Frequently Asked Questions
HOW MUCH DO I PAY AN AGENT TO HELP ME FIND AND BUY A HOME?
A buyer's representing agent is compensated at the close of escrow. They receive a commission represented as a percentage of the sale as specified in the purchase contract. The commision the buyer's agent received is paid by the seller. As a buyer there is no cost associated with working with an agent/realtor.
WHAT IS AN APPRAISAL?
It might seem simple, but first-time home buyers often misunderstand what an appraisal is and how it impacts the home-buying process. Appraisals are credible opinion of the value of a home based on a thorough and unbiased research and analysis. They are meant to reflect the market value of a property, which is not always the sale price. In many cases, an appraisal may help prevent a buyer from overpaying for a home. Though other valuation methods exist, appraisals will give you the most objective and impartial opinion of value, and are required for all real estate transactions with loans involving $250,000 or more from federally-insured financial institutions.
WHO IS AN APPRAISER?
An appraiser is an independent and impartial professional who is licensed or certified in the state he or she works. Qualified appraisers have gone through extensive education and testing and have significant experience in the field. He or she must comply with any state regulatory statues and abide by the Uniform Standards of Proffesional Appraisal Practice (USPAP), the congressionally-authorized standards for real estate appraisers in the United States developed by The Appraisal Foundation. They are also required to complete continuing education courses to ensure that they’re aware of changes in valuation methods and techniques, technology, and the marketplace. As you can see, there is significant training and expertise involved.
HOW DOES AN APPRAISER DETERMINE VALUE?
It’s important to remember that appraisals do not set the sale price of a home. Rather, the job of an appraiser is to come up with a reliable and credible opinion of value for a home. They are trained to assess a wide range of factors that affect a home’s value, including its size, location, condition, age, quality and more. Appraisers assess these factors in relation to recent sales of comparable properties to arrive at the most accurate and objective opinion of value.
WHAT CAN I DO IF I THINK MY APPRAISAL IS INACCURATE?
When examining your final appraisal report, it’s important for you to take an objective approach. Even if you are disappointed with the appraisal you receive, you may not have a credible complaint. However, there are a few clear signs that point to an incomplete or inaccurate appraisal. If the data provided is incomplete or there are major omissions, then you may have a case. For instance, if an appraiser does not document the second bathroom in your home, that would be a major issue. Other signs of a flawed appraisal include the use of non-applicable comparable sales and/or vague descriptions in the appraisal report.
If you do deem the appraisal to be inaccurate, you should notify your lender immediately. If there are major errors or you suspect unethical behavior, you should file a formal complaint with the appraisal regulatory agency in your state or through the Appraisal Subcommittee’s Appraisal Complaint National Hotline at http://refermyappraisalcomplaint.asc.gov/.
Understanding the role of an appraisal is critical when purchasing any home, especially your first.
WHAT IS ESCROW?
The process, in which a disinterested third person (a stakeholder) holds money and/or documents until satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow) have been achieved. Once these terms have been satisfied, delivery and transfer of the escrowed funds and documents takes place. (Escrow should not be confused with closings.)
A valid escrow is set up when a binding and enforceable contract of sale has been deposited with the escrow holder along with a fully executed deed. The escrow holder acts as a fudiciary and retains documents and entrusted assets until specified conditions are fulfilled. The holder is the special and impartial agent for both parties and acts according to the escrow instructions given by both. Depositors have no control over the documents after they are deposited into escrow, so the death or incapacity of one of the parties to the escrow does not terminate the escrow. Upon performance of the descendent's part of the contract, the other party is entitled to have escrow concluded according to the terms of the contract.
In closing a real estate transaction, the escrow company may perform such duties as paying liens, computing prorations, ordering title evidence, having new documents prepared, drawing up closing statements, obtaining necessary signatures, recording documents, and receiving and distributing funds. For tips & mistakes to avoid during escrow download this document from dre.ca.gov.
HOW LONG DOES THE ESCROW PROCESS LAST?
The length or term of an escrow is largely determined by the mutual agreement of the parties to the escrow. The number of days it will take to complete the escrow and/or the target closing date are indicated in the purchase contract and escrow instructions. Sometimes, the closing of an escrow can be delayed by the time it takes to approve and underwrite the loan if a lender is involved and new financing is being obtained by a buyer or borrower. Also, an escrow may not close on time as a result of unexpected circumstances, documents that have not been signed, or disputes between the parties. For tips & mistakes to avoid during escrow download this document from dre.ca.gov.
WHAT DOES THE TERM 'FUNDING' REFER TO?
The term "funding" usually refers to when your lender actually “funds” (provides the money to finance) your loan. The funding of a loan will occur only after all of the lender's conditions have been satisfied and escrow has requested funding from your lender. The escrow officer will work with the lender, as well as the mortgage broker if there is one, to ensure that the loan funds in accordance with the lender instructions and the contractual timeline of the escrow. Please note that even when all of the lender's conditions and requirements have been satisfied, the escrow officer will not authorize funding until all of the required conditions of the escrow have been met. For tips & mistakes to avoid during escrow download this document from dre.ca.gov.
WHAT DOES THE TERM 'RECORDING' REFER TO?
The term "recording" signifies when the title company has released all of the documents which must be recorded to the County where the property is located and those documents have been recorded (usually by the office of the County Recorder). Unless there are unexpected problems or delays either in escrow or title or both, it is only after the escrow officer determines that all of the conditions of the escrow have been met that they in turn authorize title to record the documents. "Recording" is also sometimes used interchangeably with "closing." It is typical that when a loan funds, the recording will take place the following business day. However, there are Counties that perform same day recordings, where the recording takes place on the same day that the loan funds. For tips & mistakes to avoid during escrow download this document from dre.ca.gov.