ANSWERS TO COMMON BUYER QUESTIONS

Earnest/Deposit Money is the money a buyer puts down to "seal the deal" and show they are a serious buyer. A buyer forfeits earnest money if they break the contract. Earnest money is NOT in addition to the purchase price, so it counts toward the cost of the home. It is usually 1% of the offer price, but this isn't a hard and fast rule. Some people offer much more to show they are serious. Others offer less if they can't afford to put that much down to get started. Earnest money is always expected to enter into an agreement to purchase.

Inspection Costs are usually paid up front and are not refunded if problems are found that kill the sale. Some examples of inspections include general home, septic, termite, electric, roof, pool, etc. This is always a dreaded step in the process because a buyer may fork out hundreds of dollars for a home inspection only to discover the home has real problems. Inspections aren't mandatory (except where certain types of mortgage require them) but most buyers who waived inspections will admit later that it wasn't a good idea. Inspection costs are rarely allowed to be rolled into the loan, so they must be paid out-of-pocket.

Appraisal Cost pays for an appraisal to confirm to the lender and/or buyer that the home is worth what is being offered in the purchase agreement. Some loans such as VA, FHA, and USDA require an appraisal. Conventional loans may also require appraisal. Cash offers do not. It is usually paid out-of-pocket, but in some cases may be rolled into the loan. Ask your lender if this is an option.

Down Payment: is a portion of the purchase price to be paid up front. Some loan types such as USDA allow 0% down payment, but most require a minimum of 3-3.5% of the purchase price. Putting down more money (such as 10% or more) can sometimes qualify you for a lower interest rate. Putting down at least 20% can also save you from paying private mortgage insurance.

Agent Fee: is compensation to a licensed agent for any services they provide to you, such as researching facts homes facts, scheduling/touring homes, writing offers, scheduling inspections, etc. Because of recently mandates (Aug 2024), the buyer is now responsible for the buyer's agent fees according to their agreement. However, you can include a request for seller to pay this cost when you write any offer. Agent Fees vary among agents and can be negotiated at the time of entering into an agreement or amended later by mutual consent.

Have you been consistently employed for about a year and had employment for the past 2 years? Is your credit score at least 600? Is your debt to income ratio below 45%? Do you have at least $1000 in savings? If you can answer yes to all of these questions, you may be ready to buy a home. Every lender has its own requirements, but if you answered yes to all of the questions I can offer you some lender names to call. Also check out these Buying Tips for helpful tips related to the home buying process.

You aren't required to have an agent, but it's not smart to go unrepresented unless you know what you're doing. You can shop for a home and make an offer home without representation, but as a buyer it could be costly not to use a professional who understands contract terms and negotiation strategies. If you reach out to a listing agent without representation, the listing agent will gladly walk you through the process, but they represent the seller. THEY ARE CONTRACTUALLY OBLIGATED TO WORK IN THE SELLER'S BEST INTEREST, unless both the seller & buyer agree to have the agent become a neutral party (facilitator). Your agent knows how to write contingencies that protect you, read contract counteroffers, make sure you don't miss deadlines, and anticipate problems before they happen.Your agent can also research a property to learn about it's history of past sales and disclosures, current permits, and other really important information to protect you.

Quite the opposite. All Realtors have access to the same database, so they're "fishing in the same water." If you ask multiple agents to find you a home and they all send you info on a home you are interested in, which agent closes the deal? And if they find out you're using multiple agents, you may not get the best service from any of them. Instead, commit to one agent who is experienced and knowledgeable. A representation agreement comes with important obligations to look out for your best interests. Once you sign an agreement, ask your agent for a custom portal with custom searches you can access. You'll get notices of new listings that match your needs as soon as they hit the market. AND if you sign a Buyer's Agreement, know the terms and while under representation, be sure to tell other agents you are represented so you don't end up having to pay multiple agent fees.

The seller signs a listing agreement that states compensation to be paid to the listing agent, and specifies if any of any compensation is to the buyer's agent is agreed to upfront. Likewise, the buyer signs a representation agreement that states the compensation the buyer's broker agency is entitled to. When you make an offer on a home, you can ask the seller to cover your buyer's agent cost. HOWEVER, the seller may not agree to pay the whole amount or any at all. As a buyer, you can ask your agent if there is any flexibility in the fee he/she is due or you can walk away from the home. In the past, sellers built the cost of buyer agent fees into the sales price, and some still do. You may want to consider increasing the offered price to include your agent's fees if all other options have been exhausted and you still want the home.