Buying · Inspections · Real Estate · Selling

Don't Panic

Property inspections are common in most real estate transactions, and are recommended even in the hottest markets. The question becomes what do you do when the inspector’s report comes back with items listed in need of repair. Whether you’re the buyer or the seller, just keep a cool head and approach the repairs logically.

Focus on the major defects. Minor repairs are not the ultimate goal of the inspection. Major repairs should be handled as soon as possible, in order to avoid any delays in closing.

Once the buyers have secured quotes for repairs, they should present their requests to the sellers either for the repairs or for a reduction in the selling price. The sellers may also choose to solicit quotes, and if there is a significant difference, the two parties may negotiate.

Either party may complete the repairs, but sellers who are busy preparing to move may offer a credit to the buyers so the buyers may have the repairs completed later to their satisfaction. Once agreed to, the final terms of the arrangement should be put into writing, and then signed and dated by both parties.

Whoever accepts responsibility for the repairs should have paid receipts for all of the work done. Proper documentation of each step in this process will protect each party and help ensure a smooth and successful closing.

Note: This article was originally published on this site on March 17, 2016. It has been updated reflect the current home market.

Buying · Inspections · Real Estate

Inspection Protection

You’ve found the home of your dreams, and you’re preparing to make your offer. As you consider price and terms, be sure to include one of the most critical components of the offer – a home inspection contingency. The contract should clearly identify how any reported problems will be rectified.

By including a satisfactory inspection in the terms of the contract, you give yourself three valuable options if repairs are needed. You can either:
a.) Request that the sellers complete the repairs before closing
b.) Negotiate a price reduction if you expect to pay for the repairs yourself
c.) Withdraw your offer without penalty

That last option isn’t very appealing, especially if you really love the home. However, you must be prepared to walk away if the sellers are uncooperative or the numbers don’t add up.

While the selling market was so hot these last few years, many buyers would forgo the inspection, just so their offer looked better than others, or to get the home before prices increased again. These normal or cooler markets allow you to be more financially sensible and insist on the inspection.

If the inspection proves to be a deal breaker, don’t sweat it, because there will be other comparable homes for your consideration. Chances are, though, that repairs will be minor and the sellers will be happy to cooperate.

Buying · Financing · Real Estate

Make a Strong Offer

Here are two terms buyers should understand when making a home purchase: “down payment” and “earnest money deposit.” They both involve money, but represent two different aspects of a home purchase.

For simplicity, let’s say a home is priced at $750,000. By financing 80%, the down payment would be $150,000, payable at closing. When making such an offer, it is assumed that the buyer has funds on hand for at least the down payment.

The “earnest money deposit” is a different story. Earnest money is paid at the time a purchase contract is signed and is negotiable. The terms under which the buyer’s earnest money can be forfeited are specific to each individual contract.

If $150,000 is on hand for a down payment, the buyer could reinforce the purchase offer with a $15,000 deposit. Buyers who offer only $5,000 or $10,000 are unknowingly broadcasting a message that perhaps they are not totally committed to complete the transaction.

When buying your next home, let sellers know you mean business. The larger your earnest money deposit, the more credible your offer becomes to the property owners.

Real Estate · Selling

Up On The Downsize

For any number of reasons, more people than ever are downsizing these days.  Whether it’s reduction in income, reduction in family size, or just a desire for easier living, smaller homes are becoming more attractive.

There are challenges associated with downsizing, but experience has taught some valuable lessons that you may find useful.  Once you’ve decided to sell, start the moving process immediately.  Your home will even show better once you’ve begun packing things away.  As you decide what to keep, consider donating unwanted items or holding a yard sale.

Solicit family members for help, and see how many belongings might be passed along to family and friends.  After all, they say that charity begins at home, right?

You can also “digitize” paper records with a scanner, saving them on your computer, or using an online storage service for an added layer of security.  Just be sure electronic versions of certain records are legally acceptable.

If you’re still left with a lot of furniture and accessories, you should strongly consider including such items in the listing for your home.  First-time buyers may be particularly attracted to such an offering, saving them time and money on furnishing their home, and expediting the entire transaction.

These tips may help you downsize, but of course, any move presents its challenges.  Speak with an experienced real estate professional today for more advice.

Real Estate · Selling

Don’t Rush To Judgment

You’ve analyzed home sale data provided by your real estate agent.  You’ve priced your home fairly based on those recent sale prices.  You’re feeling good about your asking price.  Now, however, you’re confronted by a solid offer at $6,000 less than you’d expected.

Don’t rush to judgment. Avoid the temptation to deliver a flat “No!” as your answer.  There may be more to the offer than meets the eye.  For example, say you’ve been transferred from here to several states away.  You’ve rented a home there temporarily while waiting for a sale.  Meanwhile, you’re paying rent there and a house payment here.  Six months in that situation and you will have blown at least the $6,000.

What if a buyer offers $3,000 less, but says he will pay all closing costs?  Your agent had already prepared you to pay up to $4,500 in closing costs.  Accept this offer and you’ll receive $1,500 more than expected!

Another buyer makes an offer 10% under the market.  You’re furious, but instead of rejecting the offer outright, you counter back at full price and he accepts.  He was just testing your resolve.

Buyers have many reasons for making offers.  They believe their offer is realistic.  Quite often, by keeping a cool head and exercising patience, those offers may be converted into acceptable home sale transactions.  Avoid the outright rejection of any offer until all the facts are in.

Real Estate · Selling

Do the Math

After all your preparations and marketing efforts, what do you do when you get that first offer? Don’t jump for joy or wallow in disappointment until you’ve read all the terms. Price is just the beginning, and other contingencies will ultimately affect your bottom line.

In reviewing the offer, pay attention to seller concessions, which can range from asking you to pay closing costs to including an allowance for roof repairs. Buyers may also request inclusion of certain articles of personal property not physically attached to the home. This might include the refrigerator or pieces of furniture. You can decline or accept the terms, but it’s best to establish in your listing those items included and excluded in the sale.

Mortgage and appraisal contingencies indicate that the buyer will seek financing at a certain rate and terms, and that the appraisal must satisfy the lender. Make sure that all of the terms are realistic, and that there is a reasonable time limit for the buyers to secure their financing.

These and other terms in the offer impact how much you net from your sale, regardless of what actual buying price is stated. It’s possible that a “full price” offer could result in thousands less than a lower offer with fewer contingencies, so please consult with your Realtor before listing and before accepting or rejecting any offers.

PDF Download: Do the Math

Note:This article was originally published on this site on March 28, 2012. The text has been updated and a PDF version added.

Buying · Financing · Real Estate

The Lingo of The Loan

Your real estate agent may not write your home loan, but that’s who will probably be there when you begin discussing mortgage options.  Knowing some of the nuts and bolts before you start your home search can help you find the right loan.

Factors affecting your terms are the amount, the length of the loan, and the loan-to-value ratio (how much of the home’s value you are financing).  Larger loans carry more risk to the lender, so the interest rate may be higher.

Similarly, a smaller down payment represents more risk, possibly warranting a higher interest rate.  Get the best rate by putting down as close to 20% as possible.

The difference between a 15- and 30-year loan is also critical.  Payments for a shorter term will be larger, but you’ll build equity much faster, and enjoy a slightly lower interest rate.

Also understand the workings of an adjustable rate mortgage (ARM).  You need to be fully prepared for what may happen to your payments after the first adjustment.  However, something like a 5/1 ARM (a fixed rate for five years and an adjustment each year thereafter), could be a good idea if you’re buying your first home and don’t plan to stay longer than five years.

Discuss your hopes and objectives with an agent, who can help guide you down the road to homeownership.