FAQs About Buying A Home

We have answers to your home buying FAQ before you begin the process, especially if you are a first-time home buyer. Mark Mahaffey and Associates Real Estate professionals want to help you become a wise home sell buyer.

Q: How does the home buying process work?

Starting from the beginning of the home buying process...you have decided to buy a home. Congratulations! We have found the following to be the best approach that minimizes the amount of time you have to dedicate to finding the perfect home.

• First, get your financing in order. Know how much you are able to spend as well as how much you want to spend on your new home. There is no sense in being “house poor” where you are spending your entire income just paying your mortgage. On the other hand, you don’t want to jump into a new house every couple of years. Only a lender can give you an accurate answer that, like the 3 bears, will help you find the home that is just right.
• Next, we help you start the search process by giving you direct access to the REALTOR database (MLS, a.k.a. the Multiple Listing Service).
• Begin eliminating houses by comparing the details of a particular home that is listed for sale with your own list of necessities or desires.
• As you narrow your list to those houses that are possible, use Google Map to determine distances to shopping, restaurants, work, school, etc. You can even “drive” through the neighborhood virtually in most cases by using “Street View.”
• If a home passes the “map” test, jump in your car and actually drive through the neighborhood. Get a feel for the neighborhood itself. Are the neighbors too close or too far? Are lawns neatly mowed and the homes well maintained. Does the neighborhood “feel” good to you? Go at different times of the day and week. What are evenings like? How about the weekend?
• At this point, you should be getting a good feel for where you want to live as well as for those areas that you know don’t make the cut. Over a period of time, Mark Mahaffey and Associates Real Estate will work closely with you to narrow down the hundreds or even thousands of homes that are available so that the ones that make it to the top of the list are more manageable. Now we can begin looking at the inside.

See below for more in-depth answers to specific questions regarding the home buying process.

Q: Should I look online to find a home to buy?

Sure, but we’d like to suggest that you save yourself some frustration and utilize our site exclusively. If you didn’t know it already, please note that the source for the vast majority of homes listed for sale is the REALTOR MLS. That means that when you look on Zillow, Trulia, Realtor.com, Homes.com, etc. you are seeing homes that, in almost every case, have originated from the MLS!

So, why not go directly to the source? As a real estate brokerage company, we have access to the largest MLS in the state in addition to our local MLS, so on our site, your search is going to be more efficient and effective. The biggest problem with other websites is that the information is either inaccurate or outdated. You might ask, “How could it be inaccurate if it comes from the MLS?” Because those sites only choose to include certain information pulled from all of the potential fields that are in the original property listing and that does not provide a complete picture.

Also, because there is an extra step, it takes longer for a home to show up on those external sites. And, whether the market is good or bad, the homes that are the nicest are always going to be the ones that sell faster. So, when you see something on an external site, the buyers who work with us have already been notified and have had the opportunity to be first in line. What remains are just the leftovers!

Our guess is that you don’t want to settle for what has been picked over when it comes to buying your own home, so utilize our site as a resource. You are welcome to setup your own search, or ask us to help you set up an automatic search for you based on your specifications. And, not to disparage any other company, but an advantage to our site is that our results are not limited to only the local MLS, so you’ll have a better chance to find your perfect home that you might otherwise miss.

Q: What does “Pending” mean as it relates to buying a home?

The term “Pending” means that an offer has already been accepted on a home that is listed for sale. This is often found to be the case for buyers who don’t have direct access to the Realtor database and causes them great frustration! They will find a listing online, but it will already show as “Pending.” Or, it might even show as still being available, but when we look it up, there is actually already an accepted offer, and the house is no longer available. Review the question, “Should I look online to find a home?” above for more information.

Q: What is a due diligence period?

When you make an offer on a home, you will specify a period of time within which you may conduct a variety of inspections to determine if there are any significant defects with the property that would cause you to reconsider purchasing the home. You are said to be making a diligent effort to protect yourself. Initially, the period of time is negotiable, but that time becomes fixed once the agreement is signed. A range of any where from 10 to 15 days for a traditional home purchase, but sometimes, a due diligence period may be significantly longer for complicated purchases involving large or unique properties that require the advice of specialists. In our area, the due diligence period is really what is known as an “Option.” You have the option, but not the obligation to purchase the home. If you decide to not follow through with the purchase, you may cancel the agreement and have your earnest money refunded to you (or you can instruct your agent to keep it in a trust account to be used for a future purchase on another home), as long as you cancel within the due diligence period.

Q: What's earnest money?

This is money paid by the buyer that is held in a trust account until the purchase is either cancelled or completed. In effect, it is money you put forth to back up your promise to purchase the home. It is a means of stating that you are “earnest” about making the purchase and will do your best to make that happen. This does not mean that you are forced to purchase a home that has problems or that you are penalized if you can’t get financing, but it does mean that, barring any unforeseen problems, you will be held accountable for making a good effort to complete the purchase. The amount of earnest money varies and is negotiable, but it is common to see amounts of $500 to $1,000 on lower priced properties and $5,000 or more on higher price points. When the earnest money should be paid is also negotiable, but it is commonly due within 3 days of an accepted offer.

Q: Am I required to hire a home inspector?

While you are not required to consult with anyone, it is highly advisable to at least begin by hiring a general building inspector. This person will provide a report to you regarding the status of the home and may make recommendations for additional inspections by specialists depending on his/her findings. For example, you might also be advised to consult with an expert in the following fields: Roofing, Foundation, HVAC, Septic (if applicable), etc.

It is important to know that the expense you incur in hiring your own home inspectors is NOT refundable. It is money that you will not get back if you cancel the agreement. You shouldn’t feel as though this is wasted money though. It should be thought of more as insurance. If it prevents you from making a six figure or more mistake, it is well worth it!

Q: Why get a home survey?

We recommend that you should always at least consider getting a survey done of the property you are buying. In an established, uniform, subdivided neighborhood, there is less likelihood for errors, but do NOT assume that what you see is actually what you get. Hedgerows and fences can be located in the wrong place. Storage sheds, driveways, and even homes themselves can be located too close to or over property lines. While subdivided neighborhoods are often more uniform, they are not immune to encroachments. It especially important when you are purchasing land in a rural setting to have a surveyor locate the pins that mark the boundaries of the property. Georgia courts have stated that if you do not do a survey, and there is an issue later, you are solely responsible for the fact that you did not check!

Q: What does contingency mean in real estate?

A contingency is something that must occur within a certain time frame before something else that is agreed upon will happen. In an offer to purchase a home, the most common is that the completion of the purchase is contingent upon the buyer being able to obtain financing. As a buyer, your first step is to investigate whether or not you can actually afford to purchase a home either through a cash sale or, as is most common, through obtaining financing. While your lender may be relatively certain that he/she can extend a loan to you, there are many steps required before that loan is actually approved.

The idea is to be fair to both the seller and the buyer. The seller should be able to work with someone that has a relatively good chance of completing the sale, and therefore, it is acceptable that the home buyer be required to be pre-qualified at the very least. On the other hand, the buyer should not be unduly punished if they have done their best, and due to no fault of their own, the lender refuses to grant the loan. In that case, the lender must provide a letter stating that the buyer is unable to obtain the financing as specified on the offer, and unless there are some other circumstances in question, the buyer would typically be entitled to a return of their earnest money.

Other contingencies are possible, and they are only limited by imagination and agreement among the parties. Another contingency that has been seen in the past was that the buyer would purchase a home contingent on the sale of their current home. Many sellers do not like this contingency and often will not agree to it, because it does not specify a particular time limit at which the sale of their house will occur.

Q: Should I talk to a mortgage lender before looking for houses?

Absolutely! There is no reason to not speak with a mortgage lender, as there is no cost associated with doing so. In fact, not to be insulting, but you are wasting your time if you don’t for many reasons. First of all, if a lender hasn’t told you how much of a home loan you qualify for, you won’t even know how to begin to look for a house because you won’t know your price point. Most people wouldn’t think of getting in their car to go shopping if they didn’t know how much money they had in their pocket. And, their choice of stores might vary from the thrift shop to Nordstrom’s depending on their budget. Purchasing a home is no different. You need to know what you have available to spend before bothering with the shopping trip.

And, knowing how much you have to spend will potentially save you from a broken heart! You could spend weeks or even months of time scouring the internet, driving from one neighborhood to another, comparing interiors on dozens of homes until you finally find the perfect home, only to find out that you can’t qualify for the financing you need to actually make the purchase.

On the other hand, you might mistakenly limit your range as well and give up a home that you would have preferred in order to purchase one that you just settle for. While we do not advocate spending above your means, there is often a good compromise so that you are not spending too much but not having to give up everything you like for a second rate house.

Finally, maybe even more of a heartbreak is when you find the perfect home AND you could have qualified for the appropriate financing, but you didn’t have it ready to go, so another buyer swooped in and got it under contract. As was stated, we will assist you at your pace, but we recommend that you have your financing organized so that when you do make a decision, you can move swiftly in order to give you the best possibility of beating out your competition.

Q: What is a pre-qualification letter?

In this case, the lender has simply taken the word of the buyer (and maybe done some minor research) regarding his/her current financial status, and based on that information, has given an opinion of what could be expected in the way of a loan. This opinion takes the form of a pre-qualification letter. However, if you read the letter, you will often find an entire paragraph of conditions or limitations that stipulate that the loan may or may not actually take place based on more in-depth research after you make submit an application and several pieces of supporting documentation. In some cases, you will need a minimum of a pre-qualification letter before a seller will agree to scheduling a showing. The reasoning is that there is no point in showing a house to someone who doesn’t know yet if they can qualify to make the purchase.

Q: Is a pre-approval different than a pre-qualification?

Yes, pre-approved means that the mortgage lender has actually agreed to give the home buyer a loan. The buyer is not just qualified, but has been been vetted and approved. Having a pre-approval puts the buyer in an advantageous position compared to other buyers that are only pre-qualified. When a seller is comparing offers, he/she is more likely to choose one from a buyer that has a higher chance of actually completing the purchase.

Q: What types of home loans are available?

This is a question best asked of your mortgage lender, because the type of loans available vary by the individual and the lender. In general though, there is a Conventional loan where it is not insured by an government agency, and there are government insured loans like FHA, VA, and USDA.

Conventional loans are often the least expensive source of money, but they require excellent credit and a larger down payment. A common conventional loan requires a 20% down payment. And, the better your credit score, the more likely you will pay fewer upfront costs and have a lower interest rate. If your credit isn’t as good or your funds for a down payment are limited, you might still be able to qualify for one of the government insured loans.

Since every lender has their own programs and variations, be sure to ask their professional opinion on which one would best suit your needs.

Q: How high does my credit score need to be?

Every lender has different programs that are tailored to different types of customers. That means that the minimum required credit score can vary among the lenders and loan programs. As a quick point of reference though, having a credit score of 620 or higher is advantageous. Remember though, that the higher your score, the more options you will have for financing. Make it a goal to get well into the 700’s if at all possible.

Q: Which mortgage lender is my best resource for obtaining a loan?

The best lender is the one that actually gives you a loan! You have probably seen what seem like dozens of ads for national companies that offer loans and have a variety of catchy names for their loan programs. A word of caution. Working with someone that has a call center on the other side of the world or even in another state is a risky proposition. Sellers often give preference to offers from buyers that have a LOCAL lender. A local lender is going to be far more likely to do a better job for you, because their reputation in the community matters to them. Please steer away from the giant monster-mega-banks or national mortgage companies. If you do some research, you’ll find that their customer service is among the worst in the industry. Nobody is perfect, but a local business is much more likely to be able to pick up the phone and solve a challenge than someone in another state who will treat you like a number.

Q: Does the type of financing affect my home buying offer?

Yes. Price is not the only item that affects an offer. There are also “terms” like how long of a due diligence period you are asking for, how much earnest money you are offering, how quickly you can close, and how you plan to pay for the property.

In general, as the old saying goes, “Cash is king.” A full-price cash offer with a quick close is probably going to win the day 99 times out of 100. In fact, a cash offer is so strong, it can often be a little less than other offers and still be accepted by the seller, because the seller is almost assured of a successful transaction with a minimum of problems.

The majority of people use financing when purchasing a home. As a rule of thumb, the following is a list of the types of financing and their relative likelihood of being accepted when used with an offer, but remember, each situation is different, and a seller could choose any offer based on his/her own preferences.

1. Cash
2. Conventional Loan, 20% down payment
3. Conventional Loan, other down payment (less than 20%)
4. VA, USDA, FHA, no or very small down payment
5. Seller financing, lease option, lease purchase

Q: How much should I offer to purchase a particular home?

One of the advantages of working with your own agent is being able to have that person look at comparable sales in the neighborhood that interests you. Your agent will be able to pull recent sales directly off of the MLS and not simply off of a website that has obtained information 2nd or 3rd hand. This is critical, because what a home was listed for does not matter. The only thing that matters is the actual sales price.

In addition to previous sales, it is important to have an understanding of what is going on in the real estate market. The last sales may be irrelevant if the market has changed considerably. Since your real estate agent works in the field on a daily basis, he/she can give you the benefit of knowledge that comes from the experience of being involved in transactions on a constant basis. We all want a good deal, but ultimately, you also want to be able to purchase a home. Certainly, you don’t want to pay too much, but on the other hand, you also don’t want to constantly lose out to other buyers who are making offers that are more likely to be accepted.

Q: Does it make sense to offer MORE than the list price of a home?

This may seem counter intuitive. Why would a buyer offer to pay MORE than someone is willing to take for their property? The simple answer is, competition. If the market is really hot, and there are more buyers than there are sellers, buyers might find it necessary to offer more than the list or asking price in order to have their offer accepted over another buyer.

Also, a buyer might need to offer above list price if they need to have buyer closing costs paid by the seller. Paying those costs would put less money in the pocket of the seller, so the seller would be more inclined to accept someone else’s offer that is not asking for closing costs. To avoid that, the buyer could build those costs into the offer by increasing the offer amount by the amount of the closing costs that they need so that their offer is competitive with the offers that the seller is receiving from other buyers

Bear in mind that there is probably an upper ceiling to this strategy. One of the things a lender does in the loan process is to have the home appraised. The lender is not going to lend more money than a home is worth. So, even if a buyer is actually willing to pay more, that doesn’t mean that the bank will approve that amount.

Q: What is a seller contribution to closing?

A seller contribution to close is when a seller agrees to pay some or all of the buyer’s closing costs associated with the purchase of a home. If desired, it is asked for when submitting an offer to a seller to purchase a home. Of course, the seller typically pays the real estate commissions. However, buyers are responsible for costs associated with their side of the transaction, the largest of which is usually associated with obtaining a loan. The challenge is that buyers often don’t have access to as much cash as they might need when including the necessary down payment. On the other hand, a seller may have equity built up in the home that can be accessed, which helps both the home buyer (who is short on cash), and the home seller (who wants to sell the house). This situation is also discussed in the question above where a buyer offers more than the list price, but then the seller turns right around and pays some of the buyer’s closing costs.

Q: What is a seller’s disclosure?

A seller's disclosure is a document provided by the seller which “discloses” known information about the home being sold. These are not necessarily problems but typically details are provided about the age of the roof, age of the HVAC system, the last time the septic system (if applicable) was serviced, etc. And, by law, sellers are required to disclose any defects that are known to them.

Q: What is a buyer’s agent?

Most people easily recognize that there is a real estate agent involved when they see that a home has been listed for sale. However, often it does not readily occur to people that there is another agent on the other side of the transaction that represents the buyer! It is extremely important that you have a buyer's agent that represents you and YOUR best interests. Sellers obviously already have someone looking out for for them and their interests. As a buyer, you don’t want to be at the disadvantage of trying to take on the seller and the seller’s agent by yourself!

Q: Shouldn’t I just contact the listing agent for a home that I like?

No! Do not contact the listing agent for a home you like. This is the biggest mistake we see first-time home buyers make. It is extremely important that you have your OWN representation. The listing agent represents the seller, not the buyer. They are loyal to the seller (as they should be), and they do not have the best interests of the buyer in mind (and they shouldn’t), because that would be a conflict of interests. The solution is simple, you will want your own agent (known as a buyer’s agent), and as is covered in the Seller FAQs, you are not responsible for paying the commission anyway, so there is no reason to not have the protection of someone looking out for you and not the seller.

If you happen to run into a seller’s agent, and you are interested in the home that they have listed, have them get in touch with us or get their contact information to us. We’ll gladly do more research for you to determine if it is a good fit and to set up a showing if that turns out to be the case.

Q: Should I sign an agency agreement when buying a home?

Absolutely. In the state of Georgia, we simply cannot represent you or your best interests without a written agreement. It is a requirement of the law. Do not let an agent tell you that you don’t need one for them to represent you. They are specifically prohibited from doing so, and if they do anything more than administrative type duties like filling out forms or giving you basic information, they are breaking the law. If they are willing to break the law in this manner, you have to question what other practices they are willing to participate in that may not be in your best interest. Insist on an agency agreement almost immediately when you are ready to find a home. We are happy to so for you,

Q: If I sign an agency agreement, am I forced to buy a home?

No! You are not required to purchase anything. When you sign an agreement, you are simply stating that you agree to work with us, and we are agreeing to work with you. We promise to do our best to help you find what you are looking for and to get you through the process successfully. For your part, when you see a home that interests you, communicate that to us. If an agent from another company approaches you, just let them know that you are already working with someone. That’s pretty much it. Should you decide that buying a home is no longer a priority, there is no requirement to actually make a purchase, and we can pick up where we left off at a later date.

Q: How much does the buyer pay in commission?

We addressed this question on the main Buyer’s page; however, we are including it again here in case you missed it with even a little more detail. The answer may sound too good to be true, but as a buyer, you are not responsible for paying our commission! Here’s how it works. A listing agent agrees to market a seller’s property. The seller agrees to pay that agent a commission when the house is sold. In turn, the agent that listed the property agrees to split his/her commission with any agent that represents a buyer should that buyer decide to purchase that home. So, as a buyer, you get the best of both worlds...your own representation (extremely important), but also the benefit of not paying the commission.

There are those that will argue that the buyer pays the commission since they are the one writing the check to purchase the home. We understand that, but respectfully, we think they are missing the point. In our experience, buyers are concerned with the transaction itself. Is there a particular line-item where the buyer is “charged” a commission? Most commonly, the answer is no. There are some exceptions which can be discussed on a case-by-case basis, but these are pretty infrequent. The commission is deducted from the SELLER’S proceeds. This is more of an academic discussion at this point. Purchasing a home is like purchasing anything. The cost is built into the sales price. So, could the buyer have purchased the home for less had the seller or buyer not have used an agent? Not likely, because seller’s typically know what homes around them sell for and are not going to sell for less just because they didn’t use an agent and want to be nice. And, the majority of seller’s who represent themselves still end up paying a commission to a buyer’s agent, because they are unable to find a buyer otherwise, which further demonstrates the value of working with an agent in the first place.

Q: As a buyer, can’t I just buy a home on my own without an agent?

You are scaring us! If you have read this far or have simply noted the number of questions in this FAQ section, we have to ask, are you prepared to handle everything you see here? It takes a significant amount of classroom time, outside study, years of experience, daily practice and ongoing education to do what we do. In a standard home purchase alone, we track approximately 40 items to make sure the transaction is completed properly. And, since our service is paid for by somebody else (the seller), why would you want to take a chance anyway?

Q: I have a friend that has a real estate license. Could I use him/her?

In the world of real estate, everybody seems to have a “friend in the business” that has their real estate license. And, it may seem natural to let your friend help out. It’s not our intention to criticize. Rather we want to point out what may be obvious. As we have stated before, purchasing a home is one of the largest financial transactions that most people make. And, although we are loyal to our friends too, we also recognize that it is often safer to hire someone with more experience. It is not a reflection on our friendship. To put it in perspective, many of us have the stereotypical nerdy nephew in our family that can help us with our phone, tablet or other computer without even thinking hard. That might be okay on a casual basis, but that doesn’t mean we are going to trust that person to take care of a major computer project at work. That requires an I.T. professional just like purchasing a home requires a real estate professional with years of education and experience. To use a sports analogy, you want to field the top performing athlete when you are playing the big game. That doesn’t mean you don’t respect the other players, but you want to give yourself the highest chance for success with the fewest possible problems.

Q: What happens after you help me find a home and I’ve move in?

We’re not going to simply disappear! We are very happy to have been a part of one of the most important moments of your life. Home ownership has many benefits, but as with anything, there will also be challenges. Like anything, your home will require attention from time to time. Sometimes, there will be accidents or maybe a storm does some damage. At the very least, you will need to maintain your home by keeping it in good shape through regular preventative maintenance. When those things occur, we are happy to be a resource for recommendations. We work with many professionals on a regular basis...general contractors, plumbers, electricians, roofers, lawn maintenance, insurance agents and many more. If you need something, don’t hesitate to contact us.

Contact us with your additional questions

If you have more questions that haven't been answered with our home buyer FAQs, please give us a call at 706.543.3008 and we'll do our best to give you a professional answer to your questions. To learn more about buying a home, visit our Buying page.