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How To Negotiate an Offer on a Home in the Age of Coronavirus

April 9, 2020

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The real estate market—and daily life—has been completely upended in just a few weeks. Yet maybe in spite of it all, you’ve managed to find a home you love and are ready to make an offer. Congratulations! But as you hover on the brink of what is potentially the biggest investment of your life, amid a global crisis, you may be feeling a fair amount of uncertainty.

We’re here to help you navigate this step with a new series, “Home Buying in the Age of Coronavirus.” Our third installment aims to help you answer the question: “How do I negotiate an offer right now?” It’ll also help you figure out how to get your offer to the closing table.

Here is everything you need to know about getting from offer to closing during the coronavirus pandemic.

How low can you go?

So how much can you lowball? Not as much as you would think.

“Banks have rolled out mortgage forbearance programs, so most sellers are not in immediate danger of losing their home, even if they just lost their job or their income has been significantly cut,” says Caleb Liu, who flips homes in Southern California with HouseSimplySold.com. “Other sellers have opted to pull their listings and wait for better market conditions, so inventory remains tight.”

On the other hand, a home seller who doesn’t have the luxury of time is facing a smaller buyer pool, due to stay-at-home orders and concerns about buying a home based on what may only amount to a virtual tour. So buyers could have the upper hand for a short time when it comes to homeowners who need to sell.

“Here in the Phoenix and Scottsdale region it’s still a very strong seller’s market with a low inventory of homes,” says Jo Ann Bauer, an agent with the Ozer Group Coldwell Banker Realty. “However, I think nervous sellers are going to be more open to price adjustments and negotiating with buyers, so there is room for buyers to be more aggressive in their offer price.”

Still, buyers should not assume that because we are in a pandemic they can automatically lowball a seller. Sellers may be more willing, however, to entertain offers on the lower end.

“While I’m not seeing lowball offers, I am seeing sellers—who may have held out for potential better offers if we were not in this crisis—quick to take offers they receive and get officially under contract,” adds Julia Henson, a real estate professional in Springfield, MO.

The only way to test a seller’s level of motivation is to make an offer, says John Grimes, an agent in Atlanta. But play it safe.

“Just remember that most sellers that don’t absolutely need to sell would rather not engage with a buyer that is seeking to take advantage of the situation,” says Grimes, who advises offering a modest discount of 3% to 5% below asking price to start a dialogue.

Be prepared for a longer closing

Ordinarily, once your offer is accepted, it’s a straight line to closing. In the age of coronavirus, that journey is more of a zigzag. That means buyers need to prepare for potential delays.

This is due to the health and safety concerns of appraisers, home inspectors, and repair contractors. They are adjusting their guidelines and availability, which can slow the transaction. (Many of these professionals are quickly adapting to doing their work remotely when possible.)

“Buyers may need to embrace a longer transaction process by setting the closing date out further than the typical 30 days,” advises Bauer.

She also recommends adding contingencies in the contract for the in-person viewing of the property.

“By anticipating a potential delay upfront and writing an extension into the contract, buyers can have a little more peace of mind in this uncertain time,” she says.

Ensure you have a mortgage commitment

Securing financing may be the biggest challenge right now, so make sure you have a mortgage commitment letter when you make an offer. This is a more detailed document than a pre-approval and, as the name implies, represents a firm commitment from your lender.

“Banks are issuing fewer loans in order to conserve cash to offset the imminent delinquencies,” says John Castle, an agent with Keller Williams Integrity Realty in Ottawa, Ontario. “Many buyers believe they have secured financing when, in reality, their lender may have only conditionally approved their loan.”

And many lenders are tightening up their terms and conditions. Minimum credit scores and required cash reserves have risen to new levels, making it difficult for many buyers to qualify.

Make sure your lender is staying on top of the fast-changing mortgage industry, says Nathan Claire, an agent at Momentum Realty in Jacksonville, FL.

“But as long as the buyer can qualify for whatever financing they are seeking to acquire, there shouldn’t be any issue with achieving a successful close,” Claire says.

Just don’t be afraid to over-communicate during this time.

“Make sure you touch base with your lender preferably every day, or at least every other day,” says Liu. “The credit markets are shifting rapidly.”

And if you have the funds, all-cash offers are even more desirable to sellers during this time, as they allow buyers to close on the home more quickly than an offer contingent on financing.

The post How To Negotiate an Offer on a Home in the Age of Coronavirus appeared first on Real Estate News & Insights | realtor.com®.

‘Sale Pending’ Explained: How Long Will It Take Before You Can Finally Get the Keys?

February 19, 2020

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If you’re in the process of buying a home, there’s no doubt you’ve seen the term “Sale Pending” or “Pending Offer” on more than a few real estate listings—perhaps even on the very home you’re trying to buy!

But how long does an offer stay in “Pending” status before the keys are handed over? We spoke with real estate agents from coast to coast to bring you the answers. But first, a little background.

What does ‘pending offer’ mean?

The terms of a pending offer can vary quite a bit. But a pending offer almost always means there’s an “accepted and binding contract” between buyer and seller, according to real estate agent Carrie George of Keller Williams Top of the Rockies. It means that both parties have signed a contract and are ready to move forward.

But there are often boxes that need to be checked (on both sides) in order for the sale to go through.

“An offer is ‘pending’ because there are some items that have not yet been completed in order for the contract to close,” explains real estate agent Chantay Bridges of Los Angeles Real Estate Now. “This can be anything from contingencies of the purchase, repairs, inspections, court approval, or reports.”

“No time limit negates a contact,” says Benjamin Ross, a Realtor® with Mission Real Estate Group. “The contract must be terminated, or adhered to and fulfilled (by both parties). Courts will decide legal disputes if the parties involved can’t come to a cooperative resolution, but until then—the property sits in limbo.”

How long do pending offers take?

In other words, how long does this crazy limbo period usually last?

“There’s no hard or fast answer, but typically if a buyer is getting a loan, the total under contract time is about 30 to 60 days,” George explains. “If a buyer is paying cash, the closing can take place in as little as a week.”

The amount of time an offer remains pending will often depend on exactly what terms each party is trying to meet, and how straightforward they are.

“In the event the contract close date is delayed for funding or repair issues, the pending status would continue until there’s a resolution— or the contract is terminated,” Ross says. “This can go on for a long time.”

The bottom line? Pending offers (on average) tend to last anywhere between a week and two months, but delays do happen. Here are a few of the most common reasons why.

Reasons why pending offers can take longer

There are a lot of mundane reasons a pending offer can just sit in limbo for months on end. Those include things like inspections, or a delay with the survey, appraisal, or even the homeowner insurance. Here are a few other issues to be aware of.

Repairs

“Repairs can definitely cause the pending status to stretch out for a longer period of time,” Ross says. “Most of the time, both parties are in agreement. However, there are times when hostility arises, and parties seek legal counsel. During this time, the property will remain pending.”

Financing issues

“Pending offers can go longer than 30 to 60 days if the buyer and seller agree to a longer term due to financing issues,” says Michelle Sloan, a Realtor with Re/Max Time Cincinnati. “One example is if a seller is building a home and requests a longer period between contract to closing in order for them not to move twice—but the buyer would have to agree to those terms in the offer.”

Missing paperwork or special loans

Missing paperwork situations include title issues, “such as a missing deed or a signature on a deed from a long-lost family member,” says Chris McDermott, principal broker of McDermott Realty.

Another thing to consider is the type of financing being used, since the red tape surrounding certain types of loans can also lead to longer close times.

“Areas where FHA, state, and local-led financing, and/or USDA loans are more prominent, are likely to have longer transaction times, resulting in longer pending times,” says McDermott.

What can you do to speed things up?

The answer might sound simple, but being organized and having a great real estate agent helps a lot.

“Having a good and attentive real estate agent can actually make or break a pending status,” says Denise Supplee, a Realtor with Long & Foster. “Throughout the sale process, both sides of the sale have tasks to complete, and often these tasks must be conveyed by the agent.”

So be sure to hire a real estate agent who has the expertise to see the deal through—both by helping you to complete your half of the contractual to-do list, and by keeping on top of the other party if things fall behind.

The post ‘Sale Pending’ Explained: How Long Will It Take Before You Can Finally Get the Keys? appeared first on Real Estate News & Insights | realtor.com®.

8 Mistakes to Avoid When Buying and Selling at the Same Time

January 24, 2019

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Plenty of people find themselves buying and selling a home simultaneously, but knowing that others have gone through the same stress does not make it one bit easier. After all, the stakes are so high: If your buyer backs out, you don’t have any cash to land your next home! Or if your own purchase falls through but your current home sells, you’re homeless!

It’s all like walking across the Grand Canyon on a tightrope: The tiniest thing goes wrong, and you fall.

Breathe in. Don’t panic.

It turns out that most buying-and-selling mistakes are easily avoidable—or at least predictable. Follow these eight tips to enter escrow with eyes wide open.

1. Waiting too long to prep your home for selling

Every home needs a little work before selling. You might need to repaint some scratched walls, fix broken decking, or add grout in a rarely used bathroom. Don’t wait until the last minute to kick-start this process, otherwise you could wind up in a bind.

Take, for example, one of the clients of real estate associate Kenneth Er. He was trying to buy and sell simultaneously. Er advised him repeatedly to start prepping the home, “but he kept pushing it off and pushing it off, despite actively looking for a new home and submitting offers.”

Once the client went under contract to buy a home, suddenly he and Er found themselves rushing to list his existing home. When they finally finished prepping, it was already October—precisely when the market was slowing down and it became tougher to find a buyer.

“I advised him—and would advise anyone—to get the little projects out of the way,” Er says.

2. Skipping the backup plan

When you’re buying and selling simultaneously, the number of moving parts doubles. And if any of those parts gets jammed, it can throw off both transactions.

For example, Miami Realtor® Juan P. Rojas was recently involved in a three-way transaction where the sellers of property A wanted to buy property B—and the sellers of property B wanted to buy property C.

“We had to coordinate two closes and three different families moving in and out of properties,” he recalls.

It worked out, but Rojas cautions: “Assume that you won’t be able to buy and sell at exactly the same time.”

And with that assumption, you better have a plan in place in case everything goes wrong. Keep your emergency fund well-stocked. In a best-case scenario, you may simply need a hotel for a week, but you may also find yourself looking into short-term rentals. Have cash on hand—in addition to your down payment funds—to survive the setback.

3. Buying too big

“One of the biggest mistakes that we see that simultaneous buyers and sellers make is the same one that many first-time buyers make: They fail to get pre-approved on their new loan,” says Orange Country Realtor Jessica Althoff.

Pre-approval is essential, because it puts a stop to unrealistic dreaming by telling you exactly what size of house you can afford.

“Buyers assume that with a large down payment and increased income, they will automatically qualify for a larger home loan,” she says. “Many do, but not as large as they think or wish. They begin the search and are disappointed when they can’t upgrade as much as they thought they would be able to.”

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Watch: The 4 Things You Must Do to Sell Your Home Fast

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4. Working with too little cushion

You know what price your house should sell for. But what if the market softens? If you’re forced to take an offer that’s $20,000 less than expected, there goes the down payment on your new home.

“Give yourself a cushion on what you need to sell your existing home for,” Er says.

If you’re hoping to use the entire sale price as a down payment on another home, move forward with the assumption your home will sell for less than expected.

One of Er’s clients set a purchase budget of $2.2 million. In order to afford his new home, he needed to sell his home for about $1.3 million. Not only did he exceed his purchasing budget, Er says, “We’re unlikely to get $1.3 million for his current home, due to the softening market and the time of the year. He’s stressed out and scrambling.”

5. Failing to compromise

Don’t forget you’re not the only human in a stressful situation. That person selling your dream home? And the buyers under contract for your current place? They’re all probably stressed, too.

So keep that in mind when issues come up—for example, if the buyers need an extra week of escrow because there was an issue selling their home, or the sellers don’t think they need to fix a leaky pipe for you.

“One mistake is expecting so much from the people selling the home, but not being willing to give anything to the buyers of their own home,” Althoff says. “A little compromise goes a long way, especially when there are two escrows (or more) on the line.”

6. Using two different real estate agents

Expect this already messy process to get even messier if you’re juggling agents for your listing and for buying a new home. Simplify things by using the same agent for both transactions.

“I would always prefer to handle both sides of your sale and purchase,” says agent Michael Pacheco. “Having control and insight over both transactions allows me to make sure that we close both homes simultaneously.”

There are two instances when you should not use the same real estate agent. If you’re moving out of state, look for a reputable buyer’s agent in your new location. If you’re remaining in the same area, you may also meet and like an agent who works exclusively with buyers or sellers — not both. In that case, ask for a recommendation within your agent’s brokerage so you can, at a minimum, keep both transactions under the same roof.

7. Closing on a Friday…

While you should work with your agent to determine the best timing, you’d ideally want to finalize the sale of your current home first, and then close on your new one. Try to aim for closings within two or three days of the other—”and never on a Friday,” says Realtor Karen Choate.

That’s because bank transfers can take a few days to go through. In order to ensure there’s money in your account when the time comes, buffer a few days to transfer funds.

8. …or late in the afternoon

When you’re scheduling those closings, aim for the morning—especially on the sale of your current home.

“Banks usually stop wire transfers by 3 p.m. in the time zone where the property is located,” says Choate. Closing in the morning allows extra time for the money to hit your account.

The post 8 Mistakes to Avoid When Buying and Selling at the Same Time 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®.