Buyer FAQs
Brian Gangawer
Animal Lovers❤, Pit Bull Advocates🐶, Motorsports Enthusiasts🏎️, Low-key Vegans🥗, Exhausted Parents😴, and Superstar Realtors🤩...
Animal Lovers❤, Pit Bull Advocates🐶, Motorsports Enthusiasts🏎️, Low-key Vegans🥗, Exhausted Parents😴, and Superstar Realtors🤩...
Q: What's the difference between pre-approved and pre-qualified?
Q: How do home inspections work?
Q: What happens if the house doesn't pass inspection?
Q: Can I get my escrow deposit back if I don't buy the house?
Q: How much money do I need to have for a down payment?
Q: How does the appraisal work?
Q: Who pays for closing costs and how much are they?
Q: Why should I use a Realtor if I buy new construction?
Q: How does it work if I have to buy and sell at the same time?
Q: How do I get started?
The first step in the process is to find a great Realtor. Every situation is unique, including yours. The right Realtor can help you assess your situation and identify the best next steps for you. Sometimes that means a mortgage pre-approval, sometimes it means identifying the type of home you’re looking for, and sometimes it’s something completely different. Contacting a great real estate agent first will set you on the right course as soon as you get started. It’s important that you’re completely comfortable with this person. They’re representing you in what is, for most people, one of the largest financial decisions in your life. Ask questions, check references, and be sure that you’re completely comfortable that their experience and approach are a good match for your needs.
Q: What's the difference between pre-approved and pre-qualified?
Typically, a pre-qualification is based on only the information you provide to the mortgage company without any form of documentation to support what is claimed for things like assets, income, and, in some cases, even credit. A pre-approval is provided after documentation and credit have been reviewed, making it far more reliable information for both the home buyer and seller. Pre-qualifications are rarely taken seriously by sellers in a competitive market. Pre-approvals are typically a requirement from sellers for any offer coming to them.
Q: How do home inspections work?
The home inspection is paid for by the home buyer. It is the buyer’s option, but not a requirement, to conduct inspections of any and every aspect of the home that is being conveyed with the sale during their inspection period. The length of the inspection period is negotiated at the time that the offer is being made and typically ranges from 7-15 days. The buyer and seller are both allowed to attend the inspection. It’s highly recommended for the buyer to attend as much of the inspection as possible, but the end of the inspection at a minimum. That will allow the inspector to review their findings with the buyer in person and point out any maintenance items or troublesome issues first hand.
Q: What happens if the house doesn't pass inspection?
This is a bit of a misnomer, as there really isn’t a pass/fail inspection rating. While homes can fail different types of inspections for things like permits, a home inspection is really more like a book report on the home that details the good, the bad, and the ugly. For example, if you were buying a foreclosed property for $50,000 below market value, you’d expect some things to come up in that inspection. That doesn’t mean that the house isn’t still priced appropriately for its condition or that you shouldn’t buy it. To be more specific though, there are two different types of contracts here in Florida that are commonly used. The first is the “As-Is” contract. On the As-Is contract, the buyer has the option to cancel the contract during their inspection period if they’re unhappy with any of the inspection results. Buyers can, and frequently do, request that repairs or concessions be made because of inspection findings rather than cancelling the contract. In return, the seller has the option to make repairs if the buyer is unhappy with the inspection findings, but the seller has no obligation to do anything at all. On the “traditional” sales contract (which is actually less commonly used than the as-is contract) there are specific categories of repairs that the seller is required to make if issues arise in the inspection. As part of initial negotiations, specific dollar amounts are set as limits for the cost of each of those different types of repairs that a seller can be required to make.
Q: What's an escrow deposit?
The escrow deposit is a good faith deposit made by the buyer either at the time that the offer is presented, or, more commonly, within a few days after the seller and buyer have both signed the sales contract. This deposit is held by a 3rd party; usually either the title company, attorney, or one of the real estate brokers. If the closing takes place as planned, the escrow deposit is applied towards the buyer’s down payment and/or closing costs. The escrow deposit is protected by certain contingencies within the contract that could allow it to be returned to the buyer if the closing does not take place.
Q: Can I get my escrow deposit back if I don't buy the house?
In a word, maybe. If the contract is canceled by the buyer because of one of the contingencies in their contract, and the seller does not object to the cancellation, the escrow deposit is returned to the buyer. If there is any dispute over the escrow deposit and who it should go to, neither party will receive the funds until the dispute is resolved. If you as the buyer are outside of your inspection period, and you simply choose not to move forward with the contract with no specific contingencies allowing you to do so, you may very well be forfeiting your escrow deposit. In situations like this you’ll need to consult with a real estate attorney, as only an attorney is qualified to interpret the contract and provide legal advice.
Q: How much money do I need to have for a down payment?
The amount of down payment you’ll need depends on the specific lender’s programs as well as your credit profile, property type, and your intended use for the property. VA mortgages offer financing for 100% of the sales price for qualifying veterans and there are even 100% financing options for conventional loans as well now. In those cases, there is literally no down payment and only the closing costs need covered. There are also FHA loans which require only 3.5% of the sales price as a down payment. It's important to note, however, that many lenders require larger down payments on condominiums, for rental property purchases, or for large loan amounts. These programs change with time and come and go completely occasionally. The smart move is to reach out to a lender to have your situation reviewed and current mortgage program guidelines reviewed as they pertain to you.
Q: How does the appraisal work?
The appraisal is ordered by the lender and paid for by the buyer. Typically, this takes place after the home inspection is complete and the buyer is confident that they’re moving forward with the sale in order to avoid a potentially unnecessary expense. The appraiser will go out to the house, measure the dimensions, evaluate the homes condition and features/upgrades, and take photos for their report. The appraiser will then compare the property to other similar homes in the area that have sold recently. Once that report is complete it is forward on to the lender for the Underwriter to review and approve or request revisions. That appraisal report will indicate the value that the mortgage company will use for their financing. If the appraisal shows a value higher than the sales price, congratulations on getting a great deal on the house! If the appraisal comes in lower than the contract sales price, however, you would typically need to bring the difference between the sales price and the appraisal value to closing in order to still purchase the home. If there’s any concern about the value of the property, ask your Realtor about adding an Appraisal Contingency to your offer up front. The majority of homes are appraised exactly at the sales price indicated on the contract.
Q: Who pays for closing costs and how much are they?
In both versions of the Florida residential sales contract there are specific closing costs assigned to the buyer and seller. For example, the seller typically pays for the documentary stamp taxes or “doc stamps” while the buyer pays for the recording of the new mortgage. However, the contract does include opportunities to require either party to pay certain costs. For example, either the buyer or the seller can decide who will be the closing agent that handles the closing, but the party that makes that selection will be required to pay for the Owner’s Title Policy. It’s also fairly common for the home buyer to ask for closing cost assistance from the seller in some situations. In those cases, the seller would provide a credit to the buyer at closing that would be applied towards the closing costs and/or escrow accounts for taxes and insurance. The actual dollar amount in closing costs depends heavily on the sales price of the property as well as the mortgage company’s costs. Therefore, the best estimate would come directly from your mortgage lender after they’ve completed your pre-approval and know which loan program will be best for you. If you’re looking for a very rough estimate for closing costs, they can be anywhere from 2-5% of the sales price.
Q: Why should I use a Realtor if I buy new construction?
The builder’s sales representative does not represent you. They’re either contracted to, or directly employed by, the builder. That means that they’re paid to represent the builder’s interests, not yours. Using a Realtor to purchase new construction should cost you absolutely no additional money and will not negatively impact your price with the builder. In return, you’ve now got someone working to represent you and your best interests. It’s important that you confirm with your Realtor before you decide to work with them that they don’t have any additional transaction fees, compliance fees, or other brokerage fees for helping you with the sale. If they do, and they refuse to cover those fees, find a different Realtor. Otherwise, the Realtor representing the buyer is paid by the builder, not the buyer. A Realtor that is well versed in new construction will know how to best negotiate with the builder, know how to manage the process in order to save you time and aggravation, will attend contract review meetings and builder walk-throughs, and will stay in touch throughout the process to keep things moving smoothly. The decision to work with a Realtor needs to be made BEFORE you sign anything with the builder though. Once you’ve signed a contract with the builder, or in some cases simply provided them with your contact information, the builder may refuse to allow you to be represented by a Realtor.
Q: How does it work if I have to buy and sell at the same time?
The process of buying and selling at the same time might sound a little scary, but it’s something that we deal with all of the time. You’ve got a few different options available to you when you’re in this situation. If you’re like most people, and you need to sell your current home in order to qualify for a loan on the new home, then the most straightforward approach is to list your current home for sale first. While your home is on the market you should be looking at homes and preparing your short list of favorites. Once an offer comes in on your home and the contract is signed, you make an offer on the home you like most. In our experience it’s best to negotiate ample time for closing with the buyer for your current home to be sure you’ve got plenty of time for the home search should your favorite home suddenly disappear from the market leaving you looking for a replacement. This option helps you in your negotiations with the seller of the home you’d like to buy. That’s because, while you do have a home to sell, at least your current home is already under contract with a buyer and off of the market. It is absolutely possible to make an offer on a home before your home is on the market. We’ve done it, and it has been successful. However, you’ll need to be willing to seriously incentivize the seller to take their home off of the market if yours isn’t even up for sale yet. That usually means little to no negotiation and may also mean some risk of losing the home if you aren’t able to get yours ready and sold fast enough. In a market where homes are selling in days to weeks rather than months, many sellers simply won’t entertain an offer from a buyer whose house isn’t already on the market and under contract with a buyer. If you are able to get approved for a loan on the new home without selling your current property first, you have the ability to make the offer on the new home before your current home is sold. You then proceed with the approval based on you owning both homes while working towards selling your existing property. Then, if you’re successful and the home is sold quickly, you may be able to change the loan terms with the lender prior to the closing to allow for improved interest rates and lower fees. If the idea of signing a sales contract to sell your current home before buying a new one sounds daunting, rest assured that there are other tools at your disposal to keep you protected, such as a pre-closing or post-closing occupancy agreement that would either allow you to stay in your current home after closing until the new one is ready, or allow you to move into the new one before you buy it. A good Realtor will know how to structure the deal to keep you protected throughout the process and will be keeping your best interests in mind at all times.
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