First Time Home Buyer
Whether you’re a first-time homebuyer, or one who hasn’t been through the home-buying process in a number of years, you likely have questions. Though the list extends far beyond the 5 I am going to cover now, these are the questions I most often hear:
1) “I’m just getting started. What should I do first?”
First thing, you must be pre-approved by a lender. Whether you contact a lender or a realtor first is up to you, but you cannot move forward on a home of interest until you have a mortgage lender-issued letter that says you are qualified to buy. Far too many buyers want to look at homes first and then seek out a lender. No, no, no! Doing this will most likely lead to time wasted, not to mention frustration and disappointment if you find out you cannot afford a house you previewed. Not to mention, in this quick market, that house will likely be snapped up before your lender gives the go-ahead.
2) “How long will the home-buying process take?”
If you do things right, and get your pre-approval upfront, you could be looking at as little as 4-6 weeks IF you find the house you want right away. It also depends largely on how picky you are as well as the inventory of homes available in your chosen price range and location. On average, my clients have been able to move in within 2-3 months of first meeting with me.
3) “How does buyer agency work?”
Many first timers think they will have to pay their agent’s commission. NOT TRUE, as long as the home they buy is listed by a realtor on the Multiple Listing Service (MLS). The seller pays both agents’ commission in this case. Therefore, buyers are missing out on a great opportunity for professional representation if they choose to go without. Something to note...If a buyer chooses to purchase a FSBO (For Sale by Owner) property, there is a chance the seller will refuse to pay the buyer agent’s commission (and in some cases, even work with an agent involved). While I’m at it, your agent can show you any listed property, as we all have access to RASE (Realtor Association of the Sioux Empire) lockboxes. For example, I’m a Keller Williams agent, but I can show listings by Hegg, Ameri/Star, Re/Max, etc.
4) “What is earnest money?”
When a buyer submits an offer on a property, he/she offers a certain amount of money ($500-$1,000 on average) to accompany the offer. The acceptable amount depends on the value of the property. Upon acceptance of the offer, the buyer’s check will be deposited and held in trust/escrow by either the buyer or listing agency until closing. The purpose of the check? Putting forth the earnest money says, “My offer is a serious offer made in good faith.” In short, it helps prevent frivolous offers from people who may want to back out of the deal for no good reason. In the event a buyer would do that, the seller has some cash to make up for lost time on the market. If the inspection is unacceptable and the buyer wants out of the deal, most sellers will release the money back to the buyer (although, this is not guaranteed, or perhaps not without an ordeal). Once the transaction reaches closing day, the earnest money amount will be deducted from the balance owed by the buyer. *NOTE: Earnest money is NOT the same as a down payment. Those are two separate things.
5) “How will the inspection work, and who pays for it?”
It is always a good idea to get, at minimum, a general inspection for the structural and mechanical features of the home. Any home can have hidden problems that may be detected only by an inspection professional. Depending on the extent of the inspection you want (with optional attention to testing for radon, pests, etc.), most general inspections will fall between $340-400. Money well spent! And yes, it is paid by the buyer.
Finally, it is a great idea to take a first-time homebuyer class. The Sioux Falls area has several opportunities for classes (most are free), and some will even offer you some credit toward your closing expenses.
If you have questions I didn’t cover, feel free to contact me at 605-864-9922 or sherryknutson@kw.com.