Q: I’ve never purchased a home before. Where do I even begin?
A: Unless you’ve done it before, it’s unlikely you’ll know how to buy a house. The first step is to choose a reputable Sears Real Estate REALTOR® who can guide you through the process. A REALTOR® will help you understand all of the steps you need to take and will help you navigate the home buying journey, including referring you to reputable lender.
Q: How do I know what type of loan to choose, and which lenders are reputable?
A: Real estate agents have a list of reputable lenders they have worked with in the past who not only have a variety of loan programs, but who are also honest and knowledgeable. Typically, your real estate agent can provide some recommendations. You can call the individual lenders and compare their programs and services.
Q: How much money do I need to have as a down payment?
A: It depends. Some loan programs feature a down payment of as little as $1000 and others may require 3%-20% down. Your lender will be able to visit with you about the best loans that fit your needs depending on which Colorado area you are purchasing in, your credit score, and the amount of money you have for a down payment.
Q: I’ve had some issues with my credit in the past, how do I know if I can purchase?
A: It’s always good to know the facts. Talking to a lender and having them pull your credit report to see how your issues have affected your specific credit score and report is a good idea. Your lender can provide you with a plan for correcting issues and let you know what it will take to get it cleaned up enough to purchase a home.
Q: What’s the difference between a short sale and a foreclosure?
A: A short sale is the sale of a property where the owner is currently upside down (they owe more on the home than the property is worth in the current market). A “short” occurs when the seller asks the bank/mortgage company to accept less in the amount they are owed in order to sell the property. Sellers must qualify for a short sale and receive approval from the bank to complete this process. A foreclosure is when the bank has taken over full ownership of the property by seizing it. This is due to the homeowners becoming delinquent on their payments or they’ve abandoned the property or both.
Q: How do I choose a real estate agent?
A: Choosing a REALTOR® is important. After all, they are going to help you buy one of the biggest purchases in your life! Choosing an agent isn’t just about who’s name is on the sign. You can pick the person you want to work with to represent you in buying a home listed by any company.
Q: Will I be able to have the home inspected before I buy it?
A: Absolutely! In Northern Colorado we are lucky to have a portion of the standard real estate contract dedicated to performing a home inspection on the property. If your agent is using a standard contract, you will have a deadline to meet, in which the inspection must be completed, and any objections must be agreed upon. Even with other types of contracts like HUD homes or bank-owned properties, you are allowed an inspection period, although the seller may not agree to fix any items you find wrong with the home.
Q: How do I get all of the real information about a property before I sign on the bottom line?
A: This is where a real estate agent is very valuable. They can request information about the property from the seller including disclosures and forms that may be helpful in deciding about a purchase. They also have access to the marketing information on the property which includes room measurements, features of the house, and other special items that may interest you. Additionally, if you have specific questions about a property, make sure to ask your real estate agent at the showing. They can research the information and get back to you prior to writing an offer.
Q: Why should I consider purchasing a home?
A: Buying a home is a big decision. There are certainly advantages and there are things to weigh before you make the big step and sign on the bottom line. Buying a home means you can paint the walls the color you would like and get a dog without obtaining permission. It means you can plant a garden in your backyard if you want to. And there are financial benefits to owning a home—both tax benefits and the possibility that your home will appreciate in the future and provide a nest egg. There are some drawbacks to owning a home—if you do not have an emergency fund to take care of a broken furnace, if you don’t like mowing the lawn, or if you don’t particularly enjoy home maintenance, those items could influence your decision to purchase.
Q: Should I buy new construction or resale? What are the advantages to both?
A: There are positives to both! New construction is a home that has never been lived in…you get to pick the plan and sometimes the colors. The process of building your own home can be an exciting one. The drawbacks to new construction can also be the time frame it takes to build a home (3-6+ months). Additionally, some new construction homes may not include landscaping, fences, or window coverings…these can be additional expenses for a buyer.
Resale has benefits, as well. Typically resale homes come more complete with items that may cost extra with a new home, such as, landscaping, window coverings, garage door openers, other upgrades, etc.
Q: Do I need to hire a professional home inspector?
A: We always recommend hiring a professional home inspector. While it is not “mandatory” in the contract, a professional inspector is a person whose entire focus is to look through the property and discover potential problems on your behalf. Sometimes a professional inspector may need additional experts to come and provide expert opinion about a furnace or a roof. Your real estate agent can recommend professional, reputable home inspectors.
Q: How do I find a home inspector?
A: Your REALTOR® is a great resource for a professional home inspector. Not all inspectors are the same—some have many years of experience and professional training. Others have just purchased business cards and do not have the knowledge and background it may take to thoroughly inspect a home. Your agent should be able to provide you with several names of inspectors who come highly recommended.
Q: Do you advise submitting a low-ball offer to see what the seller will take?
A: Negotiating a contract is an interesting thing. Some people think submitting a “low-ball offer” is the best way to see what a seller will take. Unfortunately, this tactic can often offend the seller in a way that they do not even provide a counterproposal to your low-ball offer. A good REALTOR® will help you decide what a good offer might be, one which involves many considerations including what’s happening in the current market, how long the home has been listed for, the current prices of other homes in the neighborhood, its condition and what you will feel comfortable with. Ultimately, it’s always your decision about what kind of offer to make to the seller. Typically, low-ball offers don’t achieve the desired result of buying a home.
Q: How do I know what price to offer on a property?
A: The listing price is not always the price to offer. Sometimes the price a home sells for is higher and sometimes it is lower. Your REALTOR® can help provide you with information and research on a property for you to decide what you may want to offer on a property. It is always your decision—use your REALTOR® as a resource to provide you with all of the information you need to make an educated decision in the current market.
Q: Should I get an attorney to help me when I’m buying a property?
A: Your REALTOR® can work with your attorney at any point on the purchase or sale of your home. Some states require attorneys to be involved in the process. Colorado does not. That being said, we always advise and recommend a real estate attorney review any paperwork or legal contracts you engage in.
Q: What are some tips on negotiating to get the best deal on a house?
A: Having a REALTOR® acting on your behalf is the first negotiating tip. They are not “emotionally involved” in the deal and can often better negotiate in your favor because of this. Your REALTOR® can help you in each scenario to negotiate the best deal on your home…each situation is different and there may be different tactics and strategies to employ in different circumstances. Do not hesitate to ask your agent what they would recommend in your personal situation.
Q: What is a contingency? Are there standard contingencies in the contract?
A: A contingency is a clause in the contract that allows for you to “get out” of the transaction for a valid and specific reason if something either doesn’t occur (you don’t sell the house you live in currently) or is unsatisfactory (inspection on a home). There are standard contingencies in the Colorado real estate contract such as a contingency for inspection, approval of your loan, and delivery of free and clear title.
Q: What is the difference between the list price and the sales price?
A: The list price is what the seller wants to sell the home for (sometimes fair market value and sometimes not) and the sales price is the final price that the buyer and seller determined was fair market value and agreed to sell the home for. Someone could list a property for $1million but that may not be the actual sales price or fair market value of the home.
Q: Can a seller help me pay for my closing costs? Is there a maximum amount they can pay?
A: Yes, depending on the type of loan you receive, a seller may help you pay for your closing costs if you negotiate that as part of your contract. Typically, the maximum is 6% although most people don’t usually need 6% in closing costs for their loan. And, all loan programs and lenders are different. Talk to your lender to see what your loan program would allow.
Q: Who gets the appliances and fixtures in the home when it is sold? What about the furniture?
A: Everything in the contract is negotiable. Typically, sellers leave built-in fixtures and appliances. Furniture is usually considered a personal property item and negotiated outside of the contract unless it is built into the property.
Q: Does a seller have to tell a buyer about problems they have had with their property such as a roof leak?
A: Yes. In the State of Colorado, a seller is required to tell a buyer about any problems they have had with the property. One of the best ways for a seller to disclose this information is through the Seller’s Property Disclosure. In addition to a seller disclosing, if their real estate agent (or the buyer’s real estate agent) knows about problems that have happened to the physical condition of the home (material fact), they are also required to disclose this information to a new buyer.
Q: When is the best time to buy a home?
A: The best time to buy a home is when you have weighed the options and have made an educated decision about all of the factors that go into purchasing a home. For example, do you have enough down payment saved, can you qualify for a home loan, how long do you plan on staying in the property or the area, and do you have some savings to take care of home maintenance issues that may come up with a property? Buying a home has to be right for you. Talk to your REALTOR® about the pluses and minuses that might go into purchasing a home right now to see if it makes sense for you.
Q: Does the seller have to do repairs to the home before we purchase it?
A: Not necessarily. If a seller agrees to complete repairs on the home during the inspection process with a buyer, they would be held (contractually) to complete any repairs they agreed to. However, some sellers wish to sell their homes in an “as is” condition and reflect their desire to do so in a lower price. And, some houses like HUD homes and bank-owned properties indicate up front to buyers that the seller is unwilling to do repairs prior to closing. All of this being said, it doesn’t mean that you can’t request that a seller complete repairs on the home before you purchase…they just might not agree to do so as part of the contract.
Q: What if something happens to the property after we close on it?
A: Typically, items that break or go out of working order after you purchase it are your responsibility as the new owner of the home. There are some extenuating circumstances to this that may have the seller be responsible for something not working, but typically the new buyer will have to fix the problem.
Q: What do I do if I am relocating to a new area? How do I find out information about the community?
A: Your REALTOR® is also a wealth of knowledge when it comes to moving to an area…they typically know a lot of people in the community and are well-educated on the features a new area might offer you and your family. At Sears Real Estate, we have a full-time relocation director who is on our staff who can help you become oriented to our area and visit with you about specific questions and amenities you desire in a community. As part of this process, we provide complimentary tours of the community, relocation information packets and assistance in moving to our area from anywhere in the country.
Q: Who typically pays for the real estate broker’s commission?
A: In Colorado, the seller typically pays for a real estate broker’s commission. That being said, it is always negotiable and there are times when a buyer may pay a portion or all of a real estate broker’s commission. It’s wise to ask your real estate agent when you are working with them what your specific situation might be as it relates to paying their fee.
Q: What is a home warranty and who pays for it?
A: A home warranty is a renewable yearly service contract that protects a home’s systems and appliances from unexpected repair or replacement costs due to a break down. Homeowners insurance does not typically cover for mechanical failures, so a home warranty can help bridge the gap. The buyer, seller or real estate agent can purchase the home warranty for the buyer.
Q: What is an appraisal gap clause in the real estate contract?
A: An appraisal gap is the difference between the appraised value of a home and the purchase price in the sales contract. An “appraisal gap clause” is used in a sales contract to guarantee that the home buyer will cover the monetary gap (bringing cash to closing) between the appraisal and the sales contract if an appraisal gap becomes an issue.
Q: What are the differences between a Buyer’s agent, Seller’s agent, Transaction Broker and Customer?
A: A buyer’s agent works solely on behalf of the buyer to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as
an advocate for the buyer. A seller’s agent (or listing agent) works solely on behalf of the seller to promote the interests of the seller with the utmost good faith, loyalty and fidelity. The agent negotiates on behalf of and acts as an advocate for the seller. A Transaction Broker or TB assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting all offers and assisting the parties with any contracts, including the closing of the transaction without being an agent or advocate for any of the parties. A customer is a party to a real estate transaction with whom the broker has no brokerage relationship.
Q: Should we write a letter to the seller with our offer?
A: It’s not against the law for a home buyer to write a personal letter to the seller. But some buyer love letters can invite sellers to unwittingly violate fair housing laws. You should consult with your REALTOR® before writing and submitting a letter to the seller.
Q: How long do I have to be at my job before I can buy a home?
A: Qualification is based on the stability of income in the same line of work or related field for approximately two years. Commission, bonus and self-employment income must be verifiable for two years and averaged for qualifying.
Q: Do I have to pay off all of my bills before I can buy a home?
A: No. Qualification is based on the acceptable percentage of income that is available for payment of monthly debts including housing debt. Talk with your lender before you assume that you must pay off debt.