Buyer's FAQ

• As a buyer, why should I use agent?
• How does my agent get paid?
• What is the process of buying a home?
• What is earnest money?
• If my contract is not accepted, do I get my earnest money back?
  
  
• What is a contingency?
• Can I get out of the contract?
• Do I need to have the home inspected?
• If it is a new home, should I still hire a home inspector?
• Should I use a REALTOR to purchase a home that is for sale by owner?


• What price should I offer for the home I am interested in?
• How low of an offer can I make?
• How do I determine if the neighborhood is safe?
• How can I find out about the schools in this district?
• Should I hire an attorney?


• How long does it take to apply for a mortgage?
• What information will the lender want from me?
• When will my mortgage payment start?
• What is included in my mortgage payment?
• What are closing costs and are they expensive?
• Does that REALTOR make money off the service providers they recommend?

As a buyer, why should I use agent?

The seller’s agent has a fiduciary responsibility to meet the seller’s needs and get the best price and terms. A buyer’s agent will be your committed advocate, negotiating the best price and terms and making sure the process is completed accurately and on time. Because this service is generally free to the buyer, it makes sense to take advantage of the expertise and protection the agent provides.

How does my agent get paid?

The buying agent is normally self-employed and paid through the seller’s agent to the buyer agent’s managing broker. The managing broker will deduct his fees and overhead costs and pay the buying agent the balance. In addition, other expenses like insurance, MLS dues, gasoline/car, and overhead items like phone and internet are paid by the buyer’s agent themselves.

What is the process of buying a home?

• Select a REALTOR: A buyer’s representative works as your advocate to help you find the right home at the best price.
• Determine if it is the right time to buy: Weigh the advantages/disadvantages of purchasing now or renting.
• Identify your needs and price range: Determine what is important to you in a house and what you can afford.
• Select a Lender: Through trusted referrals and research, find a lender to pre-qualify you so that you will know the exact price range you should be looking at.
• Find your dream home: After talking over your wants and needs with your realtor he will schedule showings to visit qualified homes.
• Negotiate the purchase: Your REALTOR will help you create, present and negotiate your offer.
• Fulfill the requirements of the sale: Your REALTOR will walk you through the process, to make sure all the deadlines are met, and all the i’s dotted and t’s crossed.
• Complete the closing: At this stage, necessary paperwork is completed and reviewed, title work is completed, insurance ordered, financial aspects properly calculated, etc.
• Move in: Schedule movers, contact utility companies, send out change of address forms, etc.

What is earnest money?

Earnest money is the down payment showing you are “earnest” or serious in buying the home, in legal terms it is call consideration. This money is held in escrow by the seller’s broker or by the Title company. If the deal falls through because of buyer default, it will be paid to seller/broker, otherwise will be applied to the down payment at closing.

If my contract is not accepted, do I get my earnest money back?

Normally the earnest check is not delivered to the Seller’s agent unless the contract has been accepted.

What is a contingency?

The closing of the property is dependent upon the successful completion of another event. The most common in Colorado are:

• Sale is contingent upon the successful sale of buyer’s home.
• Sale is contingent upon the favorable inspection of home before the resolution date.
• Sale is contingent upon successfully obtaining a loan.

Can I get out of the contract?

Yes; based on the contingencies written in the contract. Your realtor should explain the contingencies in your contract so that you understand what they mean and how they work. Otherwise, to get out of the contract you would generally lose your earnest money.

Do I need to have the home inspected?

Buying a new home is probably the biggest investment you'll ever make and a decision that will affect you for years to come. The process can be extremely stressful and confusing because of the amount of risk involved. A professional inspection will significantly reduce your risk and help make the entire home buying process easier and less stressful.

If it is a new home, should I still hire a home inspector?

Even though the city has strict building codes and the builder offers a warranty it is imperative that you hire an inspector. Your inspector will create a list of minor flaws, repairs or corrections that should be completed by the builder before closing.

Should I use a REALTOR to purchase a home that is for sale by owner?

Whether the home is listed by another real estate agent or the “Do-it-yourself homeowner” it is wise to have a professional and experience buyer’s agent representing your interests. Most “For Sale by Owners” will still pay for the REALTOR’s fee. Negotiating the best deal and assuring that the process is completed properly requires the expertise of a professional.

What price should I offer for the home I am interested in?

It is best to make a fair and reasonable offer based on the current market value of the home. This is determined by a CMA (a comparative market analysis) of the home you want to purchase provided by your realtor.

How low of an offer can I make?

There is no rule on how low you can make an offer, however try to make it a win/win situation for all involved. Your offer should leave room for negotiation. Remember that this is a business deal so do not let the fear of offending the seller keep you from offering what the property is worth to you.

How do I determine if the neighborhood is safe?

Check out the Crime Rate section for information on crime statistics.

How can I find out about the schools in this district?

Check out the School Information section for all the information you need.

Should I hire an attorney?

When you purchase a home or form a relationship with an agent, you will be signing binding contracts which have important legal consequences, you should consult legal, tax or other counsel before signing.

How long does it take to apply for a mortgage?

It only takes about 15 to 20 minutes to gather enough information from you to complete a mortgage loan application over the phone.

What information will the lender want from me?

A mortgage lender typically needs the following information from you for your loan approval:

• Your employment history for the last 2 years as verified by your last 2 paystubs and last 2 years’ W-2’s. On certain occasions we may need your tax returns as well.
• Your residential addresses for the last 2 years—where do you live?
• Your monthly mortgage payment goal as this is your best tool to help you avoid becoming a foreclosure statistic in the future. What can you afford?
• Last 2 bank statements.
• Last retirement account statement.
• Copy of your driver’s license.
• Other information may be needed depending on your exact situation.

When will my mortgage payment start?

Your first mortgage payment is due on the 1st of the following month.

i.e. If you close in March, your first payment is due May 1st. Likewise, if you buy a home in August, your first payment is due October 1st.

What is included in my mortgage payment?

• Actual mortgage payment often referred to as P&I or Principal and Interest. You can also choose an interest only payment.
• Mortgage insurance payment if you put less than 20% down
• Real estate taxes which vary from about ½% to 1.25% a year in the Denver metro area.
  i.e. A $200,000 home could have a tax bill of $1,000 a year ($200k x ½%) up to $2,500 a year ($200k x 1.25%). The biggest determinant of property taxes is the school district as better school districts have higher taxes generally speaking.
• Home owner’s insurance—the cost for this is generally $600-$1200 a year. Your credit score and the age of the home are the biggest factors in the premium.
• HOA fees—many homes in the suburbs, plus all townhouses, condos, and lofts have mandatory HOA fees. This fee is paid separately from the mortgage payment but is considered part of your payment for loan approval purposes.
• Flood insurance— very rarely needed in the Denver metro area.

What are closing costs and are they expensive?

Closing costs are costs associated with obtaining a mortgage and yes, it is a substantial amount of money but it is helpful to understand the reason for it. There are over a dozen people involved in every loan transaction and everyone needs to be paid. These include: Loan Officer, his or her employer, processor, underwriter, closer, appraiser, credit reporting agency, bank, title insurance company, county assessor, county recorder, shipping company, home owner’s insurance company, and flood data determination company.

Be glad we live in Colorado as Colorado is considered a low closing cost state by FHA. Why? First of all attorneys are not needed at our closings. Second, our property taxes are really low compared with some parts of the country where they can be 5% of the home’s value every year. Third, our State Tax Stamp is only .0001% of the sales price of a home ($20 on a $200,000 home). In some states like NY this tax is in the thousands of dollars.

On a $200,000 mortgage your closing costs will be about 2.5% of the loan amount including the 1% origination fee. For help on how to pay your closing costs please contact us as there are 3 different ways they can be paid.

Does that REALTOR make money off the service providers they recommend?

Based on Colorado and national law, a real estate agent must disclose to you if that agents benefits financially from any service provider recommended to you.