FAQ of BUYERS AND SELLERS

Should I accept an offer contingent upon the sale of the buyer's home?

Most Realtors will advise against it because they don't know the right way to structure the contract. Contingent offers are fine, but only if you get the buyer to agree to 2 things: 1) To list his property for the appraised value from an independent appraisal; 2) To agree in advance to periodic price drops until it sells. And if he doesn't comply, the contract is canceled and he loses his earnest money. If this is part of the contract, you know that his house will eventually sell.

What is the difference between being Pre-Qualified or Approved for a loan?

Pre-qualified generally means a borrower had a conversation with a mortgage company, and told a loan officer that their debts and income are. It doesn't necessarily mean a credit report was considered in giving the opinion. The term Pre-Approved normally means the same thing as Pre-Qualified.

Approved means the borrower made a complete application with a mortgage company, and has provided paycheck stubs, bank statements, W-2s, and when applicable, tax returns. The mortgage company's only conditions should be that the property is acceptable, and they can withdraw the approval if there is a material change in the borrower's situation, such as loss of a job.

What is a home inspection?

There are numerous types of inspections. An inspection is meant to evaluate, at minimum, the structural and mechanical condition of a property. It is not the same as an appraisal which evaluates the market value of a property. Persons involved in real estate transactions need unbiased information about the physical condition of property they plan to buy or sell and your contract should include a contingency that you obtain a satisfactory inspection report.
Click here to see a sample inspection. Please note that the format of inspection reports vary, and they don't always include pictures or as much detail as this sample report.

What does a home inspection include?

Every inspection should include, but not be limited to, an evaluation of at least the following:

• Foundations
• Plumbing and electrical systems
• Doors
• Ceiling, walls and floors
• Roof
• Hazardous materials concerns
• Heating and air conditioning systems
• Common areas (in condominiums)
• Insulation
• Ventilation

What's the difference between a Home Inspector and an Engineer?

Home Inspector: A person who examines any component of a building, through visual means and through normal user controls, without the use of mathematical sciences.

Engineer: Does analysis or design work requiring extensive preparation and experience in the use of mathematics, physics, chemistry and the engineering sciences.

What is a wood-destroying organism report?

A wood-destroying organism inspection report is a written opinion by a qualified state licensed structural pest control inspector based upon what was visible and evident at the time of inspection. The inspection report does not represent or guarantee the structure to be free from wood-destroying organisms or their damage, nor does it represent or guarantee that the total damage or infestation is limited to that disclosed in the report. Wood-destroying organisms include subterranean termites, damp-wood termites, carpenter ants, wood boring beetles and wood decay fungus.

Should we leave the house when there is a showing?

Buyers and agents tend to be uncomfortable is when you are home during a showing. Buyers tend to abbreviate their visit, and are inhibited about looking at everything they otherwise would. It is beneficial for sellers not to be home during showings.

What are closing costs?

Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For buyers, they are usually about 4-6% of the total sales price of a property. Some of the closing costs buyers might encounter are: loan application and origination fees, appraisal fee, county taxes, credit report, discount points, documentation fee, escrow fees, homeowners' association fees, loan fees, mortgage insurance, tax registration and title insurance premium.

For sellers, they are usually about 3.5-4% of the total sales price of a property, excluding any real estate commissions. Some of the closing costs sellers might encounter are: discount points, escrow fee, documentation fee, homeowners' association fees, pest/rot inspection, and title insurance premium.

What is a point?

One point is equal to 1% of the new loan amount. Lenders often charge an origination fee, which is normally 1 point, in addition to points. The greater the points, the lower the interest rate; the lower the points, the higher the interest rate.

What is earnest money?

When you make an offer, you will need to put up an earnest money deposit as a sign of good faith that you are seriously interested in buying a home. That deposit becomes a part of the purchase price and is held in a trust account with the title company until there is full acceptance of the offer. Typically, earnest money is 1/2-1% of the offer amount.

Is VA or FHA financing unfair to sellers?

FHA and VA loans provide purchasers the opportunity to buy homes with minimal cash investment and at lower interest rates. The result is a larger market for sellers, who also benefit by receiving all cash for their equity. There are some fees a seller must pay that aren't required for conventional loans. The fees normally range from $600 to $1,000.

What is title insurance?

Title insurance protects the named insured against loss because of defects, liens, encumbrances, adverse claims or other matters not shown or disclosed to the new owner that attach before date of policy.

What are the hazards of lead-based paint?

All sellers are required by law to make written disclosures to buyers regarding their knowledge of any lead-based paint hazards for homes built before 1978.

What is the difference between a Mortgage Broker and a Mortgage Banker?

The state of Texas differentiates between a mortgage banker and mortgage broker. A mortgage banker requires a larger net worth ($250,000) because it has the ability to engage in the entire loan process from origination through funding. A broker originates the loan and then relies on outside sources to handle the rest of the process. Most brokers cannot meet the financial requirements to originate FHA loans, whereas all mortgage bankers are able to originate FHA loans. In Texas, a broker and loan officers working under the broker must be state licensed. Loan officers working for mortgage bankers don't need to be licensed because they are employees, and the mortgage company is federally licensed.

What is the difference between a REALTOR® & Real Estate Agent?

REALTOR® identifies real estate professionals who are members of the National Association of REALTORS® and subscribe to its strict Code of Ethics. Not every real estate agent is a REALTOR®. A REALTOR® may be an appraiser, property manager or involved in some other aspect of the real estate business.

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