Quick Real Estate FAQ

from your local economist

Kana Nur-tegin, Ph.D.
Professor of Economics
Licensed Realtor®

What is FSBO?

FSBO, pronounced 'fizzbo,' stands for For Sale By Owner. A FSBO property usually means that the house is being sold without a real estate agent.

How much do real estate agents charge?

A typical commission of a real estate agent in Florida is 6%, which is usually paid by the seller. The buyer usually doesn't pay any commission to their representative. The buyer's agent receive their compensation from the seller's agent, who splits their commission with them as well as their (own) broker.

Should I hire a realtor to sell my home or do it myself?

Unless you've successfully sold a house in the past 3-4 years and know exactly what you're doing and the tradeoffs you're facing, it usually makes sense to hire a professional. Read more on this in my blog '6 Reasons Why FSBO Is Not a Good Idea'.

I'm ready to buy a home. What is the first step?

Get pre-approved for a loan. This way you will be able to set a firm budget and not waste any time on houses you cannot afford. You will also be in a better negotiating position with sellers, who will now take your interest in their house more seriously. Also, most realtors will show houses only to buyers who are pre-approved.

How much down payment should I put on a house?

It depends on many factors, including the type of loan, your credit history, the house you are buying, and your financial preferences. You can put down as little as 3%. FHA loans require a minimum of 3.5%. However, there are benefits of putting down 20%, including lower overall cost of the loan, lower upfront and ongoing fees, lower monthly payments, avoiding having to buy mortgage insurance, and better chances of getting approved for a loan. But down payment is not the only upfront money you have to deal with: don't forget about earnest money, closing costs, and possible renovation expenses. So don't get hung up on trying to come up with a large down payment, which can keep you from owning a house. The average down payment in 2016 was just 11%, according to NAR.

What is the difference between a list price and sale price?

The list price is the currently posted price of a home. The sale price is the price at which the house is sold.

What is title insurance and who pays for it?

Title insurance may be required by the lender to protect the purchase from defects on the title. Who pays for title insurance depends on what's written in the contract, so it is a point of negotiation.

What is MLS?

The Multiple Listing Service, or MLS, is a comprehensive electronic database of houses, townhomes, and condos offered for sale in a given geographical area. All real estate agents belong to an MLS and pay dues for the privilage to post their listings and access other listings. Thus, practically every home for sale in the area can be found on the MLS and every realtor uses the MLS to help their buyers find a new home. The MLS provides agents with information that's granularly detailed (far more detailed than on Zillow, Trulia, etc.) and accurate to the minute.

What is earnest money?

It is a buyer's deposit to the seller, held by a third party, representing the buyer's good faith to complete the purchase of the house. This amount is negotiable and depends on market conditions, but it's typically about 3-5% of the total purchase price.

What is steering?

Steering is a violation of the Fair Housing Act when a real estate agent 'steers' or leads his/her buyers to or away from a particular neighborhood based on that neighborhood's racial or ethnic composition, income level, etc.

How many homes should I view before making an offer?

It depends on your time flexibility, budget, current market conditions, agent, and many other things. There is no single answer for all buyers. Some make an offer after visiting only 2-3 houses, others view dozens of homes before making up their mind. As a rule of thumb, I'd recommend visiting at least 3 homes and no more than a dozen. If you visit too many homes, you risk losing focus, getting confused and frustrated, and may miss out on a home you really liked. Great homes that are well priced don't last long. Remember, 'perfect' can be the enemy of 'great.'

What is loan-to-value ratio?

The loan-to-value (LTV) ratio is the mortgage loan amount divided by the appraised value or purchase price of the property. For a lender, a higher LTV ratio represents a greater risk of default. Therefore, borrowers with higher LTV ratios are faced with higher mortgage loan rates.

What does PITI stand for?

PITI is mortgage Principal payment, Interest, Taxes and Insurance. It is viewed as a total cost of mortgage. Often, buyers underestimate their mortgage burden when they focus only on the principal and interest portion of the potential payment, ignoring the other two. More detailed information about this can be found here or here.

What is the difference between private mortgage insurance (PMI) and mortgage insurance premium (MIP)?

Both PMI and MIP are types of mortgage insurance designed to protect the lender from default. PMI applies to conventional loans, and it is required for borrowers whose down payment is less than 20%. MIP applies to FHA loans, whose down payment requirements are much lower, as low as 3.5%. These two types of mortgage insurance also differ in how long they are paid and structure of payments. Read more here.

What's short sale?

A short sale occurs when the net proceeds of a home sale fall short of the current mortgage loan obligations of the seller. The lender may agree to a short sale to recoup a portion of the loaned amount owed to them.

How do I find out which public school zone I am in?

For the most up-to-date information, enter your address in the interactive GIS map page of the website of the School District of Palm Beach County PDFs of school boundaries can be found here: elementary, middle,  and high.

What is the effect of leverage on my net worth?

Leverage is basically using other people's money (loans) to increase your net worth when the housing market is going up. When the value of the home you buy goes up, your net worth increases not only on your own money but also on the loaned amount. Beware, however, that under the same logic, leverage would exacerbate your losses if the price of your home goes down in a depressed market.

Why do I need a comparative market analysis (CMA)?

Whether you're a home seller or buyer, the CMA will help you get a good idea of the market value of a home based on similar homes (comparables) recently sold in the same neighborhood. Ask your realtor to prepare a thorough CMA for you before listing your home for sale or putting in an offer on a target house. Don't be shy to ask your realtor questions about how the CMA was prepared, which comparables were used and why, and their assumptions made in the preparation of the report, as these things may have a significant effect on the final assessment.

Where can I find information on school ratings?

Visit www.greatschools.org and enter your city, e.g. Jupiter, Palm Beach Gardens, Tequesta, Wellington, etc.

How do I find a great realtor?

If you're on this website, you've already found one (actually, a husband-and-wife team of two!). Click Contact Us at the top of the page to reach out.