Browsing Category

contingencies

Auto Added by WPeMatico

Hey, Big Spender! 6 Reasons Why Your Higher Offer Won’t Win the House

January 16, 2019

Peter Dazeley/Getty Images; alexsl/iStock; realtor.com

You’ve finally found your dream home, and it’s actually in your budget. You can swing it—with cash to spare—but with competition fierce, why not go all in and offer way above asking? The seller will be in no position to refuse, right?

Well, hang on for a second. While cash—and lots of it—is certainly king, there are other factors that play into a seller’s decision to accept an offer.

In fact, sometimes there are things in your purchase contract that can outweigh even your supersized offer. Sounds crazy, doesn’t it? But often—especially in today’s red-hot market—a successful sale goes beyond money. Here are a few scenarios in which your highest offer might not land you the keys to the front door.

1. You’re not flexible on the timeline

First and foremost among possible deal breakers is timing.

“Sellers look at the terms to their specific situation,” says Francine Brown, broker/owner and Realtor® at Brown Estate Realty in Norwalk, CT. “Maybe they need more than 30 days to move out, so if someone is pressuring them to move out sooner, that can sometimes be a turnoff if they haven’t found a new home to move into.”

On the other hand, the sellers might have already vacated the property, and are eager to unload it pronto.

That’s why customizing the length of the closing period to meet the sellers’ needs can be more important than the bottom line. Have your real estate agent find out what they need, and let them know you can accommodate them.

2. You don’t have your paperwork squared away

Yes, we’ve preached and prattled on about the importance of being pre-approved for a mortgage before you start your home search. And here’s just one of many reasons why: You can blow up the deal if you haven’t been pre-approved, says Sharon Paxson, a Realtor with Arbor Real Estate in Newport Beach, CA.

Why? If you don’t have the financing in place to make your initial down payment and closing costs, it doesn’t matter how many dollars you promise the sellers.

“Buyers must have that in place as opposed to tying up a house when they’re not really qualified to do so,” Paxson says. “When you’re ready to put in an offer, make sure your pre-approval is within 30 days or less. [If sellers] see that the pre-approval was done more than 60 days ago, that could make them wonder if you’re still credit-worthy to get a loan.”

Speaking of being credit-worthy, here’s another no-no: Making a large purchase (such as a car) during the escrow period—even if you have the money to do so. It might affect your ability to obtain financing, and that’ll be another major red flag to the seller.

3. You’re asking for too many contingencies and concessions

If you’re in a bidding war for your must-have home, you’ll want to go in not only with the highest offer, but also with the cleanest one.

“You want the deal to be as sweet and competitive as possible, so that if the seller takes it, there’s a very good chance that the sale will go through,” Paxson says.

For example, a contingency stipulating that your home must sell before you purchase the seller’s house is usually a deal breaker, Brown says.

“The seller may not consider your offer as favorable because you’re still shaky until your house actually sells,” she says.

Another potential turnoff: Negotiating for a large concession, like for the seller to pay all of the closing costs.

Instead, ask for the bare minimum closing costs—or none at all—and make sure the concession doesn’t dip into the seller’s price tag, Paxson advises.

“So if a house is listed for $300,000, and you can go up to $310,00, then put in $310,000 with a $10,000 seller’s concession,” she says.

———

Watch: 5 Secrets of Making the Perfect Offer

———

4. You’re requesting too many things be included with the home

On a related note: If you ask for the custom drapes, the Smeg appliances, and the Scandinavian hot tub to all be thrown in with the house, sellers might wave you off, Brown says.

“If the sellers had put in the listing that the chandelier wasn’t included, then don’t ask for it to be thrown in,” Brown says.

You might think you’re paying for all that stuff with your higher offer, but if you really want the house, tread lightly here. You risk offending the sellers if it looks like you’re trying to squeeze as much out of them as possible.

5. You haven’t expressed your love—for the house

You might not be the only one bidding high. And when similar offers are on the table, sometimes the sellers look for other factors to break the tie—that another happy family will live in their cherished home, for example. Or that the buyers won’t be gutting it and turning it into something totally different.

So how can you sway sellers who love their home? Put some heart into your offer by giving them some idea of who you are and why you want their home.

“I’ve seen buyers take a picture of themselves and their family. If that’s what works to make it more emotional, then do it,” Paxson says. “It just depends on who your target is. If your seller is an investor, they’re probably not going to care—they just want the money. But if they raised their family there and want to sell it to another nice family, an emotional appeal might work.”

Writing a love letter to the sellers can sometimes seal the deal, Brown adds.

“A buyer may outline why they feel this house would suit their family needs and how they can keep on the tradition of what the previous owner has,” she says.

6. You gave up after your offer was initially refused

If, for whatever reason, the sellers reject your bid, hang in there, Brown says. Contracts that come in way over asking price tend to have a high cancellation rate, perhaps because the buyers didn’t have pre-approval and their financing falls through.

“I make sure things always end nicely with the listing agent, and tell them that we want to be kept in the loop should there be any problems with the accepted offer,” she says.

Ask your agent to check in every two or three weeks. Because then, instead of putting it back on the market and creating a whole new bidding war, the listing agent may just go to the next most attractive offer: yours.

The post Hey, Big Spender! 6 Reasons Why Your Higher Offer Won’t Win the House appeared first on Real Estate News & Insights | realtor.com®.

How to Buy a Home Fast—Even Before the Holidays!

November 2, 2018

Need to know how to buy a home fast since you’re hoping to be settled in before the holidays? Then the pressure’s definitely on at this point! If you have any hope to host your Thanksgiving feast (or at least Christmas dinner) in your new digs, you’ve got to get the ball rolling on a home purchase, pronto.

Yet anyone who’s ever purchased real estate will tell you the home-buying process can be drawn out, complicated, and rife with endless paperwork—and the potential for problems to arise at a moment’s notice. While all that may be true in some cases, there are certain strategies that can speed up the home-buying process.

Follow the advice of these experts, and you’ll be putting out your new welcome mat in no time. Honest.

Home in on the right kind of house

If you’re hoping to move in a hurry, here’s a word from the wise: Avoid homes that may entail an interview with their boards—namely co-ops.

“Co-ops can take six to eight weeks to get a board interview scheduled, finalized, and approved,” notes Phillip Salem, an agent with Triplemint Real Estate. And since many folks may be traveling over the holidays, there could be further delays.

Also avoid bank-owned homes or foreclosures, which generally take much longer to close.

A far faster bet is to focus on condos or new developments.

“Closings in condos and houses in new developments, even with financing, can happen in as little as three to four weeks,” says Salem. “Most new developments have preferred lenders who are already approved for the building and ready to go.”

Get pre-approved for a mortgage

You may be tempted to check out as many open houses as possible, but it’s more important to be strategic. Don’t waste precious time touring homes that are well beyond your budget. With that in mind, your first step should be finding out exactly what you can afford.

“Get pre-approved for a mortgage by a local lender—rather than big banks or internet lenders—who has a track record of closing on time,” advises Aaron Hendon, a real estate agent with Keller Williams. “Most can swing a 21-day close, and that’s critical.”

Ray Duran, regional sales manager at Quontic Bank in Miami, says this step allows buyers to determine their budget based on what the lender will extend.

“Unless you are so wealthy that you’re going to buy your own [home] with a big pile of cash, you’re going to need a home loan,” Duran says. “Whether you decide to go to a bank or credit union, your lender will need to qualify you to see how much you can afford to buy.”

Cara Ameer, an agent with Coldwell Banker, adds that this step also sets you apart from other buyers.

“Being pre-approved puts a buyer in a position of strength, as it will put the seller and their agent at ease, knowing that the buyer has done the heavy lifting upfront,” she says.

Get your documents in order

“To speed up buying a home for the holidays, buyers should start putting together all of the documents and paperwork that are usually required during a home loan review,” says Duran.

Generally, a home buyer will need the following:

  • Federal tax returns for the past two years
  • Supporting information (e.g., W-2, 1099, or other tax forms) for the past two years
  • Two months’ worth of statements from any checking and savings, 401(k), retirement, and other accounts
  • Pay stubs for the past month

 

“The more legwork a buyer can get out of the way before starting their home search, the easier it will be to go under contract and close on a home in time for the holidays,” says Ameer. “There will always be one more thing that is needed with the loan application process, but it is much easier and faster to track down one document here or there versus having to provide stacks of documents within a few-week period.”

Work with the right real estate agent

Working with a proactive real estate agent who knows the area, as well as how to leverage technology and social networks to make things happen, is key.

“Having the right agent can make all the difference in sealing the deal, particularly in a time-critical situation,” Ameer notes. “They will know how to connect the buyer to the right inspectors, contractors, and other professionals involved in bringing the transaction to closing.”

Once you have the right agent in your corner, don’t be afraid to let the pro know what you want.

“Send your agent listings you find on the internet so that he/she can get an idea of exactly what you like,” says Jeannette Burke, an agent with Realty Executives in Sparta, NJ. “He can also evaluate each property and check the taxes, underground oil tanks, whether the house is bank-owned, pretty much everything.”

Consider shortening contingency deadlines

While buyers should almost never consider waiving any home inspection or financing contingencies, they can offer to shorten the time frame on those contingencies to effect a faster closing.

“This will also be appealing to the seller,” Ameer says. “The buyer should work with their agent to propose a realistic time frame that can be met considering the entire scenario. For example, if it’s normal to provide 10 days for all due diligence in a purchase situation, offering to complete it in five to seven days may be looked at more favorably by the seller and more realistic. In order to close within 30 days, loan approval may be needed in 20, which is why having all loan documents in place with the lender before writing an offer is key.”

Depending on the nature of the issues found during home inspections, buyers could negotiate a credit toward their closing costs in lieu of repairs being done by the seller, saving valuable time.

Stay on top of everyone

“Once under contract, you want to press all appropriate vendors—inspectors, appraisers, lenders—to stay on track,” says Hendon.

Suzy Minken, an agent with Berkshire Hathaway, agrees. “From the initial offer stage all the way through closing, there is a considerable amount of ‘elapsed time,’” she says. “If you consider how many people are often a party to the home purchase transaction—seller, buyer, two attorneys, two real estate agents, mortgage lender, home inspector—then it’s easy to understand that there is a lot of time when someone is waiting to get an answer to a question or a document. And when there is a tight window of time, it’s critical that communication between all the parties moves smoothly and swiftly.”

Do some groundwork on moving, too

You may be focused on your new home, but don’t forget about your current space, where your belongings will need to be packed up.

“Interview movers and make sure they are available for a move before the holidays,” suggests agent Maria Daou of Warburg Realty. “If you plan on painting or any kind of cosmetic work, get quotes and make sure the person doing the work will be available.”

Selling a home as well? Tune in tomorrow to learn how to sell a home before the holidays!

The post How to Buy a Home Fast—Even Before the Holidays! appeared first on Real Estate News & Insights | realtor.com®.

10 Scariest Things a Home Inspector Might Find in Your House

November 1, 2018

Home inspections are scary. Just when you swear you’ve found the house of your dreams, a home inspector comes along and tells you everything’s that’s wrong with it—which might lead you to think you should run for the hills!

But rest assured, most things turned up during a home inspection aren’t deal breakers. Still, there are certain red flags that really should make you very, very afraid. So how can you tell? For starters, you should try to attend your home inspection to see firsthand how your inspector reacts as he checks out your house.

“If your inspector comes to an abrupt halt when entering a room, or their whole demeanor changes, it’s possible they’ve just run across something very bad,” says Welmoed Sisson, a Maryland home inspector from Inspections by Bob, and author of the book “101 Things You Don’t Want in Your Home.” 

Another red flag is if you hear an inspector say, “I’ve never seen this before!” says Frank Lesh, ambassador of the American Society of Home Inspectors.

The somewhat bright side? “I tell my clients that pretty much any defect I find in a house is fixable,” says Sisson. “It’s just a matter of how much money they want to spend on the repairs.”

So if you find big bills scary, know that the 10 problems below don’t come cheap. “Any of the problems I’ve mentioned below could easily start at around $5,000 and go up from there,” Sisson says. So if your home has any of these issues, don’t say we didn’t warn you.

1. Bad electrical panels

An outdated electrical panel

Welmoed Sisson

“There are three brands of electrical panels—often called fuse boxes or breaker boxes—that we always recommend replacing, due to safety issues,” explains Sisson. “They haven’t been manufactured for decades, yet we still see them. The three brands are Federal Pacific, Zinsco, and Bulldog Pushmatic. All of them have issues with not tripping properly when excess current goes through them. The Zinsco breakers also have issues with electrical arcing, leading to fires inside the panel.”

New electrical panels will run you around $5,000 to $6,000.

2. An old deck

home inspector
This old deck could collapse under your feet.

Welmoed Sisson

“People are surprised to hear that decks only have a 12- to 15-year life span,” Sisson informs us. “The issue is the fasteners; they corrode and lose their hold on the house, and the result can be a catastrophic collapse.” Every year, people are injured or killed in deck collapses, because homeowners aren’t aware their decks aren’t safe. Plus, rebuilding a deck isn’t cheap, totaling anywhere from $10,000 to $15,000.

3. Cracked chimneys

This cracked chimney could be more dangerous than you think

Welmoed Sisson

“Any chimney repair will be expensive,” says Sisson. Even a simple crack could mean having to demolish some or all of a chimney and rebuild it. A chimney that has separated from the house is even worse. “It cannot simply be pushed back into place. It has to be completely taken down and rebuilt,” Sisson says. A complete chimney rebuild can easily top $20,000.

4. Polybutylene pipe

This water pipe, typically gray in color, was widely used in the 1980s, and was subject to a class action settlement because the joints tended to fail, causing flooding. “We still see it, and we always recommend replacing it,” Sisson says. The bill generally starts at about $10,000.

5. Aluminum wiring

Around the time of the Vietnam War, copper shot up in price, so electricians turned to aluminum for wiring houses. “The problem is that aluminum expands and contracts more than copper when it gets hot, which weakens the junctions, so there was a big increase in arcing and fires inside walls when connections loosened up,” Sisson says. “Some insurance companies won’t write policies on homes with aluminum wires, because of the risk of fire.”

6. Buried oil tank

“An environmental time bomb, and if it is leaking, the stakes are enormous,” Sisson says. “There is no limit to the homeowner’s liability for cleaning up the contamination from a leaking tank, and insurance will not cover it.”

So you think there’s no way a tank is buried on your property? You may be surprised. Buried oil tanks are still quite common in colder climates; burying the tank helps prevent the fuel from freezing and lets it flow more smoothly. Plus, older tanks were often single-wall, so any corrosion or damage to the tank could mean oil seeping into the ground. In the case of an oil leak, the tank and all the surrounding soil must be removed and disposed of as hazardous waste; the soil gets dug out until all traces of oil are gone. If it’s been leaking for a while, that could mean a lot of soil.

7. Broken trusses

Dangerous cut trusses in an attic

Courtesy Welmoed Sisson

“Altering roof trusses can seriously affect the structural integrity of the roof,” says Sisson. “We see truss sections cut to accommodate pull-down attic stairs, or to install a new air conditioner, or even in an attempt to make the ‘wasted space’ in the attic more usable. Fixing these trusses requires a structural engineer’s input.” As well as thousands to fix.

8. R-22 refrigerant (freon)

home inspector
An old AC that uses R-22, aka freon

Welmoed Sisson

This is the stuff that makes old air conditioners work—and since it’s no longer being manufactured, repairing systems that use it has become costly. According to Sisson, a repair that was once maybe $200 could now be well over $1,000.

“An A/C that uses R-22 doesn’t need to be replaced immediately, but when it needs repair, it should be replaced instead,” Sisson says. “Keep in mind that an A/C will likely conk out in the middle of summer, when contractors get backed up and prices may be inflated. So it may be prudent to replace a creaky old system before it breaks.”

9. Foundation cracks

“These are bad because they can be enormously expensive to repair properly, and the consequences of poor repair can be structural collapse,” says Sisson.

“It could be a structural problem” is a phrase that Lesh agrees his clients are particularly wary of. Lesh typically recommends for a structural engineer to be called in. “That could end up costing no more than the engineer’s fee if it’s determined to be an insignificant deficiency,” Lesh says. “But, it could require remediation to correct the problem.”

Here is more on signs of foundation problems.

10. Environmental hazards

Asbestos insulation, asbestos floor tiles, termites, mold, lead paint—all are things that must be addressed by a professional, meaning someone other than a run-of-the-mill home inspector … and could add up to a big bill.

The post 10 Scariest Things a Home Inspector Might Find in Your House appeared first on Real Estate News & Insights | realtor.com®.

Closing on a House Checklist: 6 Things Home Buyers Must Do Before They Move In

August 3, 2018

FabioBalbi/iStock; realtor.com

Welcome to your Closing on a House Checklist—a rundown of everything home buyers need to do in the 11th hour before they get their hands on those keys. Because when you’re approaching the finish line in your home-buying journey, you want nothing to go wrong, right?

That’s why we’ve put together a home closing checklist, which outlines your action points in those few days leading up to settlement. Keep this list handy to know you’ve done what you need to in order to close the deal.

1. Get all contingencies squared away

Most purchase agreements have contingencies—things that buyers must do before this transaction is official, explains Jimmy Branham, a real estate agent at the Keyes Company, in Fort Lauderdale, FL. These are the most common contingencies:

  • Home inspection contingency: This gives buyers the right to have the home professionally inspected. If something is wrong, you can request it be fixed—or you can back out of the sale. It’s rarely advisable to waive an inspection contingency. Although the average home inspection costs $300 to $500, it’s a drop in the bucket considering the costly home issues you might uncover, says Claude McGavic, executive director of the National Association of Home Inspectors.
  • Appraisal contingency: With this contingency, a third party hired by your mortgage lender evaluates the fair market value of the home. If the appraised value is less than the sale price, the contingency enables you to back out of the deal without forfeiting your earnest money deposit, says Bishoi Nageh, president of the Petra Cephas Team at Mortgage Network Solutions, in Somerset, NJ.
  • Financing contingency: This contingency gives you the right to back out of the deal if your mortgage approval falls through. You have a specified time period, as stated in the sales contract, during which you have to obtain a loan that will cover the mortgage.

 

2. Clear the title

When you buy a home, you “take title” to the property and establish legal ownership—a process that’s confirmed by local public land records. As part of the closing process, your mortgage lender will require a title search, and you’ll need to purchase title insurance to protect you from legal claims to the house.

Sometimes distant relatives—or an ex-spouse—may surface with a claim that they actually own the home, and that the seller had no right to sell it to you in the first place. But clearing title will ensure this doesn’t happen, says Marc Israel, president and chief counsel of MIT National Land Services, a title company in New York City.

As the home buyer, you’re entitled to choose the title company. You can get recommendations from your real estate agent, mortgage lender, and friends—just be sure to check out the license and reputation of each company online.

3. Get final mortgage approval

Before you can go to the closing table, your home loan must go through the underwriting process. Underwriters are like real estate detectives—it’s their job to make sure you have represented yourself and your finances truthfully, and that you haven’t made any false or misleading claims on your loan application.

The underwriter—employed by your mortgage lender—will check your credit score, review your home appraisal, and ensure your financial portfolio has remained the same since you were pre-approved for the loan.

Since underwriting typically happens shortly before closing, you don’t want to do anything while you’re in contract that’s going to hurt your credit score. That includes buying a car, boat, or any other large purchase that has to be financed.

4. Review your closing disclosure

If you’re getting a loan, one of the best ways to prepare is to thoroughly review your closing disclosure, also known as a HUD-1 settlement statement. This official document outlines your exact mortgage payments, the loan’s terms (e.g., the interest rate and duration), and additional fees you’ll pay, called closing costs (which total anywhere from 2% to 7% of your home’s price).

You’ll want to compare your closing disclosure to the loan estimate your lender gave you at the outset. If you spot any discrepancies, ask your lender to explain them.

5. Do a final walk-through

Most sales contracts allow buyers to do a walk-through of the home within 24 hours before closing. During this stage, you’re making sure the previous owner has vacated (unless you’ve allowed a rent-back arrangement in which they can stick around for a period of time before moving). You’re also double-checking that the home is in the condition agreed upon in the contract. If your home inspection revealed problems that the sellers had agreed to fix, you’ll want to make sure those repairs were made.

6. Bring the necessary documentation to closing

Make sure you have the following items when you head to the closing table:

  • Proof of homeowners insurance
  • A copy of your contract with the seller
  • Your home inspection reports
  • Any paperwork the bank required to approve your loan
  • A government-issued photo ID (Note to newlyweds who just changed their name: The ID needs to match the name that will appear on the property’s title and mortgage.)

 

Plan to sign a ton of paperwork. An attorney or settlement agent will guide you through the process. When you’re done, you’ll collect the keys and you’re finally home free!

The post Closing on a House Checklist: 6 Things Home Buyers Must Do Before They Move In appeared first on Real Estate News & Insights | realtor.com®.