It’s no secret…
The home buying process has a ton of moving parts, and navigating your way through it can become overwhelming if you do not have a clear expectations right out of the gate.
In an effort to simplify the process, my team and I decided to develop a list of frequently asked questions from home buyers.
The list is fluid… Meaning, we will edit, adjust, and add to it over time.
🙂 See below:
1. Where/how do I begin?
Start by calling a Realtor.
A good realtor will have a wealth of information/contacts they can share with you.
During your first call (or meeting), your potential real estate agent should be “fact finding” and actively listening to your needs/wants (i.e. the area(s) you are interested in, price range/budget, if schools are a consideration, size/type of property, yard specifications, garage size, rental or primary home, how long you plan to own, short/long term goals, etc).
Once a Realtor has a better understanding of your real estate needs, then an action plan can be designed to lead you forward with clear expectations.
At this point, your agent may open up their Rolodex and introduce you to other well-vetted professionals (like a mortgage lender) that can help make the home buying process easier and more enjoyable. A local lender is usually the first introduction at this early stage so that you can get pre-approved and determine your purchasing power (more on this later).
Lastly, your Realtor should be able to provide other helpful information that will be extremely useful during the home buying process. For instance, they should be able to review the current market climate (i.e. buyers’ or sellers’ market), the price range for the homes in your favorite neighborhoods, the average price per square foot, if homes are selling over list price, school ratings, etc. This information will help you make an educated and informed decision.
2. How much can I afford?
There is not a “one size fits all” when it comes to determining how much you can afford because everyone’s financial situation is unique and different.
At this stage, its best to seek help from a mortgage professional.
Mortgage lenders consider things like income, time on the job, assets, credit score, & liabilities (ie. credit cards, car payments, student loans, other mortgages, etc). This information is collected during a loan consultation (with your lender), and then reviewed for pre-approval.
Once pre-approved, you will have a clear understanding of the purchase price and loan amount you qualify for. With that said, it is not always wise to shop for a home at your max budget. I personally recommend that you review your budget, and then determine a monthly mortgage payment that makes you feel comfortable. From there, you can work with your lender to reverse engineer the details and determine the purchase price range you should be targeting.
If you would like a referral/introduction to a mortgage professional, please let me know.
3. How does a real estate agent get paid?
A buyer’s agent (real estate agent representing the buyer of a property), earns a commission that gets paid directly from the sellers proceeds (this is pre-negotiated by the listing agent).
That’s right, you do NOT need to pay a buyer’s agent for their services… the sellers pay the commissions.
Conversely, when you go to sell a property, you will be responsible for all commissions paid to real estate agents. In other words, you pay sales commissions when you sell, not when you buy.
4. How much do I need to bring to closing?
Like many real estate questions…. The answer depends on your situation. I will give you a general rule of thumb/formula for calculating. See below:
Formula: Down payment + Closing Costs = Cash Needed to Close
- Down payment = Amount determined by you and your lender
- Closing costs = roughly 2-3% of purchase price
Purchase price: $400,000
Down payment: 5% = $20,000
Closing costs: 2% = $8,000
Total cash needed to close = $28,000
For additional information, please visit an article I wrote on this topic HERE.
5. What is the timeline and process look like?
The timeline is completely negotiable so it is always best to consult your realtor and take into account market conditions as well as seller needs (and of course your needs). I say this because in a sellers’ market, you may need to position your offer to stand out among the others to capture the attention of the seller. Conversely, in a buyers’ market, you may be able to take more time or sway the offer so that it suites your needs better…either way, it’s a judgement call.
With that said, here is the standard timeline per the California Residential Purchase Agreement:
- Close of escrow: You get to set this timeline in your offer (30 days is fairly common)
- Earnest money deposit due: 3 business days – delivered to title company from the buyer
- Pre-approval letter due: 3 days (usually this is provided upfront with your offer)
- Verification of down payment & closing costs: 3 days
- Seller Disclosures due: 7 days
- Inspections contingency: 17 days
- Appraisal Contingency: 17 days
- Loan contingency: 21 days
- Loan signing: within a few days of closing
- Final walk through: within 3 days of closing of escrow
- Officially sold: once loan funds are sent to the title company and the transaction is recorded with the county
As mentioned, almost all of the dates are completely negotiable, so make sure to consult your agent on the best way to approach the transaction.
6. How long can a seller take to respond to my offer?
Per contract, the offer automatically expires in 3 days. With that said, you can shorten the deadline if you chose.
7. How much should we offer on this home?
This will depend on the properties location, the condition, the comparable homes that have sold nearby, and the demand.
I like to start by analyzing the data available to determine the average price per square foot in the area. If we know that the average home sells for approx. $200 per sq ft, and the subject property is listed at $210 per sq ft, then we need to determine if there are enough compensating factors to warrant the higher price tag (ie. more upgrades, larger lot, cul-de-sac location, etc.).
If the property is priced at $180 per sq ft, we need to look at the reason it’s being offered under the current market rate (ie. is it a fixer, is it on a noisy street, etc).
Once we have the whole picture and any details we can gather from the listing agent, we can construct an offer that makes sense. In other words, we can base our offer on data, rather than emotion. This is the best place to start.
8. How are the schools?
Schools vary from location to location; however, one of the best online resources (in my opinion) for school data is www.greatschools.org. This site has ratings, reviews, score details, parent insights, etc.
If you would like to learn more about school ratings, check out my article on, “How Are School Rated And Ranked. ”
9. How much do the utilities cost?
Utilities are an easy expense to overlook when purchasing a home. Mainly because your attention is focused on finding your dream home, or providing loan documents, or conducting inspections, or hiring movers, or buying furniture… the list goes on and on LOL.
However, the average cost of utilities is very useful information to have because it may affect your budget.
Here are the utilities to consider:
- Garbage/sewer (City)
- Water (city or well)
- Electricity (PG&E, SMUD, Roseville Electric, etc.)
- Gas (PG&E, natural gas or propane, etc)
- TV/internet (AT&T, Comcast, Dish, DirecTv, etc)
Want to know the average utility cost in your area?
Reach out to each utility provider and request an average usage report. Most companies (like PG&E, SMUD, etc) will provide you with an average cost for the area.
10. What inspections should I get?
You may order any inspections you see fit. Typically, I recommend a home, pest, and roof inspection.
Average cost of inspections (paid by the buyer):
- Home – $350-$450
- Pest – $125-175
- Roof – $125-175
Depending on the results of each report, it may be wise to conduct additional inspections (this is case-by-case).
11. Is it a good time to buy?
Real estate markets are cyclical… they go up, they go down, and they can even stay flat.
And… similar to the stock market, it is extremely difficult to time the market perfectly.
Therefore, purchasing real estate is less about timing the market, and more about the time spent in the market.
What I am trying to say is… The more time you spend in your home, the more likely you are to have a profitable investment.
Because over time you will pay down your mortgage and inflation will work to increase your home’s value (at least that is the hope 🙂 ).
Here are a few really important questions to ponder:
- How long do you plan on staying in this home?
- Are kids in your future or are they a factor now?
- How are the schools?
- Would this property make a good rental down the road?
- Does your income fluctuate substantially? Or Is it fairly steady?
- Any large career moves in your future?
- Is this a forever home or a starter home?
Answering these questions will help put things in perspective for you so that you can decide if now is a good time to buy (for you).
** Side note, there are good deals to be found in every market cycle so don’t let the market conditions bully you into making an emotional purchase. Establish a game plan and purchasing criteria with your agent… and then start tracking down the deals.
We hope you find this information useful!
Please let us know if there are any additional questions you would like answered/added to the list.
All the best!
Want to buy, sell, or invest in real estate?
Silva Realty Team can help!
We cover Sacramento & Placer County in California with a special focus on Roseville, Rocklin, Loomis, Penryn, Lincoln, Newcastle, Orangevale, & North Natomas (Sacramento).