Sell My House House Buying 5 — Questions and Answers
Question 1: What is the primary benefit of getting a pre-approval letter before house hunting?
- It locks in the purchase price with the seller
- It shows sellers the buyer is creditworthy and knows their budget (Correct answer)
- It waives the need for an appraisal
- It guarantees the mortgage will close on time
Correct answer: It shows sellers the buyer is creditworthy and knows their budget
A pre-approval letter demonstrates to sellers that a lender has verified the buyer's finances and they are ready to make a serious offer.
Question 2: When buying a home in a flood zone, what additional step is lenders likely to require?
- A second appraisal from an independent firm
- Purchase of flood insurance (Correct answer)
- A 30% down payment instead of the standard amount
- An environmental inspection of the soil
Correct answer: Purchase of flood insurance
If a property is in a FEMA-designated Special Flood Hazard Area, most lenders require the buyer to carry flood insurance as a condition of the mortgage.
Question 3: What is a 'seller's market,' and how does it typically affect buyers?
- A market where homes are discounted due to excess inventory
- A market with low inventory where sellers have more negotiating power (Correct answer)
- A period when mortgage rates are rising sharply
- A situation where buyers can demand extensive repairs
Correct answer: A market with low inventory where sellers have more negotiating power
In a seller's market, demand exceeds supply, giving sellers leverage — buyers often face bidding wars, higher prices, and fewer contingencies accepted.
Question 4: What does the term 'closing costs' generally include?
- Only the real estate agent commissions
- Fees for the loan, title, appraisal, and government recording charges (Correct answer)
- The down payment and first month's mortgage payment
- Costs to move furniture into the new home
Correct answer: Fees for the loan, title, appraisal, and government recording charges
Closing costs typically range from 2–5% of the loan amount and include lender fees, title insurance, appraisal, prepaid taxes, and recording charges.
Question 5: Which of the following is a red flag to watch for during a home showing?
- Fresh paint in a single room (Correct answer)
- Multiple offers already on the property
- A home that has been recently staged
- Motivated seller willing to negotiate price
Correct answer: Fresh paint in a single room
Fresh paint in one room can signal the seller is covering water stains, mold, or other damage that a buyer should investigate further.
Question 6: What is a 'buyer's agent,' and who typically pays their commission?
- An agent hired by the seller to find buyers; paid by the buyer
- An agent representing the buyer's interests; historically paid by the seller out of sale proceeds (Correct answer)
- A government-appointed inspector who protects buyers; paid by the state
- A bank representative who helps buyers get approved; paid by the lender
Correct answer: An agent representing the buyer's interests; historically paid by the seller out of sale proceeds
A buyer's agent represents the buyer's interests exclusively, and traditionally their commission has been paid by the seller from sale proceeds, though this is changing post-2024 NAR settlement.
Question 7: What is 'due diligence' in the context of buying a home?
- The lender's review of the buyer's credit report
- The buyer's investigation period to inspect, research, and verify all aspects of the property (Correct answer)
- The seller's obligation to disclose all known defects
- The title company's process of searching for liens
Correct answer: The buyer's investigation period to inspect, research, and verify all aspects of the property
Due diligence is the period after an offer is accepted during which the buyer conducts inspections, reviews disclosures, and investigates anything that could affect their decision.
Sell My House House Buying 5
What is the primary benefit of getting a pre-approval letter before house hunting?