Okay, as you might imagine, Realtors field quite a few questions every day. People are naturally curious, and it's a Realtors job to guide folks through the often-complex world of home buying and selling. You might also imagine that certain questions about real estate come up more often than others. Whether you're a first-time home buyer or a repeat buyer who could use a refresher on how deals get done, in this blog, I'll cover the answers to the questions that come up the most often.
#1 “What are the first steps in the home buying process?” (By far the most commonly question asked)
PRE-APPROVAL - PRE APPROVAL - PRE APPROVAL - Getting pre-approved for a mortgage is always the first step. Getting that pre-approval letter from a lender will get the ball rolling in the right direction, and here's why. First off, you need to know how much you can borrow and what you can afford. With this information, we’ll narrow down the search criteria to a suitable property which results in no time wasted in considering homes that are not within your budget. Pre-approvals also help prevent disappointment caused by falling in love with homes you are unable to afford.
Secondly, the loan estimate from your lender will show you how much is required for the down payment and the closing costs. This will then let you know if you need more time to save up money, liquidate assets, or seek mortgage gift funds from a family member. In any case, we'll have a clear picture of what is financially required. And finally, being pre-approved for a mortgage demonstrates that you are a serious buyer to both your real estate agent and the person selling the home. On a side note, most real estate agents will require you to be pre-approved before they spend time taking you out showing you properties.
#2 “How long does it take to buy a home?”
Well, it's a great question, and there's actually 2 parts to this answer. Firstly, once you've found a new home and you've placed an offer that's been accepted, the average time to complete could be somewhere between 2 and 3 months. But it's not unusual for a close to be as little as a couple of weeks. And the second part is more about the actual search for a place that checks most of the boxes of what you're looking for. And it's not uncommon for that search to last much longer. A great example I had earlier this year is when I had a client I've been working with for 2 years that finally found their dream home. It will happen right when it's meant to!
#3 “What is a seller's market?
I'm going to keep it really simple here - a seller's market refers to a real estate market where the demand is more than the supply that's available. This puts the seller in a strong position to not have to negotiate as much and keep more value in their home. However, it's good to know that this can vary, not only from city to city, but also from subarea to subarea within the city.
#4 “What is a buyer's market?”Again, let's keep it simple. A buyer’s market is characterized by a market that has higher inventory and reduced demand, allowing buyers to be in a strong seat and giving them more opportunities to negotiate a better deal.
#5 “How much do I need to pay a Realtor to help me buy a property?”Well, the great news here is to hire a Realtor to help you through the process of buying a new home should not cost you anything financially, as all commissions which covers all the fees, are paid by the seller. All a Realtor should require is your commitment to an exclusive client relationship.
#6 “What kind of credit score do I need to buy a home?”Well, this is not such a straightforward question and comprises of many factors that are involved in the pre-approval process. What I will say is borrowers with a higher credit score represent less risk to the lender, and this often results in a lower down payment requirement and better interest rates. And then on the other side, home shoppers with a lower credit score may need to bring more money to the table or accept a higher interest rate to offset the lender’s risk.
#7 “How much do I need to put down for a down payment?”How much you need to put down and how much you should put down varies. The minimum down payment in Canada is 5% of the purchase price of the property. And that's because several first-time home buyer programs don't require a big down payment, and what's more, some programs allow payment contributions from family members in the form of a gift. On a side note, understanding that the more you put down usually means a lower monthly mortgage payment, and you can sometimes get a better interest rate because of it.
#8 “Should I sell my current home before buying a new home?”Well, if you build up with equity in your current home that will be applied to the down payment of your new home, most likely this is a good idea. However, some home buyers now decide to turn their current home into an investment property and rent it out. In that case, the current home will not need to be sold. However, your loan advisor will still need to evaluate your risk profile and credit history to determine whether making a loan on a new home is feasible while retaining the title to the old home.
#9 “How many homes should I view before actually buying one?”Well, that's really up to you. Home shopping today is easier than ever before. The ability to search for homes online and see pictures, virtual tours before even setting foot out your door has completely changed the home buying game. But nothing beats visiting a home in person to see how it looks and feels. I recently had a client where they fell in love with the very first place they saw, they decided to put in an offer and got it right away and has never been happier. I had another client that loved the first place they saw, but they had to satisfy their need of thinking that they can't just buy the very first place they saw. They went out, looked at a couple more, and when they came back, luckily the first home was still available. Just remember, when you're looking at other places, someone might be coming back to that first place for their second viewing, and you could miss out.
#10 “How much deposit should I put down?”Well, I always tell my clients to put down as much as possible to make the offer look as strong as possible. A bigger deposit shows the seller you're a serious buyer and makes them more inclined to deal with you. A key here to remember that the deposit will form part of your mortgage down payment, and anything more than above in your down payment comes back to you.
#11 “What if my offer is rejected?”Well, sellers can flat out accept or reject an initial offer. But more often than not, sellers can initiate a counteroffer. Remember this, a deal isn't dead until it's dead. So, if a counteroffer is offered by the seller, you're still in the game. You and your Realtor just need to review the offer and determine whether it is acceptable. If it is, then approving it closes the deal. Keep in mind though, offers and counteroffers can go back and forth many times. It is not unusual and negotiations are part of what a Realtor does as a matter of routine. Each revision should bring you closer and closer to getting a deal done.
#12 “Should I order a home inspection?”Well, 99.9% of the time, yes. Home inspections are highly recommended because they can reveal defects in the home that are not easily detected. Home Inspections bring peace of mind to one of the biggest investments in your lifetime.
#13 “Do I need to do a final walkthrough before possession?”It is not required to do a final walkthrough, but it is probably a good idea. Final walkthroughs give the buyer a chance to make sure nothing has changed since their first visit. If repairs were requested as part of the offer, a follow-up visit ensures that everything is squared away as expected as per the terms of the contract.
So, there you have it -13 of the most commonly asked questions about real estate.
Regardless of whatever you choose to do, research is key and getting the right information and looking into all the options available to make sure you’re making a fully informed decision for yourself is essential.
If this blog post has led to more questions and you'd like to talk with somebody about the idea of selling or buying a home, please don't hesitate to reach out. I know a pretty fantastic Realtor...
I'm loving all the comments, questions, feedback, and ideas and subjects for me to cover. So, if you have something, please post it in the comments below., and as always, thanks for reading.