E-Mail Elizabeth Weintraub, Home Buying & Selling Guide

F.A.Q.

Q. My husband and I are first-time homebuyers. There are a lot of condos in our neighborhood, and we're wondering if we'd be better off buying a condo instead of a house. What do you think?

A. Typically, a single family residence (SFR) will appreciate more than a condo. Whether you should buy a condo depends on your lifestyle and preference. Condos generally cost less than a SFR; however, newer condos can cost the same as older homes, meaning you get more for the money under those circumstances. It can be argued that there will always be a market for condos if they cost less than a house because that's where the pressure is most constant -- on entry-level housing.

Q. What is a FICO score?

A. It's a credit risk scoring system that lenders rely on to determine a borrower's credit worthiness. Scores range from 300 to 850. Most conventional loans are cut-off at about 620, with scores falling below that level deemed sub-prime loans, meaning the interest rates and points cost more. Preferred loans (low interest rates & costs) are typically offered to those with scores above 720.

Q. How much of my take-home pay is reasonable to spend on a new home?

A. In the olden days, before 1990, lenders used the 28/36 rule, meaning 28'% of your gross monthly income (or front-end ratio) was used to calculate your total monthly housing payment. This housing payment included principal, interest, taxes, insurance, association fees. The back-end ratio, 36% of your gross monthly income, was used to calculate your total housing monthly expense plus your revolving monthly debt. If those numbers were higher, you did not qualify. But today, higher ratios are used.

Q. What's involved in a home inspection? My agent suggested I get a home inspection but doesn't the seller have to tell me if something is wrong?

A. Most states require sellers to disclose material facts to a buyer. Material facts are anything that would affect a buyer's decision to purchase or nudge the buyer to offer a lower price if the facts were known. Home inspections are conducted by professionals and point out home defects or repairs that should be made. Smart buyers will always pay for a professional home inspection to know upfront what is wrong or is likely to soon require repair or replacement.

Q. How do agents get paid? My cousin is a real estate agent, and I'd like to hire her to help me buy a house.

A. Typically, a buyer's agent is paid by the seller and shares in the commission the listing agent has negotiated. All fees are paid to the agent's broker who then pays a portion to the agent. Some agents operate as exclusive buyer's agents and are paid directly by the buyer.

Q. What does dual agency mean, and is it legal?

A. Selling (buyer's) brokers represent the buyer. Listing (seller's) brokers represent the seller. Sometimes, with written permission, a broker represents both the seller and the buyer, and this is called dual agency. It is not legal in all states. Brokers and their agents are required to disclose in writing the capacity of representation (agency) to principals.

Q. How hard is it to sell a home without an agent?

A. Sellers with experience, knowledge and money often sell their own homes. You will need to advertise, show your home to prospective buyers, select the right price, negotiate the price, prepare the paperwork required to accept an offer and complete required disclosure forms, plus comply with federal, state and local laws.

Q. Is it better to buy a home first or should we sell our present home before buying?

A. Typically, in a buyer's market, meaning there is more inventory on the market than there are buyers, it is better to sell your home first. In a seller's market, where there is little inventory available and few buyers, it is better to buy your home first. However, you lose a bit of negotiating ground when you buy first because it removes some of your objectivity and puts more pressure on you to sell.

Q. Are foreclosures a good deal? I hear buyers can get really good deals by buying homes in foreclosure.

A. If you know your legal rights and the market conditions very well, some homes can be purchased in foreclosure below market value, but generally there is no guarantee concerning the condition of these homes. Often, if the sellers aren't making the payments, they aren't taking care of routine maintenance either. Because of redemption period laws, it is typically better to buy a home before the notice of default is filed. For more information, consult a lawyer who specializes in real estate.

Q. I'm trying to decide where I should live. My present real estate agent is showing me homes in one town, but I'd also like to look in another city. Is it OK to hire two different real estate agents?

A. Often agents specialize in one or two areas. If your existing agent is not well versed in the area where you want to look, you should ask her for a referral to an agent in the second city. This way she won't feel like you are going behind her back. Plus, it is possible that if you do buy through agent number two that agent number one will receive a referral fee as a form of reimbursement for time already expended.