HOUSING MARKET ADVICE (Borrowed from a fellow Realtor)

If you plan on buying a house this year, please pay attention. Sellers aren’t willing to pay a penny towards closing costs and EVERYTHING is selling well over asking price. Please save up and be able to pay your own closing costs. (2-4% of purchase price and will be explained in more detail below ).

Buyers are getting their offers accepted everyday but if you want to be one of them, you have to submit your highest and best offer! Bring your game. So how much money do you need?

Let’s break it down

Earnest money - 1-5% of the purchase price or more if possible. If you want to let a seller know that you’re serious, you have to have some skin in the game.

These funds will be deposited right after the offer is accepted (within 2-3 days) and they will be held in an escrow account.

Upon closing, these funds will go towards what you owe at closing and show as a credit to you on the closing disclosure.

Remember, you’re probably competing against a few 100% cash offers.

Inspection - ($400-$600)

Some buyers are waiving inspections, so the shorter the inspection period the better.

Appraisal - ($500-700)

This is how the bank/lender determines if the house is valued at the purchase price amount.

The lender isn’t going to finance more than a house is worth so if you’re feeling froggy and want to jump well over asking price to win the deal, make sure you have some extra cash to cover an appraisal gap.

Example: home is under contract at $500k but appraises at $485k, the appraisal gap is $15k and you would need to add that to your down payment amount.

Many winning buyers are waiving the appraisal contingency or guaranteeing a dollar amount over a low appraisal and they provide a proof of funds statement to the Seller.

Closing Costs and Prepaids - (2%-4% of the purchase price). These are the fees that are associated with your home purchase. These include lender fees, title and escrow fees, taxes, prepaid homeowners insurance of one full year plus 2 months of payments to be held in an escrow account with your lender.

Down Payment - This amount depends on the type of loan that you have.

3.5%-FHA loans

3%-20%-Conventional loans

VA (Veterans) - ZERO money down

USDA - ZERO money down

Condos/Investments/Second homes are typically 20%+.

And one final point from me: You need to sell to buy? That’s almost impossible in this market. Get the home you're selling under contract first (and the good news is that it will likely sell quickly!)

If you're the seller, use a power move and ask for a 60-90 day close so you have enough time to find and buy your next Home. Note: An alternative would be to negotiate for a post-closing occupancy.

Final Note - If you think it’s not a good time to buy a Home and you want to wait, please don’t wait long. Interest Rates are still historically low (but rising) and Home values are only going up.

Chances are, you will pay a higher interest rate and a higher price if you choose to wait. Which means less Home for your hard-earned money.

Owning a Home is such a great feeling and accomplishment and you will be paying off your OWN mortgage instead of your landlord’s.

In the best of best worlds, Real Estate transactions run smoothly, no hitches, no delays. Unfortunately, that is not always the case. At times closings get delayed or, worse case scenario, terminated, particularly residential, with either the Seller or the Buyer initiating the termination.

More often than not, its the Buyer initiating. The reasons vary from unfavorable home inspection results, deal-breakers found in the covenants, Title didn't clear, property didn't appraise at or above sale price, Buyer's expected terms of financing fell through, Buyer's contingency of their own home sale fell through. There's also the unexpected death or severe illness/accident with one of the parties or a family member, job transfer/relocation fell through, etc.

I also know of a contract being terminated within a week of acceptance when the buyer (who contracted site unseen) discovered information provided by the Listing Agent was false, i.e. basement wasn't a walk-out, the square footage of living space included the 2 car garage, there was only one full bath, not 3.

The good news is that when a Real Estate contract is terminated in good faith and both parties have signed off on the earnest money release form, the Buyer can expect to receive the earnest deposit in very short order.

But what if both parties didn't sign off? What does the holder of the earnest deposit (usually a Title Company) do?

There is not a set in stone protocol across the boards for all Title/Escrow Companies with regard to the release of earnest deposits when either party has failed to sign the release. They have their own policies. Depending on whether or not recourse actions have been taken or are in progress, some hold it indefinitely until both parties agree (I came across more than one that still had funds from 7-10 years prior), some default automatically to the Buyer after several months of holding it, some to the Seller.

Whatever the case may be, you owe it to yourself to perform your due diligence and read the fine print on everything related to the property sales contract and for Sellers, that includes the Listing Agreement. Note: Some Listing Agreements have a choice of clauses regarding the earnest deposit on a terminated contract if awarded to the Seller. One is that the Realtor would get half of it, another the Seller gets the entire sum, and yet another is a fill in the blank on the amount/percent.

In speaking with a lot of Realtors I found that in many cases the Buyer forfeits the earnest deposit even if they terminated in good faith. Apparently some they don't consider it worth their time to pursue recourse. And some who do consider it worthwhile, will go to their Attorney, usually at considerable cost, and have them assist in getting it returned to them.

My advice, in addition to performing your due diligence right out the gate, is to not waive your right to recourse and if something goes awry on the contract, seek mediation as your first option to resolution. Its relatively inexpensive and has a very good record of success (about 85% of cases resolve with mediation). Note: You are also welcome to involve your attorney in the Mediation process if you so choose.

In this day and age of online selling and purchasing, there is concern over the safety and security of conducting real transactions via Amazon, Zillow, Self-Directed IRA Real Estate Investment Companies and other online sources.

More often than not, an individual seeking to purchase or sell real estate is not educated on the process and is "flying blind" so to speak.

In my professional experience, nearly one-for-one, any upset over a real estate transaction can be traced back to the client/customer not knowing and/or not understanding the procedure.

By survey the two most important qualities that clients look for in Agent representation are trust and good communication. These go hand in hand, i.e. if the Agent is not communicating when he/she should be, clients tend to get anxious as they want to be kept informed. They need reassurance that they are in good hands and that their Agent has their back.

That said, it is far better to go with a Realtor (R) than a Real Estate Agent and do the transaction in-person rather than on-line. Note: I have included a link below to a very informative article on inman.com that explains the difference between a Realtor (R) and a Real Estate Agent. Please note, any on-line transactions would not be performed by a Realtor(R).

https://www.inman.com/2016/04/04/difference-real-estate-agent-realtor-explained/

Next... What about on-line vs in-person? Honestly, I think its a no-brainer. Even if I wasn't a licensed Realtor (R), I would never, ever purchase or sell a propery on-line. But, it all depends on the person and their needs and wants as well as the risks they are willing to take.

Ask yourself, "If something goes awry, am I protected?" "And if so, what is the process and is it simple or complicated?" Please note, in an in-person transaction you have near immediate access to resolution either with the Realtor (R), the Broker, Real Estate Commission, Mediation (if you didn't waive your right to mediate) and last but not least, litigation.

As for on-line, you have never met the person and are usually clueless as to where they are located, let alone who their supervisor is or how to contact him/her. Further, the on-line "agents" are not Realtors (R) , so are not bound by any codes.
All too likely they will require that you sign waivers and non-disclosure agreements, which could wind you up in a mess with no recourse.

Personally, I pride myself in being a "relational" as opposed to a "transactional" Realtor (R). Its not about the money for me, its about truly helping people. The photo at the top of this article is one of a family I helped and bonded with. I have many more photos of them and their children. Its the relationships in my profession that bring joy to my life. The transaction simply made the introduction.

In ending, whatever route you decide to take, I strongly advise you seek legal counsel as needed and meanwhile do not sign anything that you don't understand, let alone anything that would waive your rights to recourse or free speech.