
deposit.




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“All forms and documents from DocStoc are provided “as is” without warranty of any kind,
express or implied. DocStoc does not provide any legal advice, and assumes no responsibility
for the enforceability or effectiveness of its documents. Users should consult with a lawyer if
there is any question as to the appropriateness of the documents for their particular situation.”




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