Buying FAQs

Below is a collection of frequently asked questions that we have put together to help you in your understanding of buying a home.  If you have any other questions, not listed here, feel free to email us at info@rtrealty.com. We will be happy to answer your questions and add them to our list of FAQs.

What is a REALTOR®?

A REALTOR® is an agent or agency that belongs to the local or state board of REALTORS and is affiliated with the "National Association of REALTORS" (NAR).They follow a strict code of ethics beyond state license laws and also sponsor the Multiple Listing System (MLS), which is used to list houses for sale.

REALTOR is a trademark of the National Association of Realtors.

Why should I use a real estate agent?

A real estate agent is more than just a salesperson. A real estate agent may act on your behalf, providing you with advice and guidance when buying or selling a home. Due to the constant changing of the market, the information available on listings is not always 100% accurate. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with a real estate agent.

If you are in the market to buy, it would be advisable to use a Buyer's Agent. They can make recommendations on what terms and prices to offer as well as negotiating a deal with your best interest in mind.

What is a broker?

An individual who is authorized to open and run his/her own agency. All real estate offices have one principal broker. Brokers supervise real estate agents.

What are closing costs?

Closing costs are expenses incurred by buyers and sellers in transferring ownership of a property.

What is a contingency?

A contingency is a provision included in a sales contract stating that certain events must occur, or certain conditions must be met before the contract is valid.

What is a debt-to-income ratio?

A debt-to-income ratio is the percentage of a person's monthly earnings used to pay off all debt obligations.

Can a home depreciate in value?

Generally, real property never depreciates in value, or more so, it is not very common for property to depreciate. This is why it's a great investment. Make sure you carefully consider location and community when choosing a home, it can affect the homes future value greatly. If you are in a newly developed area, do some research on the construction of the surrounding areas being developed to determine if they may affect your home’s value.

What is an Escalation Clause?

An Overview of an Escalation Clause

An escalation clause is something you can include in your offer if you’re attempting to buy a home. This clause is one way to win a home when there’s a bidding war or competition for it.

An escalation clause is something you might include in your offer that guarantees you’ll increase your agreed-upon price if there’s a specific factor determined. In real estate offers, an escalation clause will state that if another offer is made on the property, your bid will automatically go up by a certain amount so that your offer will remain the highest.

An escalation clause can state that initially as a buyer, you’re willing to pay a particular price. Then, you’ll go up to a pre-determined limit if competing offers are received.

You might add this clause if you’re pretty sure a property will receive multiple offers, which your real estate agent should be able to offer you guidance on.

With that being said, even if you have an escalation clause, there’s no guarantee you will be the successful bidder.

How Does it Work?

If you find the perfect home and you make an offer of $300,000, but you suspect that the house will receive at least one other offer, you put in the escalation clause, theoretically. You might as an example, say that if you’re outbid, you’ll go up $10,000 over any other offers. You can say that your highest bid will be $310,000.

Most of these clauses are set up to gradually and incrementally increase your offer at set amounts whenever someone outbids you.

The ceiling is an integral part of this so that you don’t spend more than you can afford. Also, if someone put in an offer that’s above your ceiling, you’re outbid.

In a seller’s market, which were in right now, an escalation clause can be beneficial.

If you’re gong to put in an escalation clause, you need to consult with a professional first, a real estate agent and an attorney. They’ll help you figure out whether your situation calls for it, as well as what your amount should be and your ceiling.

For an escalation clause to go into effect, the seller must prove the competing offer. Sellers can’t use your escalation clause to get you to pay more for the home.

Are There Risks?

Escalation clauses can be helpful when you’re in a competitive market, but a downside to consider is that you have to lay it all on the line from the start. You’re telling a seller right away how much you’re willing to pay for the house. That means their counteroffer can be your ceiling price. You also don’t necessarily have any way of knowing whether the offer competing with yours was legitimate or not.

Additionally, not all sellers prioritize highest price when accepting an offer.

Tips for Using Escalation Clauses

If you’re thinking about making yourself a mor competitive buyer than escalation clause, you need to be realistic. Base your price ceiling on you financial situation and your preapproval letter. You also have to remind yourself that you can still be outbid.

Don’t use an escalation clause on every house. Use it strategically and when you’re genuinely in love with a home.

You might also want to include an appraisal contingency if you’re going to add the escalation clause. With an appraisal contingency, once the home is appraised, it has to meet the agreed-upon purchase price. You don’t want to end up paying more than the market value for the home.

What is an escrow officer?

An escrow officer is the person that walks you through the closing process. They are usually employed by the title company that you are working with. They are a neutral third-party, responsible for overseeing the escrow process. They typically perform the title searches, prepare final paperwork, witness the document signings as well as ensure that the transaction is executed properly and legally.

What's the Difference between a "Listing Agent" and "Selling Agent"?

Listing Agents usually deal with sellers and are the ones who will list a property for sale on the Multiple Listing Service.

Selling Agents (also Buyers Agents) mostly deal with the homebuyers, usually only listing just a few homes for sale. They will sell the homes (which have been placed in the MLS) via the listing agents.

The majority of agents will focus on one or the other. Some agents will also divide their time between sellers and buyers and are usually regarded as the best ones since they are dealing with both sides of the coin.

If you phone an agent from a magazine or newspaper ad, you are usually contacting the listing agent. These agents will place ads to show the seller that they are making an effort to sell their home. Also, their advertising efforts can draw others who may decide to sell their homes.

What is the difference between being prequalified and preapproved for a loan?

If you're prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a pre-approval.

If you're preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment - and the lender is willing to give you a loan, basically meaning you're approved!

You will usually be provided an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.

What does FSBO mean?

FSBO stands for For Sale By Owner. A for sale by owner property usually indicates that the property is being sold without a real estate agent.

What is homeowner’s association (HOA)?

Homeowners association is a nonprofit association that manages the common areas of a condominium or "planned unit development" (PUD). Unit owners pay a fee to the association in order to maintain areas such as a pool or playground that are owned jointly.

What is a Multiple Listing Service (MLS)?

A multiple listing service is a computerized listing of the homes for sale in an area listed with a realtor. Agents are granted access to the MLS and can use it to find a house in a particular price range or area.

Is an older home as good a value as a new home?

This is really just a matter of preference, but both newer and older homes offer distinct advantages, depending upon your unique taste and lifestyle.

Older homes can generally cost less than new homes, however, there are many cases where new homes can also cost less than older homes. Most new homes will not have any backyard landscaping, and some don’t include any front landscaping either. With an older home, the landscaping is normally already completed and could have 10''s of thousands of dollars in landscaping done, which is included in the purchase price.

Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they’re concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. A good Home Warranty plan protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in.

In a new house, you can pick your own color schemes, flooring, kitchen cabinets, appliances, custom wiring for TV''s, electrical, computers, phones and speakers, etc., as well as have more upgrade options. Modern features like media rooms, extra-large closets and extra-large bathrooms and tubs are also more attainable in ground-up construction. In a used home, you rely largely on the previous resident's tastes and technological whims, unless you plan to farm out thousands into a remodeling and rewiring.

New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems. Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.

As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home.

New-home designers can use new building materials such as glazed Energy Star windows, thicker insulation and other technology that will lower future energy costs for the owner. Most states now have minimum energy-efficiency requirements for new construction. Kitchens and laundry areas in new homes are designed to house more efficient energy-saving appliances. Older homes, unless they have undergone an energy retrofit, usually cost much more per square foot to air-condition and heat.

Builders have to follow very strict guidelines in new-homes and additions, especially in the West and Northwest, where earthquake safety standards must be observed. In general, new homes are usually more fire-safe and better accommodating of new security and garage-door systems. Older homes can be better judged for their quality and timeless beauty. New homes that now possess a smooth veneer might reveal the use of substandard building materials or shoddy workmanship over time.

As you can see there are advantages and dis-advantages to each, but it really comes down to what fits you and what you are looking for in a home.

What is a "One-Time Show" listing?

With this type of listing the homeowner signs an agreement with the agent. What this agreement declares is the homeowner will provide the agent with a commission for selling the property. This agreement also states the homeowner cannot negotiate with the buyer at a later time to avoid paying a commission. This type of listing is most often used by agent showing FSBO (for sale by owner).

What is title insurance?

Title insurance is insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property.