Contingencies To Ask For When Making A Purchase Offer

Contingencies are a great resource when it comes to both buying and selling a home. Both buyers and sellers tend to ask for certain contingencies to be included in the purchase contracts for a home. These contracts have a time limit on them to give both buyers and sellers time to get the things that the contracts state done. This time frame is usually somewhere in the neighborhood of several weeks’ time between the signing of the sales contract and the closing of the deal on the home.

Meeting And Removing Contingencies

During the time that you have between the sales agreement and the closing of the home, you’ll be working to either meet the contingencies or trying to have them removed. This can be done through renegotiating or having work orders completed. In some cases at this point the entire purchase may be called off.  

Standard Or Not?

Some contingencies are very common and it would be a bad choice to reject them. Buyer’s inspection contingencies, for example, are quite common. In this case, closing is subject to the approval of an inspection report. If a buyer really loves a property and is in the “desperate” category, they’ll often end up waiving this and take the home as is. Your realtor and attorney will be able to inform you of what types of contingencies are the norm. 

Some of the things that buyers and sellers see on these contracts are a little out of the ordinary or are less convenient. They become a matter of negotiation. Some sellers may ask that the deal is contingent upon them closing on another home. If you need a home in a hurry, you may want to reject this and request a time limit. As a buyer, you always risk failing to reach a contract with your seller when you ask for these changes. Anything that you’re able to handle in a contract is worth it if you really love the house, but there’s a balance. As a buyer, you can do the same, requesting a contingency that you sell your house before the new home is purchased. 

Financing 

Most standard home purchase contracts include a contingency that the buyer is able to secure financing to buy the home. There’s also a time frame for the intended financing to be secured. The only way to skip these contingencies is to have an all cash offer, which is pretty rare! 

Other contingencies that are almost a must include the inspection contingency and the title contingency. These protect the buyer in order to be sure that the home has a clean title and no major damage. These allow buyers to back out of a buying a home if there is more work to it than they thought. The title contingency also protects renters or squatters from selling a home that they do not own.

What to Do the Day Before You Complete Your Home Purchase

With 24 hours before you finalize your home purchase, you might feel a mix of anxiety and excitement.

What will it be like to finally own a home? How will the home closing process go? And what will I need to do to ensure everything goes seamlessly as you wrap up your home purchase? These are just some of the common questions that homebuyers consider in the hours leading up to a home closing.

It is important to prepare as much as possible before you complete a home purchase. Lucky for you, we’re here to help you do just that.

Let’s take a look at three tips that you can use to get ready to finish a home purchase.

1. Get Your Paperwork in Order

You may need multiple forms of identification and other essential documents when you close on a home. Thus, you should put together a folder of any must-have documents at least a day in advance.

If you find that documents are missing, retrieve them as quickly as possible. Also, try to get multiple copies of important documents if you can.

When it comes to getting ready for a home closing, it usually is better to over-prepare. Therefore, if you plan ahead as much as you can, you’ll have all of the documents you need to complete the home closing process without delay.

2. Finish Any Last-Minute Packing

After you finalize a home purchase, you’ll be ready to move in to your new home. As such, you should ensure that all of your belongings are packed up and ready to go.

If you’re vacating an apartment, ensure that you’ve notified your landlord and provided sufficient notice about your upcoming move. That way, you’ll be able to finish your rental agreement on good terms with your landlord.

Also, if you need extra help for your move, be sure to reach out to a moving company or family members and friends. And if you require a moving truck, don’t forget to rent one in the days leading up to your move.

3. Consult with Your Real Estate Agent

The day before a home closing can be stressful, particularly for first-time homebuyers. If you have any concerns about the home closing process, be sure to consult with your real estate agent.

Your real estate agent likely has been a life-saver throughout the homebuying process thus far and will continue to assist you in any way possible. If you have questions about the home closing cycle, your real estate agent will respond to your queries immediately.

In addition, your real estate agent can teach you the ins and outs about what will happen before, during and after a home closing. He or she will explain what to look for during a final home walk-through, what home closing forms that you’ll need to sign and what to expect after a home purchase.

Streamline the home closing process – use these tips, and you can get take the guesswork out of finalizing a home purchase.

Pros and Cons of Buying a House

To buy or not to buy that is the question. There are reasons for or against homeownership on both sides of the fence. So here are the pros and cons of buying a home. You decide…

Pros:

1. It Costs Less- With record low interest rates, and low home prices a mortgage payment on a house can be less than a rental payments.

2. Equity -If you own a home rather than rent you are building equity. If you pay rent you have nothing to show for it. If you own a home you are building equity. Even if housing prices stay flat part of your mortgage payment goes towards the principal balance and eventually you will own the home.

Cons:

1. You Could Get a Better Money Return-A home may not be the best return on your money. You may find a better return on capital in the stock market. If you are just looking at it in a strictly financial way there are better investment strategies. Historically, the S&P 500 has returned an average of 13.4% — 4.8% higher than the 8.6% average return on housing.

2. It is a Big Commitment-You can’t just sell your house and move quickly. It is a long term decision. If you job requires frequent moves this can be a significant consideration.

Now that you have seen some of the pros and cons the decision is ultimately up to you and what is best in your circumstance. The pros cannot be disputed. Low rates and prices almost make buying a no-brainer if it fits within your financial situation.

Hidden Costs of Owning a Home

You saved all your money for a down payment on a house and calculated the costs of the mortgage but wait just a minute…owning a home also comes with several hidden costs. Those costs can add up. So before you buy your home, here are additional home-related expenses you’ll want to include in your budgeting:

Real Estate Taxes

Often your real estate taxes are included in your monthly mortgage payment but in some instances you may pay them directly. The amount of taxes you pay varies depending on the value of your home’s and the tax rate in your community.

Private Mortgage Insurance

Your monthly mortgage payment may also include PMI (private mortgage insurance). Lenders typically charge a PMI if your loan exceeds 80 percent of the sales price.

Homeowners Insurance

Most banks require that you hold homeowners insurance. Homeowner’s insurance protects from damage to the home from things like fire, theft or weather. Just because you have insurance doesn’t mean there are no costs to you remember to set aside your deductible.

While owning a home does have hidden costs the gain of homeownership is always more than the cost.

 

What You Need to Know: Asbestos

If you live in or are buying an older home you may be concerned about asbestos. Asbestos was banned in 1978 because of the health risks associated with it.

Asbestos fibers are dangerous when inhaled.  The microscopic fibers can become lodged in the respiratory system and lead to asbestosis or scarring of the respiratory tissues.

Asbestos was commonly used as a binder and fire retardant in many building products. It can typically be found in acoustical ceiling tiles; thermal insulation of boilers and pipes; steel fireproofing, cement asbestos siding and roofing; tile and sheet floor coverings.

Inspectors are most concerned with what is known as friable asbestos (easily crumbled or pulverized to powder) and often recommend it be removed. It should always be removed and disposed of by a qualified contractor. Contact the Environmental Protection Agency for an updated list of qualified testing and or mitigation contractors.

 

 

 

What You Need to Know When Looking at an Open House

The housing market has been heating up and lately there seems to be more buyers than homes. So where do you start when house hunting? Many buyers like to start at Open Houses to get a feel for the market. It is always best to try to find a real estate agent to help guide you through the buying process , however, if you want to try to get your feet wet first an Open House might be your best bet.

There are some things you will want to know about how to tackle an Open House:

1. How do you find Open Houses?

Your best bet is to find a real estate professional that represents buyers and have them help you find Open Houses that are right for you. Agents are familiar with the inventory and could save you an unnecessary trip to a house that isn’t right for you. Most open houses take place on Saturday or Sunday, so Thursday is a good day to start your search.

2. Be prepared

Plan your route, make sure you have the right directions and have plenty of gas to get where you are going. Take along a pen and paper to make notes on properties.

3. Get to know the area

The house may be great; but how is the area? Take the time to drive around the surrounding neighborhoods of homes you like and get to know the area. A real estate professional is a great resource for community information.

4. Check for agency

Most agents at an Open House represent the seller. You will want to work with an agent that is able to represent you as the buyer. If you like the agent at the Open House, and have not yet contracted with an agent, make sure to discuss agency and representation.

5. Take notes

Take notes and write down a list of quick pros and cons after you have viewed a home. This will help you remember the houses you have viewed.

Viewing Open Houses can help you get a sense for what’s out there in the marketplace. It will help you determine if the house you want and your finances match up with the houses that are on the market. It is always best to find a real estate professional to help you find the home of your dreams. Buying a home is no small matter.

Seller or Buyer Market?

If you listen to the media you will never know which way is up when it comes to the state of the real estate market. It’s not just the market that determines how a house will sell but also location, price, and condition of the home.

Like they say real estate is local. Just like you wouldn’t expect the weather to be the same in one place vs. another – the same is true about the real estate market. There are a few things you can look at to determine the type of market in your area.

1. Contact a real estate professional.

2. If you are a seller ask for a comparable market analysis on your home.

3. If you are a buyer determine the average number of days on the market in your desired area and price range.

4. Ask your agent what the absorption rate is the market your are looking to buy or sell. Absorption rate is the rate at which homes are selling.

Whether you are buying a home or selling it’s important to understand the market conditions.

What is an Interest-Only Mortgage?

When it comes to mortgages there is a lot to know and a lot of choices. One loan that was popular before the housing crisis was the interest-only loan.

An interest-only loan is an adjustable-rate loan with an initial fixed period when only interest is due. They are typically available in 5-, 7- or 10-year terms.

Economists blame interest-only loans for the foreclosure crisis citing they were issued too freely. Today, interest-only loans are more difficult to obtain. Borrowers were using interest-only loans to qualify for a more expensive home and when the interest-only term ended the payment went up leaving many homeowners unable to afford the mortgage payment.

Interest-only loans are now being used by wealthy borrowers as a financial tool to help them manage irregular cash flow, reap a tax benefit, or free up cash for investment elsewhere.

Lenders that offer interest-only loans have strict qualifying standards. They generally require 30 percent equity in a property, and a minimum FICO score of 720. Lenders also look at the ability to pay back the loan is based on the fully amortized payment, not the interest-only payment.

 

 

What You Need to Know: Adjustable Rate Mortgages

Trying to decide what type of mortgage is right for you can be tricky business. So you may be wondering what is an adjustable rate mortgage? An adjustable rate mortgage or ARM, has an interest rate that is linked to an economic index. This means the interest rate, and your payments, adjust up or down as the index changes.

There are three things to know about adjustable rate mortgages: index, margin and adjustment period.

What is the index? The index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities. Each adjustable rate mortgage is linked to a specific index.

The margin is the lender’s cost of doing business plus the profit they will make on the loan. The margin is added to the index rate to determine your total interest rate.

The adjustment period is the period between potential interest rate adjustments. For example, you may see a loan described as a 5-1. The first figure (5) refers to the initial period of the loan, or how long the rate will stay the same. The second number (1) is the adjustment period. This is how often adjustments can be made to the rate after the initial period has ended. In this case, one year or annually.

An adjustable rate mortgage might be a good choice if you are looking to qualify for a larger loan. The rate of an ARM is typically lower than a fixed rate mortgage. Remember, when the adjustment period is up the rate and payment can increase.

Another reason to consider an ARM is if you are planning to sell the home within a few years. If this is the case you may end up selling before the adjustment period is up.

Federal law provides that all lenders provide a federal Truth in Lending Disclosure Statement before consummating a consumer credit transaction. This will be given to you in writing. It is designed to help you compare and select a mortgage.

How NOT to Negotiate a Home Purchase

When you are looking at buying a home there are don’ts you should be aware of. Many times the handling of the negotiation can mean the difference in huge amounts of money. This is why it is vital to have an experienced agent on your side. Here are just a few common pitfalls to avoid.

 

Not doing your homework

Doing your homework is important in such a large purchase. Ask your agent for a list of comparable homes recent sale prices. Look to see how long comparable listings have been on the market and what the average sale to list price ratio is. This will give you the information you need when making an offer and negotiating a final sale price.

Not understanding the seller

Try to look at the deal from the opposite side of the table. A sale is typically emotional for a seller. When making an offer try not to insult the seller, offering a fair and realistic offer to purchase will typically get you further in the negotiations. If you know the seller’s motivations for selling you may also be able to offer terms that might be more attractive like a quick close or inspection.

Showing your cards

While you want to know as much about the seller as possible divulge as little about yourself in the negotiation as possible. Any knowledge the seller has about your motivation can be used as leverage in the negotiation.

Getting your heart set

Buying a home can often be an emotional process. Identify several properties you’d be happy with as well. Be careful not to get your heart in the way of your head as it can sometimes hinder the deal.

Trying to win

In a sale there needs to be two ingredients: a seller who wants to sell and a buyer who wants to buy. Try not to getting caught up in the game. Ultimately it is about buying a home and not winning a negotiation.