Get the Answers to the Scariest Real Estate Questions
Generally, the average American will only become involved in the real estate market a couple of times during their lifetime. Given the dynamic nature and the constant evolution within the industry, its difficult for most Americans to understand the various nuances involved with the buying and selling of real estate.
With that in mind, there are surely a great number of questions people would love to ask about real estate, but find themselves reluctant to do so for a variety of reasons. This writing will serve as an attempt to address common questions with simple answers design for easy understanding.
Question 1: Is it necessary to get pre-approval for a loan before starting the search for a home?
Answer 1: It’s not absolutely necessary, but highly recommended. By securing pre-approval from a lender, you will have a good idea of the price range you should be targeting. This will keep you from wasting time looking at homes that might be beyond your means, at least from a lender’s perspective. It also saves you from the frustration and embarrassment of making an offer, only to have the deal fall through due to financing issues.
Question 2: Is buying a home a good investment?
Answer 2: The answer depends on a number of factors. If you anticipate owning the home less than five years, you could be at risk of creating little to no value due to market conditions. If you are looking at the purchase as a long term investment, a lot will depend on your expectations. As a worst case scenario, the payments you make towards your mortgage might end up serving as nothing more than a savings account with tax advantages, which is a good thing for folks who have trouble saving money. In the right location and under certain circumstances, you might realize a significant increase in value over a 10-15 year period. Contrary to popular opinion, buying a home is a good, but not great investment for most people.
Question 3: Is “rent to own” a good strategy?
Answer 3: If you are ready to buy a home, but need more time to accumulate a reasonable down payment, a rent to own agreement is a great way to get the house you want off the market while you attempt to get all your ducks in order for the purchase of said property. As long as the rent is reasonable and comparable, there really is very little risk with using this strategy.
Question 4: If I’m selling my home, what percentages should I anticipate paying in commissions and fees?
Answer 4: Keeping in mind some things are negotiable and percentages may vary for a variety of reasons, you can expect the real estate agent commissions to be 5%-6% with another 3%-5% combined going to the title company, the escrow company, various inspectors and the appraiser.
Question 5: Does it make sense to do home upgrades to enhance the value of the home prior to selling it?
Answer 5: A lot will depend on the condition of your home as it sits now. If the home is in desperate need of repairs, you might have to upgrade just to get the home sold. If it already looks pretty good, you might not derive enough return from the upgrade to justify the costs. With that said, upgrades to the kitchen and bathrooms return more value than fixing the living room or adding a pool.
Question 6: What kind of minimum credit score do I need to qualify for a home loan?
Answer 6: Lenders like to see a credit score in the 620-650 range, depending on other factors such as purchase price, the appraisal and the anticipated down payment. Some lenders might accept a slightly lower credit score, but will ask for more restrictive terms in return.
Question 7: Do I need a realtor as a buyer or seller?
Answer 7: If you have significant knowledge about the process, it is possible to survive without a realtor. However, there are significant risks involved. A real estate agent serves as a barrier to keep you from running into legal problems while trying to maximize the value you get from the transaction. It is highly recommended that you let the professionals handle a transaction of this magnitude.
Hopefully, the above information is useful. Buying and selling real estate is a significant endeavor. In order to protect your best interests, you need to set aside your reservations and be prepared to ask any questions that will make the process easier for you to manage and understand.