Real Estate Questions and Answers - Common FAQs
Below are a list of some common real estate-related questions we get from customers and clients. Where possible, we have provided a brief explanation and summary; however, some topics and questions require an in-depth discussion for a broader understanding. In those cases, we have provided links to more comprehensive articles and information. As always, feel free to contact us if you have further questions, FAQs, or need additional help.
What is earnest money?
Earnest money is a good-faith deposit made by a buyer to demonstrate serious intent when submitting an offer on a property. Typically ranging from 1% to 3% of the purchase price, this deposit is submitted shortly after a purchase agreement is signed and held in escrow by a neutral third party — usually a title company, an attorney, or real estate brokerage — until closing. If the transaction proceeds successfully, the earnest money is applied toward the buyer's down payment or closing costs. However, if the buyer backs out for a reason not protected by a contingency in the contract (such as a financing or inspection contingency), the seller generally has the right to keep the deposit as compensation for taking the property off the market. Conversely, if the deal falls through due to the seller's actions or a failed contingency, the earnest money is typically returned to the buyer in full.
What is a "Buy Before You Sell"?
Buying a new home before selling your current one is more achievable than many homeowners realize thanks to a variety of financing options available in today's market. While traditional bridge loans remain one solution, alternatives such as buy-before-you-sell programs and mortgage recasts can often provide greater flexibility with lower costs. Homeowners with sufficient equity may qualify for programs that reduce or eliminate their existing mortgage payment from qualification calculations, making it easier to purchase a new home before selling. Others may benefit from buying with a smaller down payment and later using the proceeds from their home sale to recast their mortgage, lowering monthly payments without refinancing.
Additional financing strategies can help homeowners access funds for down payments, home improvements, or specialized borrowing needs. Home Equity Lines of Credit (HELOCs) can provide flexible financing for renovations that may improve a home's marketability before listing, while some borrowers may temporarily borrow against retirement or investment assets. Self-employed buyers may also have access to alternative mortgage programs that qualify borrowers using 1099 income or bank statements instead of traditional tax-return income. Because every financial situation is unique, homeowners should consult both an experienced real estate professional and a knowledgeable mortgage lender to determine the financing strategy that best aligns with their goals before making a move. Read more...
What’s a due diligence period?
A due diligence period in a real estate transaction is a contractually defined window of time — typically ranging from 7 to 30 days depending on the market and agreement — during which the buyer has the opportunity to thoroughly investigate the property before committing to the purchase. During this period, the buyer can conduct inspections (structural, mechanical, pest, environmental, etc.), review HOA documents, survey the land, assess zoning regulations, verify title history, and evaluate any other factors that might affect the property's value or suitability. In many markets, particularly in the Southeast, the buyer may pay a separate, non-refundable due diligence fee directly to the seller in exchange for this investigative period. If the buyer uncovers issues they find unacceptable, they have the right to renegotiate the terms, request repairs, or walk away from the deal entirely and receive their earnest money back — as long as they do so before the due diligence period expires. Once the period ends, the buyer is generally locked in, making it a critical and time-sensitive phase of the transaction.
What is a typical down payment for a mortgage loan?
Down payments vary depending on the type of mortgage a buyer pursues. Conventional loans typically require a minimum of 3% to 5% down for qualifying first-time buyers, though most lenders prefer 20% to avoid the added cost of private mortgage insurance (PMI), which protects the lender if the borrower defaults. FHA loans, backed by the Federal Housing Administration, are popular among first-time or lower-credit buyers and require as little as 3.5% down. VA loans, available to eligible active-duty military, veterans, and surviving spouses, are one of the most attractive options on the market as they require no down payment. USDA loans, designed for buyers in eligible rural and suburban areas, also offer 100% financing with no down payment. Jumbo loans, which exceed the conforming loan limits set by Fannie Mae and Freddie Mac (currently $806,500 in most areas), typically require a more substantial down payment of 10% to 20% or more. Compare mortgage types here...
What’s a termite bond?
A termite bond is a contractual agreement between a homeowner and a licensed pest control company that provides ongoing protection against termite infestation and, depending on the type of bond, coverage for damage caused by termites. Essentially, it functions like an insurance policy for termite-related issues, requiring the homeowner to pay an initial treatment fee followed by annual renewal fees — typically ranging from $100 to $300 per year — to keep the bond active.
There are two primary types of termite bonds: a retreatment bond, which only covers the cost of future termite treatments if an infestation is discovered, and a repair bond, which is more comprehensive and covers both retreatment and the cost of repairing structural damage caused by termites up to a specified dollar limit. The pest control company will conduct regular inspections — usually annually — to monitor for termite activity and ensure the property remains protected.
Termite bonds are particularly common and often considered essential in the Southeast and other warm, humid regions of the country where subterranean termites are highly prevalent and can cause devastating structural damage if left unchecked. From a real estate transaction standpoint, many lenders — especially those issuing FHA and VA loans — require a clear termite inspection letter (commonly called a CL-100 or Wood Infestation Report) before approving financing, and sellers are frequently asked to provide or transfer an existing termite bond to the buyer at closing as a condition of the sale. For buyers, inheriting an active termite bond provides peace of mind and financial protection against one of the most costly and silent threats to a home's structural integrity.
Who pays the Realtor fees?
Realtor fees in the United States have traditionally been paid by the seller out of the proceeds of the sale, though this landscape has shifted somewhat following a landmark 2024 settlement by the National Association of Realtors (NAR) that changed how commissions are disclosed and negotiated.
Historically, the seller would pay a total commission — typically ranging from 5% to 6% of the home's sale price — which was then split between the seller's agent and the buyer's agent, with each receiving roughly 2.5% to 3%. On a $400,000 home, for example, a 6% commission would amount to $24,000 total, split evenly between both agents. Under the new rules that took effect in August 2024, buyers are now required to sign a written buyer representation agreement (BBA) [see "What is a BBA?" below] that explicitly outlines the compensation their agent will receive, and sellers are no longer obligated to offer compensation to the buyer's agent through the MLS listing. This means buyers may now be responsible for negotiating and paying their own agent's fee directly, though in practice many sellers still opt to offer buyer agent compensation as an incentive to attract more offers.
Commission rates (compensation) are always technically negotiable and can vary based on the local market, the price of the home, the complexity of the transaction, and the services provided by the agent. Some discount brokerages and flat-fee services offer reduced commission structures — sometimes as low as 1% to 2% — though these may come with fewer services than a full-service agent provides. Overall, realtor commissions represent one of the largest closing costs in any real estate transaction and are an important factor for both buyers and sellers to understand and negotiate upfront.
What's a CMA? Comparative Market Analysis?
A Comparative Market Analysis (CMA) is a professional evaluation used by real estate agents to estimate the current market value of a property. It compares the home to similar recently sold, active, pending, and expired listings within the same area, taking into account factors such as size, condition, age, location, upgrades, and overall market trends. Unlike a formal appraisal, a CMA is designed to provide homeowners and buyers with a practical pricing strategy based on real-time market activity.
A CMA is important because accurate pricing directly impacts how quickly a property sells and how much interest it generates. Overpricing can reduce buyer activity and lead to longer market time, while underpricing may leave money on the table. Sellers use a CMA to establish a competitive listing price, while buyers use it to evaluate whether a property is fairly priced before making an offer. In changing market conditions, a well-prepared CMA helps support informed, data-driven real estate decisions.
Do I have to have a Realtor if I'm buying a home?
While it is absolutely possible to purchase a home without a realtor — a practice known as buying "unrepresented" — doing so means navigating one of the most complex and high-stakes financial transactions of your life without professional guidance, which carries significant risk for the average buyer. Here is a compelling case for why engaging a skilled buyer's agent is well worth it.
Buying a home is far more than simply finding a property you love and signing a contract — it is a multi-layered legal, financial, and logistical process filled with deadlines, disclosures, negotiations, and potential pitfalls that can cost an unrepresented buyer thousands of dollars or expose them to serious legal liability. A licensed Realtor buyer's agent brings invaluable market expertise (think of it as if you were hiring an attorney), knowing not only what homes are listed for but what they are actually worth based on recent comparable sales, neighborhood trends, and local market conditions — knowledge that gives you a critical edge when crafting a competitive yet fair offer.
Beyond pricing, an experienced realtor serves as your lead negotiator, advocating fiercely on your behalf not just on purchase price but on repairs, closing costs, contingencies, possession dates, and personal property inclusions — details that an emotionally invested buyer might mishandle or overlook entirely.
Your agent will also coordinate and attend inspections, help you interpret the findings, and advise you on whether to push for concessions or walk away from a problematic property before you are financially committed.
From a legal standpoint, real estate contracts are binding documents with strict timelines and contingency language that, if misunderstood or mismanaged, can result in the loss of your earnest money or even a lawsuit — your realtor ensures every deadline is met and every document is properly executed. Furthermore, a well-connected buyer's agent has a network of trusted professionals — lenders, inspectors, attorneys, contractors, and title companies — that they can recommend to streamline the process and ensure you are working with reputable people at every stage.
Perhaps most importantly, in the vast majority of transactions the seller is already paying a commission that covers the buyer's agent compensation, meaning you can access all of this expertise, advocacy, and protection at little to no direct cost to you.
In a market where a single misstep can cost you tens of thousands of dollars or the home of your dreams, having a knowledgeable professional in your corner is not just a convenience — it is one of the smartest investments you can make in the homebuying process.
What is a BBA?
A Buyer Broker Agreement (BBA) is a legally binding contract between a prospective home buyer and a licensed real estate agent or brokerage that formally establishes the professional relationship between the two parties and outlines the terms under which the agent will represent the buyer throughout the home purchase process.
Think of it as the buyer-side equivalent of the listing agreement a seller signs with their agent — it defines the scope of representation, the duration of the agreement, the geographic area covered, and most importantly, the compensation or fees the buyer's agent will receive for their services.
The agreement typically specifies whether the agent will be working as an exclusive representative of the buyer (meaning the buyer cannot simultaneously work with other agents during the contract period) or in a non-exclusive capacity, and it details what happens if the buyer finds a property on their own or through another source during the agreement period.
The compensation section outlines the agreed-upon fee — whether a flat fee, an hourly rate, or a percentage of the purchase price — and clarifies how that fee will be paid, whether by the buyer directly, offset by compensation offered by the seller, or a combination of both.
The need for a Buyer Broker Agreement became significantly more formalized following the NAR settlement that took effect in August 2024, which mandated that buyer's agents must have a signed BBA in place before showing a buyer any properties. Prior to this rule change, buyer representation agreements existed but were not universally required, and many buyers worked with agents informally without fully understanding the nature of the relationship or how their agent was being compensated. The new rules were designed to bring greater transparency to the commission process, ensure buyers fully understand what they are agreeing to, and eliminate the longstanding practice of buyer agent compensation being quietly baked into seller-paid commissions without the buyer's explicit awareness or consent.
From a practical standpoint, the BBA also benefits the buyer by ensuring their agent has a fiduciary duty to act solely in the buyer's best interest — a legal and ethical obligation to prioritize the buyer's needs above all others, including the agent's own financial interests.
Without a formal representation agreement, a buyer risks working with an agent who may technically be representing the seller or acting as a neutral transaction coordinator rather than a true advocate. For the agent, the BBA provides a level of professional security, ensuring that after investing significant time, effort, and resources into helping a buyer search for and negotiate a home, they will be fairly compensated for their work.
Ultimately, a well-crafted Buyer Broker Agreement creates clarity, accountability, and trust on both sides of the relationship, laying the foundation for a smoother, more transparent, and more professionally managed homebuying experience.
What is Radon and Radon Testing?
Radon is a naturally occurring radioactive gas that seeps up from the soil and can accumulate to dangerous levels in homes, particularly in basements and lower levels. It is the second leading cause of lung cancer in the United States and is colorless and odorless, making it completely undetectable without testing. Radon testing is strongly recommended in most markets and is either conducted during the general inspection or as a separate add-on service.
What's a Construction Loan?
A construction loan is a short-term, specialized financing product designed to fund the building of a new home from the ground up, covering the costs of land acquisition (in some cases), labor, materials, permits, and other expenses associated with the construction process.
Unlike a traditional mortgage — which provides a lump sum disbursement to purchase an already-existing property — a construction loan releases funds incrementally in a series of scheduled payments known as draws, which are tied to specific milestones in the construction timeline such as foundation completion, framing, rough-in of mechanical systems, and final completion. This draw structure ensures that funds are released only as work is actually completed and verified, protecting both the lender and the borrower from funds being misused or construction stalling due to financial mismanagement. Construction loans are inherently more complex, more risky from a lender's perspective, and more demanding in terms of documentation and oversight than standard mortgage products, which is why fewer lenders offer them and the qualification requirements tend to be more stringent. Learn more about construction loans here.
What's a home inspection?
A home inspection is a comprehensive, non-invasive visual examination of a residential property's overall condition, systems, and components conducted by a licensed or certified professional home inspector who systematically evaluates the home from top to bottom and documents their findings in a detailed written report delivered to the buyer.
The inspector examines the property as it exists at a specific point in time, assessing the condition and functionality of the home's major structural elements and mechanical systems including the roof, foundation, exterior walls, grading and drainage, attic, insulation, windows and doors, plumbing, electrical, heating and cooling systems, interior walls, ceilings, floors, and built-in appliances.
The resulting inspection report — which can range from 20 to 100 or more pages depending on the size and complexity of the property — documents observed deficiencies, safety concerns, items in need of repair or replacement, and general maintenance recommendations, typically accompanied by photographs of each identified issue. It is important to understand that a home inspection is not a pass/fail test and does not constitute a guarantee or warranty of the property's condition — rather, it is a professional opinion of the home's condition at the time of inspection based on what is visible and accessible, providing the buyer with the most complete and objective picture of the property's condition that is reasonably obtainable short of destructive investigation.
What Are Freddie Mac and Fannie Mae?
Fannie Mae, formally known as the Federal National Mortgage Association, was created in 1938 during the Great Depression to help increase the availability of mortgage financing. Freddie Mac, officially the Federal Home Loan Mortgage Corporation, was established in 1970 to provide additional competition and stability in the mortgage market.
Both organizations operate in a similar way. After a lender originates a mortgage, Fannie Mae or Freddie Mac may purchase that loan from the lender if it meets certain underwriting guidelines. By buying mortgages, they provide lenders with additional capital that can be used to make new home loans. This process helps increase liquidity in the housing market and supports broader access to homeownership.
What's an assumable mortgage?
An assumable mortgage is a type of home loan that allows a buyer to take over — or "assume" — the seller's existing mortgage, including its remaining balance, interest rate, repayment term, and other loan conditions, rather than obtaining a new mortgage at current market rates. In essence, the buyer steps into the seller's shoes with respect to the existing loan, continuing to make payments under the original terms as if they were the original borrower. The appeal of an assumable mortgage is straightforward and powerful — in a rising interest rate environment, a buyer who assumes a seller's existing mortgage at a significantly lower rate than what is currently available in the market can achieve substantial monthly savings and dramatically reduce the total interest paid over the life of the loan.
What's a reverse mortgage?
A reverse mortgage is a specialized home loan product available to homeowners aged 62 or older that allows them to convert a portion of their home equity into tax-free cash without having to sell the home, give up the title, or make monthly mortgage payments.
The most common type is the Home Equity Conversion Mortgage (HECM), which is federally insured by the FHA and regulated by the U.S. Department of Housing and Urban Development (HUD). Instead of the borrower making payments to the lender as in a traditional mortgage, the lender makes payments to the borrower — either as a lump sum, a line of credit, fixed monthly payments, or a combination thereof — and the loan balance grows over time as interest accrues. The loan does not become due until the last surviving borrower permanently leaves the home, sells the property, or passes away, at which point the loan must be repaid, typically through the sale of the home.
A homeowner might choose a reverse mortgage for a variety of compelling reasons, most of which center around financial flexibility and security in retirement. For seniors who are "house rich but cash poor" — meaning they have significant equity built up in their home but limited liquid assets or retirement income — a reverse mortgage can provide a critical supplemental income stream to cover daily living expenses, healthcare costs, home modifications for aging in place, or unexpected financial emergencies without the burden of a monthly repayment obligation.
It can also serve as a strategic financial planning tool, allowing retirees to delay drawing down investment accounts or defer Social Security benefits to maximize their eventual payout. However, a reverse mortgage is not without risks and drawbacks — the loan balance grows over time, reducing the equity available to heirs, and the borrower remains responsible for property taxes, homeowner's insurance, and home maintenance, failure of which can trigger default and foreclosure. For these reasons, HUD requires all prospective reverse mortgage borrowers to complete independent counseling with an approved housing counselor before proceeding, ensuring they fully understand the implications before committing to this significant financial decision.
What does staging a home mean?
Home staging is the process of strategically preparing, decorating, and presenting a property for sale in a way that maximizes its visual appeal, highlights its best features, minimizes its weaknesses, and allows prospective buyers to emotionally connect with the space by envisioning themselves living there.
Staging goes far beyond simply cleaning and decluttering — though those are foundational elements — and encompasses a comprehensive approach to furniture arrangement, lighting, color, décor, and overall aesthetic that is specifically designed to photograph beautifully, show well in person, and appeal to the broadest possible pool of buyers.
A professional home stager — a specialist trained in interior design, buyer psychology, and real estate marketing — will assess the property with a critical and objective eye, often recommending the removal of personal items such as family photos and idiosyncratic décor, the rearrangement or replacement of furniture to improve flow and perceived space, the addition of carefully curated accessories and soft furnishings, fresh paint in neutral and universally appealing colors, and enhancements to curb appeal and exterior presentation.
Staging can range from a simple consultation in which the stager advises the homeowner on what to do themselves, to a full-service engagement in which the stager brings in rental furniture, artwork, rugs, plants, and accessories to completely transform an empty or poorly furnished property into a warm, aspirational, and market-ready home.
The reasons to stage a home are compelling and well-supported by real estate industry data.
The most powerful argument for staging is its direct impact on sale price and days on market — professionally staged homes consistently sell faster and for more money than their unstaged counterparts, with numerous industry studies suggesting that staged homes sell for anywhere from 5% to 20% more than non-staged homes and spend significantly fewer days on the market. In an era where the overwhelming majority of buyers begin their home search online, the importance of stunning photography cannot be overstated — a staged home photographs dramatically better than a cluttered, personalized, or empty one, generating more clicks, more showings, and ultimately more offers. Staging also addresses one of the most significant psychological challenges in real estate, which is helping buyers — who are often making an emotionally driven decision — see past the current owner's personal taste and lifestyle to imagine the home as their own canvas.
An empty home, paradoxically, is often harder for buyers to connect with than a thoughtfully furnished one because vacant spaces feel cold, smaller than they actually are, and devoid of the warmth and livability that buyers are seeking. For sellers of vacant or investment properties, bringing in rental staging furniture and décor can be a transformative investment that pays for itself many times over in a higher sale price. Even in a strong seller's market where homes are selling quickly regardless of condition, staging can be the difference between one offer and multiple competing offers — between selling at asking price and selling significantly above it. When weighed against the cost of staging — which typically ranges from a few hundred dollars for a consultation to several thousand for a full professional staging — the return on investment makes it one of the most financially sound pre-listing decisions a seller can make.
What is a recast of a mortgage loan?
A mortgage recast, also known as a loan recast or re-amortization, is a process by which a borrower makes a large lump-sum payment toward the principal balance of an existing mortgage and then asks the lender to recalculate — or re-amortize — the remaining loan balance over the remaining term of the original loan, resulting in a lower monthly payment while keeping the same interest rate and loan term intact. Unlike refinancing, which replaces the existing loan with an entirely new loan and involves a new application, credit check, appraisal, and closing costs, a recast is a much simpler, faster, and less expensive modification to the existing loan that simply adjusts the monthly payment schedule to reflect the reduced principal balance.
What is title insurance?
Title insurance is a specialized form of indemnity insurance that protects real estate buyers and mortgage lenders against financial losses arising from defects, disputes, or claims related to the ownership history — or "title" — of a property. Unlike most other forms of insurance, which protect against future events or risks, title insurance is unique in that it protects against past events — specifically, problems or encumbrances that may have occurred in the property's ownership history before the current buyer took possession, which may not have been discovered during the title search process. It is a one-time premium paid at closing that provides coverage for as long as the insured party holds an interest in the property.
How do relocation real estate companies work?
Relocation real estate companies, often referred to as "relo" companies, are specialized firms that serve as intermediaries between employers and the real estate market to transfer employees from one geographic location to another. When a company needs to move an employee — whether across the country or internationally — managing the complexities of buying and selling homes, coordinating moves, and navigating unfamiliar markets is far beyond the scope of a typical HR department, which is why many mid-size to large corporations contract with relocation companies to handle the entire process on their behalf.
What's an appraisal?
An appraisal in residential real estate is a professional, unbiased estimate of a property's fair market value conducted by a licensed or certified appraiser who is trained and credentialed to evaluate real property. The appraiser performs an in-person inspection of the home, assessing its size, condition, layout, features, upgrades, and overall quality, then analyzes recent sales of comparable properties — commonly referred to as "comps" — in the surrounding area to arrive at a supportable, defensible opinion of value that is documented in a formal written report. The resulting appraisal report is a legally recognized document that carries significant weight in real estate transactions, lending decisions, legal proceedings, and tax matters. Learn more about appraisals here.
What is PMI – Private Mortgage Insurance?
Private Mortgage Insurance, universally known in the real estate and lending industries as PMI, is a type of insurance policy that a borrower is required to purchase and pay for on behalf of their mortgage lender when they obtain a conventional home loan with a down payment of less than 20% of the property's purchase price.
Despite the fact that the borrower pays the premiums, PMI is designed entirely to protect the lender — not the borrower — against financial loss in the event the borrower defaults on the loan and the property goes into foreclosure. The fundamental logic behind PMI is straightforward — lenders consider loans with less than 20% equity at origination to carry a meaningfully higher risk of default and loss, and PMI transfers a portion of that risk to a private insurance company, allowing lenders to extend financing to borrowers with smaller down payments while maintaining acceptable risk exposure.
From the borrower's perspective, PMI is essentially the cost of admission for accessing homeownership with less than 20% down — an additional monthly expense that provides no direct benefit to the borrower but enables them to purchase a home sooner than they could if required to save a full 20% down payment.
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