Not-So-Simple Questions

Many people want simple answers to their simple questions, but sometimes that is not possible. In real estate, as in so many things in life, seemingly simple questions can open the door to complex issues. Here are a few common questions regarding home buying that require a nuanced response.

What’s the best amount for a down payment?

When it comes to buying a house, financial decisions must be made based on interrelated considerations. The “right” down payment amount depends on a whole host of factors.

A higher down payment will reduce the amount of the overall loan and usually, the interest rate of said loan. Based on this, you may want to allocate as much cash as you possibly can to the down payment. However, if you do so, will you have enough money for closing costs, moving expenses, and repairs? Will you be able to purchase furniture and furnishings? Do you need some of that cash for other needs? It’s all about trade-offs, both short-term and long-term.

Is it better to have a lower monthly payment and live with drafty windows or should you opt for a higher mortgage payment so you have enough cash to replace all the windows when you move in? Your Realtor can help you understand the impacts of each choice, but ultimately, you’re the one writing the check. You must weigh the pros and cons based on what matters to you.

With seller financing, would I pay a higher or lower interest rate?

That’s like asking, “Is it raining or is it Tuesday?” As with the example above, you cannot consider financial decisions in a vacuum. Similarly to a conventional loan, the interest rate of seller financing depends on all sorts things: the term of the loan, the amount of the loan, the creditworthiness of the buyer, and more.

Let’s say the house next door with an identical floor plan sold for $500,000 last week. Might it be worth paying $600K to get a significantly lower interest rate? Maybe. On the other hand, if you have less cash on hand but would be able to manage a higher monthly payment, maybe it would be better to offer $470,000 and pay a higher interest rate. (In that case, there should be a significant prepayment penalty to make up for shortfall in purchase price.) These and dozens of other variables affect the transaction, and they must be negotiated in tandem rather than individually.

Although real estate negotiations are often set up to pit one side against the other, seller financing can be a win-win. Maybe the sellers have limited alternatives for where to invest their money because they know that in five years, their oldest child is headed to college and they’ll need the cash. If they carry the financing while you fix up the property, that allows you to qualify for conventional financing in a few years and the sellers to have access to their cash for college—everyone benefits.

Should I get a home inspection?

Another favorite question is whether to order a home inspection. These inspections are not required, but they are an excellent way for real estate transactions to be based on accurate information from the outset.

Sometimes, buyers think that because they are good at home repairs (or maybe even licensed contractors), they can simply go around and fix any problems they see. However, while contractors are good at building houses, they sometimes overlook simple but important things like the polarity of plugs. Home inspectors are unbiased experts in their field.

I don’t think I have ever seen a home inspection come back completely clean, even for brand new houses that have never been lived in. Home inspections are like health insurance: it feels like you’re paying too much if you don’t find something wrong. But how much is peace of mind worth?

If nothing comes up, great! That is information that can be used during the purchase negotiation. If a problem is identified, it will have been found by an objective third party (not the buyer or seller who may be seen as biased). This allows everyone to manage their expectations accordingly.

If you have questions about property management or real estate, please contact me at or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.

Dick Selzer is a real estate broker who has been in the business for more than 45 years.

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