If you are considering buying a home and are one of the 86% of homebuyers who use a realtor to make this purchase, you'll likely have many questions for the realtor you are considering working with. Guest Blogger Elizabeth Davidson, with Cascade Hasson Sotheby's International Realty, answers the FAQs that Realtors are often asked leading up to and during the home buying process. Elizabeth has been a realtor since 2010 and ranks in the top 2% of the approximately 16,000 realtors in her servicre area. CLICK HERE for more info about Elizabeth.
I want to purchase a home but have no idea how to start the process. Where do I start?
Congratulations on deciding to buy a home! The first place to start is to get pre-approved by a Mortgage Broker if you'll be using a mortgage to buy a home. The Mortgage Broker will collect financial documentation to help determine how much of a loan you qualify for. This will provide you with the maximum purchase price of a home you could buy and information on what your monthly payment will be at different price points. You may not want to buy at the top of your pre-approved loan amount. Many Buyers don’t! Next, you’ll want to connect with a Realtor. Sometimes, you’ll connect with a Realtor before getting pre-approved, which also works fine! Your Realtor will be able to provide you with recommended lenders to reach out to for pre-approval. Ask your friends, family, neighbors, or colleagues for a recommendation for a Realtor. Make sure the Realtor is local, full-time, has good reviews online, and has past sales! Most importantly, you want to make sure you and your Realtor are a good fit, meaning you feel they are listening to your needs and working in your best interest.
I’ve got my Realtor and am pre-approved, now what?
Here comes the fun part! Now, you can begin looking at homes. One of the most important things to decide on before viewing homes is the locations/neighborhoods you’d like to live in. Feel free to attend open houses in all the areas you’re interested in to help determine if it will be a good fit for you. Driving by homes you see online to preview the neighborhood is always a good idea. Often just going by the home will eliminate it from your list. Once you’ve determined the location, price, and “must haves” in a home, view the houses with your Realtor. Your Realtor will provide you with information on the home and point out things that you may not see or know to look at, such as recognizing the house needs an exterior paint job or cracks in the drywall inside. Once you find “the one” and want to write an offer, your Realtor will help guide you in what price to offer, potential seller concessions, and any additional terms you may need to write into the offer. If you happen to be competing with another offer(s), there will be many strategies you’ll need to use to stand out to the Seller.
I've got an idea of the city or cities I'm interested in, how do I find out when new homes come on the market that fit my criteria?
Great question! There are many online resources to find this, but the best way to keep informed is to have your realtor set you up to receive Listing Alerts by email. They can plug in all the criteria you want in a home, and as new homes come on the market, you'll automatically get an email if it matches your criteria. It's the best way to keep in the loop and ensure you don't miss out on the house of your dreams. If you aren't currently working with a realtor and want to be set up to receive Listing Alerts by email, CLICK HERE, answer a few questions, and I can set you up for any city you'd be interested in.
How long will it take me to find/buy a home?
According to a national study, buyers look at 5-7 homes on average before they make an offer on one. I’ve had some Buyers look at less and many who’ve looked at more than that. The process could be four weeks from when you start looking up to six months. It depends on the market conditions, price point, expectations, and location.
I found a home and want to submit an offer. What next?
There are many steps once you're ready to submit an offer:
Your realtor will want to call the Listing Agent to inquire if there are other offers or expected offers on the home. They should also ask about any terms the seller would find appealing to help give your offer a leg up.
You need to determine the price and terms to put in the offer. For the price, your realtor will want to pull and look at comps in the area to help guide you with what price to offer. I get more into terms in answer to the next question.
Your Realtor will walk you through and summarize the purchase contract before having you sign it. You should always read it as well! You want to be well informed on what contingencies you have and precisely what you’re agreeing to before signing the offer.
Once you’ve signed the offer, your Realtor will submit it to the Listing Agent who’s representing the Seller, along with the pre-approval letter from your lender (if applicable). The Seller can either accept your offer, counter your offer or reject your offer.
If the Seller accepts your offer, congratulations, you are now under contract to purchase the home! Your due diligence timelines start the following business day after mutual acceptance (that’s how it works in Oregon, other states may vary).
If the Seller sends you a counteroffer, the ball is in your court. You can either accept their counteroffer, counter their counteroffer or reject it entirely.
What ARE the strategies I can use to make my offer stand out to a Seller when competing against other Buyers?
There are many different strategies that can be used to make your offer stand out. Sometimes you need to use them all. Occasionally, you need just one or two. It depends on how many offers are expected to be received. Some strategies to consider:
First and foremost, the price will be one of the most critical aspects of your offer. You’ll want to offer the highest net price to the Sellers. Other things can sway a Seller to choose a lower-priced offer, but the highest net price is usually the determining factor.
Offer a higher than “standard” earnest money deposit. In Oregon, our most common earnest money deposit is 1% of the purchase price.
Shorten your Inspection Contingency period. This is the time period that you are agreeing to complete your inspections and wrap up any repair negotiations. In Oregon, our standard Inspection Contingency period is ten business days. The Buyer's Inspections are one of the most stressful parts of the sales process for Sellers. The sooner they can get through it, the better.
Offer a rent back to the Sellers. This allows the seller additional time to vacate the house after closing. If there's a lot of competition, you may even want to offer free rent back. In most situations, you won't have a mortgage payment due for more than a month, so often, buyers will have the ability to do this.
Offer an appraisal guarantee. This is if the appraisal comes in lower than what you're offering, you'll still go through with the sale and not ask for the seller to reduce the price. Before including this in your offer, you should talk with your lender about this, your ability to do it, and its impact on your loan.
Now that I’m under contract, do I get to have a home inspection?
YES! I always recommend a complete home inspection, radon test, and sewer scope. If you’re purchasing a home with a well and septic system, you’ll also want to have those inspected. You will have an agreed-upon number of business days to complete all of your inspections and any repair negotiations. In Oregon, our standard is ten business days, but that window is often shortened to strengthen an offer.
What happens if the home inspection goes terribly, and I don’t want to purchase the home anymore?
This is what the home inspection contingency in your purchase contract is for. As long as you didn’t waive this contingency, you can absolutely back out of your contract based on the home inspection and get your earnest money back.
What is earnest money?
Earnest money is essentially a buyer's "skin in the game." Your offer/purchase contract will state how much earnest money you'll deposit. We typically see at least 1% of the purchase price in Oregon, but it can vary. Once you go under contract, your earnest money must be deposited at the designated title company. The title company opens an escrow account for your earnest money, which sits in that account until closing, and it's applied toward your down payment. The earnest money is refundable based on the inspection contingency and financing contingency spelled out in the purchase agreement.
What happens after I have my home inspections and we’ve negotiated repairs?
Once you’ve gotten through your home inspection contingency, there’s not much for the Buyer to do until closing. Behind the scenes, your lender is working on getting your loan finalized. They’ll likely continue asking you for documents as they do this.
Is an appraisal the same thing as an inspection?
No, it’s not. An inspection is just the physical inspection of the property and has nothing to do with the lender or the Buyers loan. An appraisal is when your lender sends a 3rd party company/person out to the home you’re buying to determine its value based on the comparable sales near it. The bank/lender wants to make sure they’re lending on a home that is worth AT LEAST the purchase price the buyer is paying for it. If the appraisal shows that the value is below the purchase price, then you either need to try and negotiate with the Sellers to bring the purchase price down to meet the appraised value, OR the buyer may need to make up the difference. I recommend having a conversation with your lender upfront on how a low appraisal can impact your mortgage.
How much do inspections cost?
Inspection costs can vary depending on the home's size and the type of inspection. If you're buying a home that's hooked up to city water and sewer, then I will always recommend a full home inspection ($500-$650), a sewer scope ($125-$150), and a radon test ($125-$150). I tell my buyers to have at least $1000 available for inspections. If the home is on a well and/or septic, you'll also need to have those inspected. And if the house had an oil tank on the property, you'll want to have a tank search to ensure it's either been removed or decommissioned.
Once my offer is accepted, how long will it take before I own the home?
This depends on if you’re using a loan or paying cash. If you’re using a loan to purchase the home, it’s typically 25-35 days from when your offer is accepted to the day you officially own the home. If you’re paying cash for a home, you could technically close within a few days; however, most cash purchases take 2-3 weeks to complete to allow time for inspections.
How much do I have to pay a Realtor to represent me in my purchase?
At this time in Oregon, the Buyer doesn't pay their Realtor, the Seller of the home you are purchasing does! It seems like a great deal, right? If it costs you nothing to have top-notch representation, why wouldn't you? However, there are some rare exceptions to this. There are instances where the Seller is not offering to pay the Buyer's Agent's commission, OR the commission the Seller is paying is far below the standard. In both cases, you'd be responsible for compensating your Realtor. The commissions can usually be rolled into your loan (if you're using one). Before you get anxious about having to pay your Realtor, remember that your Realtor is ensuring you are getting a fair deal, negotiating on price, terms, and repairs…saving you a lot of money in the long run. They're watching your back and ensuring you understand exactly what you agree to. Buying a home is a HUGE investment, and you want a Pro guiding you through the process.
How much of a down payment do I need?
The national average for a down payment is 11%. Many buyers utilize 0% down VA or USDA loans, FHA loans with 3.5% down, and conventional loans requiring as little as 3%-5% down. If you put less than 20% down, you will have private mortgage insurance, which is an added cost to your monthly payment, but it’s typically minimal, and you can drop it off your mortgage once you have 20% equity in the home! Even with the added cost of mortgage insurance, buying a home with less than 20% down far outweighs the cost of not buying one! Investing in homeownership is the best hedge against inflation. When you buy a house and lock in a mortgage, you know your monthly payment, and you can budget accordingly. If you’re renting, the landlord can increase your rent yearly, potentially making it unaffordable for you to rent that house or apartment. It’s far better to pay your mortgage than someone else’s! CLICK HERE for more info on lending options.
Why do I need a realtor?
Using a Realtor when buying or selling is important because it's complicated, stressful, and intricate. You need a professional watching out for you, whether it's in helping you prep your home for the market, pricing your home for the market, reducing your liability, negotiating on your behalf, and helping you navigate the Home Buying or Home Selling Process. There's so much more that goes into these transactions than people realize. Without a good Realtor, you will likely leave money on the table! According to the National Association of Realtors, 86% of home buyers choose to use a realtor for their purchase, and as mentioned above, in most instances, it's free for the home buyer!
Will I save money using the listing realtor?
Usually, no, you won’t. The commission has been set with the Seller before the home is listed on the market.
The house is newer do I really need to get an inspection?
100% yes! Even in a newer home, numerous things could be wrong with the house. Even with brand-new construction, I recommend a home inspection, sewer scope, and radon test because you never know what’s going on with a house, and an inspector will look at everything.
I own a house currently but want a new one. How do I go about this?
There are multiple ways to go about this. First, speak with your lender to see if you can qualify for a new home while still owning your current home. If you can, we shop and get you under contract on your new home and then list your existing home quickly. This way, you can sell your current home soon after you buy your new one. Another alternative is to list your current home first, sell it but negotiate a 30-60 day rent back from the Buyer, have the proceeds in your bank account, and then start the search for your new home. The third way to do this is by making an offer on a home contingent on the sale of your current home. And lastly, lenders have a unique loan program for this exact scenario called a Bridge Loan, where they lend you the down payment to buy, and then once you sell your departing home, pay the Bridge Loan off. There are a lot of options for you to pull this off! CLICK HERE for info on Bridge Loan.
With interest rates so high, is it smart to buy now?
Absolutely. You're going to be paying someone's mortgage if you don't. You may as well be paying your own vs. your landlords! With interest rates increasing, we saw multiple offers decrease, and the ability to negotiate Seller paid closing costs come into play. In some instances, you could have the Seller pay for a rate buy down for you. Buying real estate is investing in your wealth! You can start today or wait years when home prices are even higher.
I’m a first-time homebuyer or haven’t bought a home for a while, and the whole process seems a little daunting to me. How do I get over this and move forward?
Speak with a knowledgeable, experienced local Realtor! They will walk you through the process from start to finish and answer all your questions.
I want to buy a home and need to find a Realtor...
Choosing an experienced, top performing realtor, can make all the difference in the world in your home buying journey. CLICK HERE to sign up for Realtor Connect and we'll connect you with a top preforming realtor in your area.
How do I start the process of getting pre-approved and buying a home?
Talk to a mortgage broker or loan officer. If you don't have one or just want to compare a quote you've recently received, reach out to Todd Davidson. tdavidson@umortgage.com / 971.275.2465
That's it! The answers to 23 FAQs a Realtor gets asked. If you have other questions about a mortgage or buying a home, reach out. Happy to help!
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