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HOW TO GET YOUR OFFER ACCEPTED

If a home is in good condition, is in a good location and priced correctly, it will likely get multiple offers. Some agents will tell you the only way to make sure your offer is accepted is to offer more money. That might not always be the best strategy.

The highest offer always gets serious consideration, but it doesn’t always win. Have your agent call the listing agent to find out why the seller is moving, where they are moving to, and if the seller has any specific requirements.

Consider the following scenario that is fairly common – Mr. and Mrs. Smith are buying a new home that won’t be ready for about 4 months. However, the builder requires that they put their home on the market ASAP. They list their home for $500,000 and get two offers. Offer #1 is for $500,000 with a 30 day close of escrow and immediate possession. Offer #2 is for $490,000 with a 60 day close and a 60 day rent-back until the Smiths’ new home is ready. So which one will they take? It depends. Let’s say that the Smiths have no kids and they have relatives in town that they can stay with. They also need every penny to buy the new home. In this case, offer #1 looks better to them. Now let’s change our example to say that the Smiths have two big dogs, three kids in school, Mr. Smith works from home, and they’d have to live in the Holiday Inn Express until their new home is ready. In this case, offer #2 looks much better, even though it is $10,000 less. To them, it may be worth $10,000 to avoid a double-move.

So do your homework to find out the Seller’s hot buttons instead of just throwing money at them!

NEW SHORT SALE RULES

Short sales have gone from being the bulk of our market to being somewhat rare. However, there are still some homeowners out there that may be considering a short sale. Not all short sales are the same. Each lender will have their own guidelines and rules. If your lender participates in the government HAFA program, there are some new rules that are very interesting.

 

When HAFA first started they would pay $6,000 to the 2nd lender. Then they upped it to $8,500. Under their new rules they will pay up to $12,000 to a 2nd lender. This should help many short sales that are “stuck” because the 2nd lender wants more than the first lender would give them.

 

The next issue is in regards to the homeowner getting money at close of escrow as an incentive and/or for relocation expenses. At first almost no lenders would allow short sale homeowners to receive any funds at closing. But then some homeowners figured out that they may be better off to just sit in the home and live rent-free for months and months and maybe even have the lender pay them “cash for keys” after foreclosure. HAFA came out with a $3,000 relocation incentive to the homeowner for a while to solve this problem. Under their new rules they’ve increased that to where the occupant (whether the homeowner or tenant) could be eligible for up to $10,000 in relocation expenses. I just got a short sale approved where the homeowner is getting $10,000 for relocation and $5,000 as a further incentive to do the short sale. (Please note that I’m not advocating whether this is a “good” or “bad” use of our tax dollars or whether this is the “right” thing to do for some borrowers. Just passing on the info so you are aware.)

WHAT DOES “AS-IS” REALLY MEAN?

Our standard real estate contract includes a clause that states that the home is being sold in it’s present “as-is” condition. Some people mistakenly think that this gives the Seller protection against having to disclose anything wrong with the home or make any repairs to the home.

 

In the past, “caveat emptor” (buyer beware) applied to real estate. This means that the Seller could sell their home “as-is” and actually HIDE major problems. The burden was on the Buyer to discover these problems. And even if they did, they were still contractually obligated to buy the home, or lose their deposit if they backed out.

 

This is no longer the case. Selling a home “as-is” today means that the Seller still must disclose any known defects. In addition, the Buyer has the right to have any inspections done at their expense. If the Buyer doesn’t like what is discovered during these inspections, they can either cancel the contract and ask to have their deposit returned, or ask the Seller to fix the unsatisfactory items. If the Seller is unwilling or unable to fix them, the Buyer may be able to cancel the contract.

 

In some contracts, the buyer will include an additional clause where the Seller agrees to provide a pest report clearance. If I am representing the Seller in this situation, I will recommend that they counter this clause out of the contract and return it back to an “as-is” situation. This means that the Seller won’t be forced to pay a huge, unexpected repair bill. However, if the needed repairs are extensive, then the Seller may need to make some concessions or do some repairs, or the Buyer may back out. I just like making it a negotiable item until we have a known dollar amount.

 

DOWN PAYMENT—THEN AND NOW

In the early 1900’s, home loans were rare. You either had to save over a lifetime, or inherit money in order to buy a home for cash. The few home loans that existed required at least 50% down. The loan itself was a balloon loan due in five years or less. Thankfully, times have changed. Down payment requirements have fallen dramatically over the years.

 

A few decades ago most lenders settled in around the 20% down payment scenario and that was the “norm” for quite a while. Then 10% down become popular, then it went to 3% down, and then nothing down, and then during the height of the mortgage mania, they’d give you a loan for 125% of the value of the property! Of course that was crazy and that blew up in their faces big-time!

 

When the real estate bubble burst, many lenders reverted back to 20% down, but even then loans were hard to get. Good borrowers were having trouble getting loans even if they had the 20% down. And many other borrowers just couldn’t come up with 20% down. So the government radically revamped their lending programs and became the “lender of last resort.” 3.5% down payment loans became abundant, although they came with higher fees in the form of mortgage insurance.

 

Now that prices are back up and foreclosures and short sales have diminished greatly, lenders are feeling more optimistic again. Yes, to get the best rates and terms with lowest fees (initial and monthly fees) you are still looking at 20% down. But if you don’t have 20% down, there are now lots of programs again for 10%, 5%, 3.5% and even 0% down. But thankfully I haven’t seen the return of the 125% loan again!

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