15 Most Common Question a Realtor is Asked!
As you might imagine, seasoned Santa Cruz real estate agents field quite a few questions on a daily basis. People are naturally curious, and it’s an agent’s job to guide folks through the often-complex world of home buying and selling.
I’m Shemeika Fox, your Santa Cruz Real Estate Expert…You might also imagine that some questions about Santa Cruz real estate come up more often than others. Whether you’re a first time Santa Cruz home buyer or repeat Santa Cruz home buyer who could use a refresher on how Santa Cruz Real Estate deals actually get done, here are some answers to the questions that come up most often.
1. What the first step in the Santa Cruz home buying process?
Getting pre-approved for a mortgage is the first step of the Santa Cruz home buying process. Getting a pre-approval letter from a lender will help get the process started.
First, you need to know how much money you can borrow. Knowing how much home you can afford narrows down your Santa Cruz home search to those that are suitable and fit in your budget. Thus no time is wasted considering Santa Cruz homes that are not within your budget. (Pre-approvals also help prevent disappointment caused by falling in love with Santa Cruz homes that are out of reach financially.)
Second, the loan estimate from your lender will show how much money is required for the down payment and closing costs. You may need more time to save up money, liquidate other assets or seek mortgage gift funds from family. In any case, you will have a clear picture of what is financially required.
Finally, being pre-approved for a mortgage demonstrates that you are a serious Santa Cruz homes buyer to both your Santa Cruz real estate agent and the person selling their Santa Cruz home.
Most real estate agents will require a pre-approval before showing homes – this is especially true at the higher end of the Santa Cruz real estate market; sellers of luxury homes will only allow pre-screened (and verified) buyers view their Santa Cruz homes. This is meant to keep out those people who are just window shopping and protect the seller’s privacy. What’s more, by limiting who enters their home, Santa Cruz sellers are given extra security from potential thieves trying to case the home (like identifying security systems, locating expensive artwork or other high-value personal property).
2. How long does it take to buy a Santa Cruz home?
From start (searching online) to finish (closing escrow), buying a home takes about 10 to 12 weeks. Once a Santa Cruz home is selected and the offer is accepted, the average time to complete the escrow period on a home is 30 to 45 days (under normal market conditions, and if the Santa Cruz home buyer is obtaining a loan. If the Santa Cruz home buyer is paying cash, the process can be as quick as 3-7 days if all parties agree!
Market conditions are a major factor in how fast Santa Cruz homes are sold. In hot markets with a lot of sales activity, buying a home may take a little longer than normal. That’s because several parties involved in the transaction get behind when business suddenly picks up. For example, a spike in Santa Cruz home sales increases the demand for property appraisals and home inspections, yet there will be no increase in the number of appraisers and inspectors available to do the same work. Lender turn-around times for loan underwriting can also slow down. If each party involved in a deal takes a day or two longer to get their work done, the entire process gets extended.
3. What is a seller’s market?
In sellers’ markets, increasing demand for Santa Cruz homes drives up prices. Here are some of the drivers of demand:
- Economic factors – the local labor market heats up, bringing an inflow of new Santa Cruz residents and pushing up Santa Cruz home prices before more inventory can be built or comes to market.
- Interest rates trending downward – improves home affordability, creating more Santa Cruz buyer interest, particularly for Santa Cruz’s first time home buyers who can afford bigger Santa Cruz homes as the cost of money gets cheaper.
- A short-term spike in interest rates – may compel “on the fence” Santa Cruz home buyers to make a purchase if they believe the upward trend will continue. Santa Cruz Buyers want to make a move before their purchasing power, or the amount they can borrow gets eroded.
- Low inventory or fewer Santa Cruz homes on the market because of a lack of new construction. Prices for existing Santa Cruz homes may go up because there are fewer units available.
4. What is a buyer’s market?
A buyer’s market is characterized by declining home prices and reduced demand. When we see our absorption rate at 6 months or more, that indicates a buyers market- Absorbtion rate is rate in which homes are sold in a set period of time. Several factors may affect long-term and short-term buyer demand, like: Economic disruption if a big employer shuts down operations, laying off their workforce.
- Interest rates trending higher – the amount of money people can borrow to buy a home is reduced because the cost of money is higher, thus reducing the total number of potential Santa Cruz buyers in the Santa Cruz real estate market. When interest rates go up, generally you will see home prices drop to meet the level of demand and buyers can often times find better deals, or get their offers accepted.
- Short-term drop in interest rates – can give borrowers a temporary edge with more purchasing power before home prices can react to the recent interest rate changes.
- High inventory – a new subdivision can create downward pressure on prices of older homes nearby, particularly if they lack highly desirable features like modern appliances, current styles and trends etc.
- Natural disasters – a recent earthquake or flooding can tank property values in the neighborhood where those disruptions occurred.
5. What is a stratified market?
A stratified market happens where supply and demand characteristics differ by price point, in the same area typically by city. For example, home sales for properties above $1.5M may be brisk, a seller’s market, while homes under $750k may be sluggish, indicating a buyer’s market. This scenario comes along every so often in West Coast cities where international investors – looking to park their money in the United States – buy expensive real estate. At the same time, home sales activity in mid-priced homes could be entirely different as well!
6. How much do I have to pay an agent to help me buy a house?
Get this!! Santa Cruz Home buyers generally pay little or no fees to hire a Santa Cruz agent to help them buy a home.
For most Santa Cruz home sales, there are two real estate agents involved in the deal: one that represents the seller and another who represents the buyer.
Listing brokers represent sellers and charge a fee to represent them and market the property. The property will also be placed in the local multiple listing service (MLS), where other agents in the area (and nationally) will be able to search and find the home for sale.
Agents who represent buyers (a.k.a. buyer’s agent) are compensated by the listing broker for bringing Santa Cruz home buyers to the table. When the Santa Cruz home is sold, the listing broker splits the listing fee with the buyer’s agent. Thus, buyers don’t pay their agents. Isn’t that the best news ever??
7. What kind of credit score do I need to buy a home?
Most loan programs require a FICO score of 620 or better. Borrowers with higher credit scores represent less risk to the lender, often resulting in a lower the down payment requirement and better interest rate. Conversely, home shoppers with lower credit scores may need to bring more money to the table (or accept a higher interest rate) to offset the lender’s risk.
8. How much do I need for a down payment?
The national average for down payments is 11%. But that figure includes first time and repeat buyers. Let’s take a closer look.
While the broad down payment average is 11%, first time homebuyers usually only put down 3 to 5% on a home. That’s because several first-time home buyer programs don’t require big down payments. A longtime favorite, the FHA loan, requires 3.5% down. What’s more, some programs allow down payment contributions from family members in the form of a gift.
Some programs require even less. VA loans and USDA loans can be made with zero down. However, these programs are more restrictive. VA loans are only made to former or current military service members. USDA loans are only available to low to-middle income buyers in USDA-eligible rural areas.
For many years, conventional loans required a 20% down payment. These types of loans were typically taken out by repeat buyers who could use equity from their existing home as a source of down payment funds. However, some newer conventional loan programs are available with 3% down if the borrower carries private mortgage insurance (PMI).
9. Should I sell my current home before buying a new one?
If the built-up equity in your current Santa Cruz home will be applied to the down payment on the new home, naturally the former Santa Cruz home will need to be sold first, unless you have access to additional cash and or want to explore the option of a bridge loan!
Some Santa Cruz home buyers decide to turn their current home into an investment property, renting 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 Santa Cruz home is feasible while retaining title to the old home.
Santa Cruz Buyers often have a short time frame to sell their current home when relocating to a new city because of a job transfer. If you are moving but taking a position with the same employer, check to see if they offer relocation assistance to help offset some of the costs.
10. How many homes should I view before buying one?
That’s up to you! For sure, Santa Cruz home shopping is easier today than ever before due to the good ol’ internet and technology. The ability to search for homes online and see pictures, and video even before setting a foot outside the comfort of your living room, has completely changed the home buying game. Convenience is at an all-time high. But, nothing beats visiting a home to see how it looks and ‘feels’ in person.
11. What is earnest money?
When you make an offer on a home, your agent will ask for an earnest deposit. Earnest money is made in good faith to demonstrate – to the seller – that the buyer’s offer is genuine. Earnest money essentially takes the home off the market to anyone else and reserves it for you.
The earnest deposit is sent to escrow for safekeeping. If a deal is struck, the earnest money is applied to the down payment and closing costs. If the deal falls through, the money is returned to the buyer, should the buyer still have contingencies in place.
Important: if the terms of a deal are agreed upon by both parties, but then the buyer backs out, the earnest money may not be returned to the buyer. Ask your Santa Cruz agent about the ways to protect your earnest money deposit.
12. How long can the seller take to respond to my offer?
Written offers should stipulate the timeframe in which the seller should respond. In the standard California Association of Realtors purchase agreement, if left blank, is a three day timeframe for response. I generally shorten that to 2 days which should in most instances be sufficient time to get a response from the seller.
13. What if my offer is rejected?
Sellers can flat-out accept or reject an initial offer. But there is also a third path that is quite common, sellers can initiate a counteroffer. Remember this: a deal isn’t dead until it’s dead. I have in some instances countered back and fourth more than 6 times before we finally had an accepted offer. If a counteroffer is prepared by the seller, you’re still in the game. You and your Santa Cruz agent just need to review it and determine whether the counteroffer is acceptable. If so, then approving it closes the deal immediately. Keep in mind, offers and counteroffers can go back-and-forth many times; this is not unusual and negotiations are a part of what Realtors do as a matter of routine. Each revision should bring both parties closer together on the terms of the deal. Also please note that when there is a seller multiple counter offer, the counter needs to be signed by the sellers twice before the offer is ratified. Once upon presentation and a second time if the sellers are accepting your offer as the winning offer.
14. Should I order a home inspection?
Yes! Home inspections are a great way to really understand the condition of the Santa Cruz home in which you are considering purchasing. Some Santa Cruz Sellers will provide a home and even a pest inspection up front. If the Santa Cruz Home seller does not provide those inspections it is highly recommended that you get them for your protection. Some mortgage programs require inspections before they will fund the loan. Home inspections bring peace of mind to one of the biggest investments of a lifetime.
15. Do I need to do a final walk-through?
It’s not required, but it’s a darn good idea! Final walk-throughs give buyers 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, per the terms of the contract.
Well, I think that does it for the 15 questions a Realtor is most commonly asked, if you have additional questions, or would like to dive a little deeper, feel free to reach out for a complimentary, confidential consultation. I’m Shemeika Fox, your Santa Cruz Real Estate Expert and as always, I am here to help!