| Here is a collection of frequently asked questions that I have put together to help you in buying or selling a home. If you have any other questions, not listed here, feel free to call or send an email. |
| What does FSBO mean? |
| FSBO stands for For Sale By Owner. A for sale by owner property usually indicates that the property is being sold without a real estate agent. |
| What is a broker? |
| An agent who is authorized to open and run his/her own agency. All real estate offices have one principal broker. |
| What is a Multiple Listing Service (MLS)? |
| A multiple listing service is a computerized listing of the homes for sale in an area listed with a realtor. Agents are granted access to the MLS and can use it to find a house in a particular price range or area. |
| What is a debt-to-income ratio? |
| A debt-to-income ratio is the percentage of a person’s monthly earnings used to pay off all debt obligations. You may see conventional loan debt limits referred to as the 28/36 qualifying ratio. Those numbers refer to two percentages that are used to examine two aspects of your debt load. |
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| • The First Number, 28% This number indicates the maximum percentage of your |
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monthly gross income that the lender allows for housing expenses. The total i
ncludes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues. (Often
referred to by the acronym PITI.) |
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| • The Second Number, 36% This number refers to the maximum percentage of your |
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monthly gross income that the lender allows for housing expenses plus recurring
debt. Recurring debt includes credit card payments, child support, car loans, and
other obligations that will not be paid off within a relatively short period of time
(6-10 months). |
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| What is title insurance? |
Title insurance is protection against loss arising from problems connected to the title to your property.
Before you purchased your home, it may have gone through several ownership changes, and the land on which it stands went through many more. There may be a weak link at any point in that chain that could emerge to cause trouble. For example, someone along the way may have forged a signature in transferring title. Or there may be unpaid real estate taxes or other liens. Title insurance covers the insured party for any claims and legal fees that arise out of such problems. |
| What's the Difference between a "Listing Agent" and "Selling Agent"? |
Listing Agents usually deal with sellers, and are the ones who will list a property for sale on the Multiple Listing Service.
Selling Agents (also Buyers Agents) mostly deal with the homebuyers, usually only listing just a few homes for sale. They will sell the homes (which have been placed in the MLS) via the listing agents.
The majority of agents will focus on one or the other. Some agents will also divide their time between sellers and buyers and are usually regarded as the best ones since they are dealing with both sides of the coin.
If you phone an agent from a magazine or newspaper ad, you are usually contacting the listing agent. These agents will place ads to show the seller that they are making an effort to sell their home. Also their advertising efforts can draw others who may decide to sell their homes.
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| What is the difference between being prequalified and preapproved for a loan? |
If you're prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a preapproval.
If you're preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment - and the lender is willing to give you a loan, basically meaning you're approved!
You will usually be provided an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
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| What is a REALTOR®? |
| A REALTOR® is an agent or agency that belongs to the local or state board of REALTORS® and is affiliated with the "National Association of REALTORS® (NAR). They follow a strict code of ethics beyond state license laws and also sponsor the Multiple Listing System (MLS), which is used to list houses for sale. |
| Why should I use a real estate agent? |
| A real estate agent is licensed in the field of real estate in order to act on your behalf, providing you with advice and guidance when buying or selling a home. If you are in the market to buy, it would be advisable to use a Buyer's Agent. They can make recommendations on what terms and prices to offer as well as negotiating a deal with your best interest in mind. Below are just a few of the benefits of using a real estate agent. |
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| • To help you determine your buying power - that is, your financial reserves plus |
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your borrowing capacity |
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| • Your agent has many resources to assist you in your home search. Sometimes |
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the property you are seeking is available but not actively advertised in the market,
and it will take some investigation by your agent to find all available properties. |
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| • To assist you in the selection process by providing objective information about |
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each property incluing local community information on utilities, zoning. schools, etc. |
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| NEGOTIATIONS. There are myriad negotiating factors, including but not limited to
price, financing, terms, date of possession and often the inclusion or exclusion of
repairs and furnishings or equipment |
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| • Provides due diligence during the evaluation of the property. Depending on the |
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area and property, this could include inspections for termites, dry rot, asbestos,
faulty structure, roof condition, septic tank and well tests, just to name a few.
Your agentcan assist you in finding qualified responsible professionals to do most
of these investigations and provide you with written reports |
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| • To help you in understanding different financing options and in identifying qualified |
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lenders. |
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| • Your agent can guide you through the closing process and make sure everything |
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flows together smoothly. |
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| Is an older home as good a value as a new home? |
This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.
Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less then older homes. Most new homes will not have any backyard landscaping and some don't include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10''s of thousands of dollars in landscaping done, which is included in the purchase price.
Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they're concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve.
In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV's, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident's tastes and technological whims, unless you plan to farm thousands into a remodeling and rewiring.
New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.
Builders have to follow very strict guidelines in new-homes and additions. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems.
Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.
As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home. |
| Can a home depreciate in value? |
Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate. This is why it's a great investment. Make sure you carefully consider location and community when choosing a home, it can effect the homes future value greatly.
If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may effect your homes value. |
| What are closing costs? |
These expenses associated with the transfer of title or final sale when buying or purchasing a home. These costs generally represent between 3% and 4% of the purchase price. These will vary by province and city, and are often linked to the price of the home. Your lender, lawyer or notary and real estate agent can help you estimate them. The typical costs incurred in the process are:
High Ratio Mortgage application fee
Paid to the mortgage insurer to process your application if you're applying for a high-ratio mortgage (less than 25% down payment).
Mortgage default insurance: High-ratio mortgages (those with less than 25% down payment) require insurance against default. The cost is usually added to the mortgage, and ranges from 1.00% to 3.25% depending on the amount of your down payment. There is an additional 0.25% premium for variable rate mortgages.
Appraisal fee
The cost for a professional appraiser's opinion of the value of the property. Your mortgage lender will require an appraisal to determine whether the selling price is reasonable for that market.
Land survey fee (or title insurance in lieu)
The lender usually requires a recent survey of the property or title insurance in lieu.
Home inspection fee
This covers the cost of a professional inspection of your home.
Legal costs
Legal costs include fees for the professional services provided by your lawyer or notary, costs involved in conducting a title search, drafting the title deed and preparing the mortgage, as well as registration fees and other disbursements.
Prepaid taxes, utility bills and other charges: The seller may have prepaid some bills before the closing date, which you will have to cover. All taxes, utility bills, and other charges incurred after the closing date become your responsibility. |
| What is a home warranty plan? |
| A home warranty is a service contract, usually covering one year, which helps protect homeowners against the cost of unexpected covered repairs or replacement on their major systems and appliances that break down due to normal wear and tear. Generally, basic coverage for a home regardless of age includes the home's heating, plumbing, electrical system, water heater and major appliances, such as range/oven/cooktop, dishwasher, garbage disposal, etc. |
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