The 25 most Frequently Asked Questions

These are the 25 most Frequently Asked Questions that we have received over the years from homebuyers and sellers, just like you. Learn what you need to know before you begin the process! If you have any additional questions, or want further details, please contact me at: yingying@tysonshomevalues.com

Categories:

Using an Agent or Selling on Your Own

  Why should I hire an agent to sell my house?
Most people do not have the experience, knowledge or training to sell their own home in an effective manner. Also, they may not want to spend the time and effort necessary to bring about a successful sale. On the other hand, it is the mission of an agent to not only sell a property in a professional manner, but also to protect the interests of the public in any real estate transaction they are involved in. The resources and manpower of a broker's office also back a real estate agent, combining to provide all the necessary elements to bring buyers and sellers together in a successful transaction.

  Is an agent more likely to find a buyer than you selling your home by yourself?
Research has shown that an agent will typically outperform homeowners selling their own property, especially in slow markets.

  How should I select a real estate agent?
A good strategy is to consider personal recommendations. Ask your family, friends and anyone else whose opinion you trust, if they could recommend an agent from their personal experiences. Generally, you will want to choose a real estate agent who is knowledgeable, is someone you feel comfortable dealing with, and who is able to provide the level of customer service and professional guidance that you require.
If recommendations aren't an option due to a long-distance relocation, try interviewing agents who specialize in the neighborhoods you are interested in. You can locate these agents most effectively by doing a search on the internet, or simply by calling local real estate offices.

top

The Listing Contract

  What is a listing agreement?
Rather than a real estate contract, a listing agreement is actually an employment contract. It creates a special relationship between the principal (the owner of the property) and the broker (represented by the sales agent). Most significantly, it authorizes the agent to act on behalf of the principal to represent the principal's real estate to third parties.

  Are commission rates negotiable?
Yes, commission rates are not set by any commercial or governmental entity. Willing parties may negotiate them.

  What is the advantage of an exclusive-right-to-sell listing agreement?
An exclusive-right-to-sell agreement protects the agent, allowing the agent to commit more time and resources to selling the client's property. It also provides an incentive to work harder and sell the house for the top market-driven price.

top

Understanding Agency

  What is an agent?
An agent is an individual authorized to act on behalf of another person, the principal. The agent owes a fiduciary responsibility to the principal, to act in their best interests.

What is a buyer's agent?
A buyer's agent works on behalf of the buyer, not the seller. This form of agency takes the form of an employment contract between the agent and principal, whereby the agent is charged with locating a house matching the criteria specified by the buyer.


  What obligations does a seller's agent owe to the buyer?
The listing, or seller's agent, owes a buying customer the duties of reasonable care and skill; honest and fair dealing, and the disclosure of known facts.

  What is dual agency?
Dual agency, where legally allowed, occurs when an agent represents both the buyer and seller in a single transaction. The agent, however, must have the consent of both parties involved.

top

Finding a Home

  How can I find out about a particular community, regarding the important features about the neighborhood and area?
It is almost as important to learn about the neighborhood where you want to buy as the house itself. Here are some basics to consider. Before you make a decision on a house, try driving your usual commute from your workplace to the neighborhood, on a normal workday. Also, visit neighborhoods that you are interested in at various times, to observe if you are comfortable with the types of people living there, including the number of (potentially noisy) children. Also, are the houses and yards well maintained in the neighborhood? Can you see if dogs (or other pets) are safely fenced in; or are there problem dogs that run loose, or bark continuously? To find out more about the schools serving the neighborhood, visit local governmental web sites; they almost always have a link to the local school system's site. If you can't find what you're looking for online, telephone the School Board directly to get answers to any of your questions.

  How should I begin my home search?
To begin your home search with confidence and purpose, you will need to consider your financial situation early on. Your ability to pay off a mortgage will determine the price range of the homes you start looking at. Step number one : Determine your price range by going through the pre-qualifying process. A loan officer, reviewing financial records that you provide, can pre-qualify, or even pre-approve you for a loan, thereby helping you set your budget. Step number two: Consider where you want to live, and make a list of the neighborhoods that you are interested in. Step number three: Make a wish list of what you are looking for in a home, and prioritize the list, from the most important features to less important. Step number four: Find a good real estate agent to help your home search. Remember, using a buyer's agent costs you nothing, but can save you lots of time and money.

top

About Mortgages, and Qualifying for a Loan

  What are the types of loans available?
Most loans can be categorized into three main types: fixed-rate, adjustable-rate and hybrid loans, that combine features of the other two.
Fixed-rate Mortgage: A loan that has an unchanging interest rate over its term. Traditionally the most popular choice among homeowners, because it is easy to plan and budget for, and may help protect the homeowner from the effects of inflation.
Adjustable-rate Mortgage (ARM): A loan with an interest rate that changes periodically to keep pace with changing economic levels. The interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. ARM loans usually have caps that limit the interest rate from rising above a predetermined limit between adjustment periods (for example, no more than five percent a year) as well as a ceiling on how much the interest rate may increase during the life of the loan.
Hybrid loan: A loan that combines the features of fixed-rate and adjustable rate loans. Consult your real estate agent about when these specialized types of loans may be beneficial for you.

top

  How much money and/or salary will I need to qualify for a loan?
The amount of money you need for a down payment varies with the total value of the house you plan to buy and individual mortgage lender requirements. Determine your price range by going through the pre-qualifying process. A loan officer, reviewing financial records that you provide, can pre-qualify, or even pre-approve you for a loan, thereby helping you to set your budget. Mortgage lenders used to adhere to a strict qualifying formula with guidelines stating that 28 percent of your gross income could be spent on housing, and up to 36 percent for outstanding debt. Today, those numbers are no longer carved in stone. Qualifying guidelines now vary greatly among lenders, who now are typically more interested in the total scope of a borrower's assets, liabilities, and credit history than before.

  What are points?
Discount points are the amount lending institutions charge in exchange for lowering the interest rate; one point equals one percent of the mortgage loan amount. It may be worthwhile to pay points to lower your interest rate, if you intend to live in your new home for a long time.

top

Selling for Top Dollar

  How do I find out about the value of my home?
Short of having an appraisal done, the most accurate method (that shouldn't cost you anything), is having a real estate agent conduct a CMA, or Comparative Market Analysis, of your home. A CMA is a method of determining the market value of a home by comparing the prices of recently sold homes that are similar in location, style, and amenities.

  How can I make my home more saleable?
Here is a quick list of things to get you started. Ask your real estate agent for more details regarding your specific situation, and for a list of qualified contractors to do the repairs.

1) Clean up, and unclutter your home.
2) Don't rearrange a cluttered home; instead throw out, or sell everything that isn't absolutely necessary.
3) Do needed repairs that if not done, might detract from the showing of the house.
4) Paint your home a neutral color, and make the rest of the decor as neutral as possible.
5) Consider curb appeal; do any needed cosmetic improvements and landscaping chores.

top

Home Improvements and Sale Price

  What is the payback value of home improvements?
Research indicates that the most cost-effective improvements are to the kitchen and bathroom(s). Major kitchen remodeling has proven to return a 45 – 70 percent payback potential, while adding a new bath or bathroom remodeling can yield 60 – 100 percent dollar cost returns.

  What is meant by overimproving a house?
Overimproving a house means putting more money into remodeling or improvements than you can recoup when selling your home. To increase the chances of a good return, target your remodeling for mass appeal and play it safe with colors and building materials. Try to make improvements blend in with the current style and building materials throughout the house.

top

Tax Issues for Buyers and Sellers

  What taxes will I pay as a seller? …as a buyer?
Under the Tax Relief Act of 1997, most homeowners can sell their home every two years and can enjoy profits of up to $250,000 (for single tax filers) or $500,000 (for married couples filing jointly) with no capital gains tax. The “once in a lifetime” 55 year old age limit has been eliminated. As a buyer, you should be aware that some portion of real estate property taxes are usually paid for in advance (deducted from the buyer) during closing. Check your closing statement for any prorated real estate taxes. The buyer may also have to pay transfer taxes, or other local or specialized taxes on the transaction. Keep in mind that tax laws change continually; and you should always seek the advice of your professional tax advisor if you have any questions before filing your tax return.

  What tax issues are relevant to buying a home, as opposed to renting?
For homebuyers, deductible expenses include all settlement charges for points. Points paid by either the seller or buyer would be deductible by the buyer in the year of the purchase. Individuals owning a home can expect to pay real estate personal property taxes – which can be deducted from their federal income taxes. Also, interest payments on a residential mortgage are tax deductible in most cases; and along with building equity, it is a primary factor in why buying a house may make better financial sense than renting.

  Do sellers need to report the sale of their home, even if no tax is due on the profit?
At the time of this document's publishing, sellers were required to report the sale of their home on Form 2119, and attach it to their income tax return – even if no tax was due. Also, the party that handled the closing is required to report the sale of your home to the IRS on Form 1099. Since tax laws are constantly changing, we always recommend that you consult your tax advisor prior to selling your home; it will be time well spent.

top

Settlement (Closing)

  What is the closing, and who generally pays what to whom?

The term “closing” refers to the day when the buyer and seller actually sign the necessary paperwork and formalize the exchange of money for the title to the property. Closing costs vary for each particular sale. In general, a home buyer's closing costs might include:

1) Lender's points
2) the Appraisal
3) Prepaid interest on the loan
4) Insurance escrow
5) Lender's real estate tax escrow

The seller's closing costs may include:

1) Survey fees
2) Title insurance
3) Broker's commission
4) Attorney's fees
5) FHA fees and costs

Closing costs it is important to remember, are usually negotiable between the buyer and seller.

  What is the Uniform Settlement Statement?
Whenever a purchase is financed with a federally related mortgage loan, the closing is regulated by the Real Estate Settlement Procedures Act (RESPA). The majority of residential loans are in this category. All of these transactions must use the Uniform Settlement Statement (or HUD Form I), as the closing document.

  Will settlement be on the exact date stated in the contract?
Not always; leeway is usually given depending on various factors. For example, flexible time allowances may be made for making repairs to the house, or for the seller to find new housing prior to settlement.

top

© Realty Pro Marketing, LLC 2001, 2002, 2003, 2004, 2005