What is a buyer’s market?
A buyer’s market is characterized by a reduced demand in real estate which usually occurs during a declining market. In short, it means there are more homes for sale than there are buyers in the market. This typically results in home prices stagnating or dropping.
What is a seller’s market?
A seller’s market is characterized by an increased demand in real estate which usually occurs in a healthy market. In short, it means there are more buyers in the market than there are homes for sale. This typically drives real estate prices up.
What is a short sale?
A short sale is the sale of a property where the home is worth less than the amount the homeowners owe in mortgages or liens. A short sale can take a lot of time and can be very unpredictable as it must be approved by the lender. This process is initiated by the seller.
What is a foreclosure?
A foreclosure is when the bank takes ownership of the home due to the previous homeowner being unable to make their monthly mortgage payments. Typically, foreclosed homes have already been abandoned and the bank usually wants to sell the property quickly. This process is initiated by the lender.
What happens if an appraisal comes in low?
It depends. A few things can be done if the appraisal comes in low: the buyer can come up with the difference, the seller can make a reduce the sales price, the appraisal can be appealed, or the transaction can be terminated. Most of the time, it is best to review and appeal the appraisal prior to choosing one of the other options. If the appeal is rejected, the buyer and seller can negotiate the sales price to see if there is a compromise. If the buyer and seller cannot come to an agreement they can choose to terminate the transaction.
What does it mean if a property is listed “as-is”?
In North Carolina, there are no state laws or commission rules that require sellers to make repairs to the property they are selling. The contract even reads “Buyer acknowledges and understands that unless the parties agree otherwise, the property is being sold in its current condition.” While the sellers are not required to make repairs, it is common to negotiate some repairs or credit towards repairs during a real estate transaction. On occasion, a seller will list the property “as-is” which indicates the seller’s inability or unwillingness to make repairs to the property or give credit toward repairs.
What is a contingency?
A contingent offer means that an offer has been accepted on the property, but the closing is contingent upon certain criteria being addressed/completed. The most common contingency is the sale of the buyer’s current home (this usually means that the buyer needs to funds from their current property in order to qualify and close for the new property).
What is the first step in the home buying process?
Every buyer should start their home buying process by getting pre-approved for a mortgage. This will help you understand how much you can afford to borrow which will help you narrow down you home search. The lender will also be able to discuss what your monthly payments will look like, how much money you will need for down payment and how much you will need for closing costs. A pre-approval letter will need to be submitted with any offers you make as it shows the sellers you are a ready, willing and able buyer.
What is the minimum credit score needed to qualify for a home loan?
Majority of home loans require a 620 credit score or higher to qualify. Better credit scores typically result in better interest rates and lower down payment requirements.
How much does it cost to have an agent represent me?
Buyers pay little to no fees to an agent when buying a property. For most home sales, the listing agent will compensate your buyer’s agent for bringing a qualified buyer’s (you) offer to the table. When the home is sold the listing agent will split their commission (paid for by the seller) with the buyer’s agent.
How much do I need for a down payment?
It depends as all loan programs are different. FHA loans typically require 3.5% down, conventional loans have programs that only require 3% or 5% down, and VA or USDA loans require zero down. There are also first-time home buyer loan programs that also require zero money down. It is good to keep in mind that most loan programs require private mortgage insurance (PMI) for loans that have less than a 20% down payment.
Additionally, it is good to remember that, even if you are using a loan that requires zero money down, you will still need to be prepared to have funds available for the due diligence and earnest money deposits for the property (remember that these are credited back to you if/when the property closes).
What is private mortgage insurance (PMI)?
PMI is a type of mortgage insurance that is built into your monthly mortgage payment (or occasionally paid for in lump sum up front) that is required if you put less than 20% down on a home loan. PMI protects the lender if you stop making payments on your loan.
What is earnest money?
Earnest money is a good faith deposit on the property that shows the seller that your offer is serious and genuine. The earnest money deposit takes the property off the market and reserves it for you. Earnest money is placed in a trust account until closing where it will then be applied to your down payment and closing costs.
What is due diligence?
The due diligence period provides the buyer an opportunity to reasonably inspect the property for any issues and take time to address any concerns they may have with respect to the property. Due diligence is a negotiable period of time that is usually accompanied by a due diligence deposit. The due diligence deposit protects the buyer’s earnest money during the due diligence period and is non-refundable should the buyer decide to walk away during the due diligence period. If/when the property closes, the due diligence deposit gets credited back to the buyer.
Do I need to have a home inspection?
Yes, while a home inspection is not required, it is highly recommended as they can reveal property defects and other potential issues with the property. Other, more specific, inspections are also recommended (like septic and termite) and are required for certain loan types. Home inspections can also be used to negotiate repairs with the seller.
How long does it take to close on a house?
In North Carolina, most homes close between 30-45 days from the day that an offer is accepted.
What if my offer is rejected?
Sellers are entitled to accept, counteroffer or reject when an offer is presented to them. Counteroffers are the most common response to an initial offer. If your offer is rejected, you still have an opportunity to present another offer to the sellers (should you so choose).
How much are closing costs?
Closing costs, on average, fall between 2-3% of the purchase price of the home. These cost include thinks like lender fees, attorney fees, escrow account funding, pro-rated taxes, title fees, home inspection fee, appraisal fee and more.
How do I finance my first real estate investment?
There are many different ways to finance your first real estate deal. The conventional way would be to work with a lender and secure a mortgage on the property. Because this is an investment, you will likely be required to put a minimum of 20% down on the property. There are also other options like private or hard money lenders, wholesaling, or partnering with other investors.
Can I gain access to the MLS without a real estate license?
Yes, you can partner with a local licensed real estate agent who can set you up with direct access to the MLS.
Are there tax benefits that come with investing in real estate properties?
Yes, if you rent a property you can deduct things like expenses, repairs, depreciation, interest, taxes and more. Contact your CPA for a complete list of real estate investment tax benefits.
What does AVR mean?
AVR stands for “after repair value”. Investors use this number and compare it to the property price and cost of repairs to determine if a property is profitable and a good deal. Most investors aim to have their AVR at least 10% higher than the property plus repair cost.
Do I need a real estate license to be an investor?
No, you can partner with a local real estate agent who can help you with your investing needs!
What is an exit strategy?
An exit strategy is the plan that the investor organizes that will remove them from a real estate investing deal. The three most common exit strategies are wholesaling, rehabbing and renting. Each strategy has their benefits and the best one depends on the investors goals.
Why should I use an agent?
- A real estate agent is an expert in their field.
- They are an advocate and are legally obligated to look out for your best interest.
- They have the most up to date information.
- They know how the process works and what to look for and will advise you every step of the way.
- They can provide detailed information to help you make informed decisions.
- They are pros at marketing properties.
- They will help you accurately price your property.
- They will help you navigate the paperwork.
- They will help you get more money for your house (on average agent assisted listings sold for $39,000 more than for sale by owner listings)
- They are well connected in the industry.
- They will list your property in MLS.
What should I do to prepare my home for sale?
It depends. It is best to discuss with a local real estate agent who can put together a customized list of things to do prior to listing your property.
Generally, it is best to:
- Clean and de-clutter your property
- Make any necessary repairs
- Depersonalize – remove personal items, photos, etc.
How do you determine what I should list my home for?
Your real estate agent will use comparable properties that have sold to aid them in determining the price range that you should list your property for. The agent will make adjustments to these sold properties to account for different features that your property may or may not have. Some items an agent may adjust for are: square footage, number of bathrooms, property age, number of garages, number of fireplaces, porches, condition of the property and more.
Should I price my home higher to leave room for negotiations?
No, a well-priced property will sell quickly and will sell for listing price. There is no need to factor in negotiations as today’s buyers are very well educated. A home that is overpriced can actually cost the seller time and money.
Do you have to disclose a previous mold remediation when you sell a home?
No, in North Carolina sellers are not required to disclose anything. Realtors on the other hand have to disclose all material facts about a property (if they are aware of them or should have been aware of them).
How much do you charge to list my house?
Commission is negotiable. It is important that you select your agent based on their capabilities and what they offer verses their price. A good agent is worth the money spent and will usually help you net more money than you would have if you sold on your own.
Can I or should I be present for showings?
No, it is best for sellers to not be present during showings. Buyers tend to feel uncomfortable when viewing the property and tend to spend less time at the property when owners are present. Buyers will also talk less openly about the property to ensure they don’t say anything that may offend the seller.
What should I do to prepare my house for showings?
It is best to make sure the home is clean, ensure that all curtains and blinds are open to allow for natural light and ensure that you turn on all lights throughout your home. There are different tactics agents can use to effectively market your property during any season.
When is the best time to list my home for sale?
It depends. It is best to list when the house is ready but spring is widely accepted as the most ideal time to sell a property with summer and fall coming in as close second and third options.
Can I use real estate website estimates to help price my home?
No. Trendy real estate websites can provide estimates that will give you a general idea of what your property could sell for. Keep in mind that these are just estimates based on information they have gathered from various internet sources, but they do not factor in all the necessary items that will help your properly price your property. Additionally, it is common for these online estimates to be thousands of dollars off. It is best to consult with a real estate profession as they can give you a more accurate price range for your property.
What is the difference between list price and sales price?
The list price is the price that the seller lists their property for (think of it as the sales goal). The sales price is the price a buyer actually paid for the property, after negotiations.
What is the difference between market value and assessed value?
Assessed value is a figure that your local municipality uses to determine your property tax bill and has nothing to do with market value. Market value is what the buyer would be willing to pay for a property on the open market.
Can a landlord raise my rent?
Landlords can only raise the rent once the lease has expired (not during your lease term). If you decide to extend or renew your lease, the landlord is within their rights to increase the rent.
What is a security deposit for?
A security deposit is a preset amount of money that the tenant provides the landlord. The security deposit is held by the landlord as collateral during the tenant’s lease term to ensure the property is not defaced or damaged. If the tenant damages the property, the security deposit is kept to help the landlord recoup some of their loss.
How do I get my security deposit back?
As long as you keep the property in good condition and don’t damage anything on the property you are entitled to get your security deposit back at the end of your lease. Landlords are required to return the security deposit to the tenant within 30 days of the lease ending.
When is the landlord allowed to enter the property?
Generally, landlords are required to give tenants 24-hours notice prior to entering the property.
What is an eviction?
An eviction is the process where the landlord removes a tenant from their rental property (usually due to the tenant not paying their rent). Your lease will outline all circumstance under an eviction can take place.
What do I need to do to get approved for a rental application?
Each landlord or property management company can have different application approval requirements; however, most places require: pre-tax monthly income to be more than 3x the rent cost, the tenant to have a credit score 620 or higher, and a clean rental history.