All About Earnest Money

What is earnest money?

Earnest money is money that shows the seller of a property that the buyer under contract is “in earnest”–serious–about the purchase.  The money is usually 1-2% of the total purchase price, and goes into an escrow account after the contract is agreed to by both parties.

 

How much should my earnest money be?

The amount that you offer in earnest money is part of the original offer that you make for the property.  It is usually 1-2% of the total purchase price, but there are some further considerations to think about when determining the amount of earnest money to offer.  If you are in a competitive housing market, offering more money could make your offer more attractive to a seller.  At the same time, you don’t want to offer an amount that is needlessly high (over 5%, as a rule of thumb) because you want to protect your assets too in case the deal falls through.

 

What happens with my earnest money?

After both parties have signed the Purchase and Sale Agreement, they are under contract and the buyer will need to deposit earnest money, usually at the title company.  Your real estate agent will tell you the timeline and remind you when and where to deposit the check.  The money then sits in an escrow account (neutral third party) until the closing, at which time it will go towards the buyer’s down payment and/or closing costs.  Do not ever give your earnest money check directly to the seller.

 

If the closing does not end up happening due to buyer’s contingencies such as inspection or financing, the earnest money should go back to the buyer.  If the closing doesn’t happen because the buyer walks away at the last minute due to other reasons besides those outlined in the contingencies, the earnest money is supposed to go to the seller to offset the cost of having lost time that the house could have been on the market.  However, cancellation fees might need to be deducted from the earnest money deposit if the contract is voided, and both parties will need to agree on how the funds get disbursed since it’s held in trust.  Disagreements on where the money should go can result in further complications and legal fees, so it is best to have representation from a professional real estate agent who can speak authoritatively on your behalf.

 

As an experienced real estate agent, I will know exactly how to guide you, whether you’re on the buying or selling side.  I will help you understand the contingencies in place on your Purchase and Sale Agreement, and how they affect your decision-making timeline.  My knowledge will ensure that you avoid pitfalls that can come from mishandling earnest money, for a smooth transaction from contract to closing!

 

 

Three Things to Prepare Your Home for Sale

So you’ve decided to put your home on the market.  You know you’ll need to prepare it for showings, but where to begin?  It can all seem so daunting and exciting–here are some tips to help you think about the ways you can approach the showing preparation.

 

  1. Clean.  It seems obvious, but there are many layers to the kind of cleaning that will really benefit you as a seller.
  • This is your opportunity to help buyers see your home in its best possible light–literally!  Windows should be clean so that maximum light streams in.  
  • Places where dust settles like ceiling fans and baseboards should be wiped down.
  • Decluttering will help buyers envision their own personalities in your space.  Take down the kids’ art projects and family photos.
  • Closets will get peered into by buyers, and scrutinized!  Make sure they’re clean but also seem accommodating–organize them and leave them half empty to show off storage space.
  • Use brand new kitchen and bathroom towels and bathroom rugs.   
  • Make sure the front entryway (outdoors) is cleaned, de-cluttered, and plants are trimmed and weeded.  The first impression is a powerful one.
  • Remember–a clean house feels like a bigger house!  If you’re still living in the home, remove half of your stuff.  Then, go back and remove another half.
     

  1.  Consider your furniture.
  • Furniture should be the appropriate size for each room.  Anything too big for a room will make your space feel smaller than it is.
  • Furniture should not block the flow of movement between rooms.  Try touring your home yourself.  Do you find yourself stepping around any furniture that feels in the way?  Move it!
  • Furniture is an opportunity to show how rooms can be used and get people inspired about the space your home has to offer.  Sure, there’s the obvious dining table or bed.  But perhaps you could also show a reading nook or mini office.
     

  1.  Think about sensory details.
  • Buyers don’t just shop with their eyes.  Do everything you can to address other sensory experiences that buyers will have in your home.
  • Use decor to highlight assets: a bright vase of flowers to set off the kitchen island or pretty pillows on the window seat.
  • Smells can be tricky.  You don’t want to give the impression that you’re concealing something, but you also want an appealing aroma.  Many people bake bread or cookies to add that irresistible touch.
  • Comfortable temperature.  Buyers should feel cozy in winter.  You’ll have them remove their shoes (because this is a nice house and worth it!) and you want them to feel at home in their stocking feet.  In summer, try to maintain good airflow.  And use a dehumidifier if your house feels damp.  It will help with the smell and temperature.       

 
Preparing your home for sale can seem overwhelming, but if you break it down and think about these three themes, you’ll be well on your way to a successful sale!  Remember that the number one thing to do to prepare yourself for your home sale is the enlist the support and input of an experienced real estate agent.  Let me be your guide!  

Closing Disclosure for Buyers

You’ve shopped, chosen a property, negotiated, renegotiated, inspected, renegotiated, and arrived at closing! Congratulations! Once the detailed work of settling on a contract is finished, all you have left to do is work with your lender to ensure funding. After you’ve provided all necessary supporting documentation for the loan, one of the final steps (required by law) is that the lender has to provide you with a Closing Disclosure at least 3 days prior to the closing.

The Consumer Financial Protection Bureau has streamlined the Closing Disclosure that buyers receive prior to signing on a loan. The hope is that this new delivery of information will protect consumers and help them understand the details of the loans they are taking on. Take the 3 days provided to review the CD and compare with the loan estimate from your lender.

Check out this website for a full description of the disclosure. You can move between “check details” and “get definitions” to completely understand the CD. Expand the boxes along the right column to read more details:

http://www.consumerfinance.gov/owning-a-home/closing-disclosure/

As always, I welcome any questions you might have about your closing.

All About Short Sales

 

What is a short sale?

A short sale is when the seller of a home is “upside down” in their mortgage and is trying avoid going into foreclosure by selling the home before the bank takes possession of it.  The seller will need to get the bank to agree to accept less money for the home than what they owe on the mortgage.  

Who benefits from a short sale?

Different parties benefit in different ways.  The lender avoids the expensive repossession process that they would have to undergo with foreclosure.  The seller avoids the negative ramifications to their credit score and the possibility of having to file for bankruptcy.  Buyers can potentially benefit from a short sale by getting a home they couldn’t otherwise afford, or entering into a market they couldn’t otherwise afford.  But buyers should be cautious of the potential pitfalls of a short sale, and should always have the help of an experienced real estate agent when attempting a short sale purchase.

What are the pitfalls of short sale transactions?

There are several things to be aware of when considering a short sale—things that make the process very different from a typical home purchase.  Remember that you are dealing with a seller and a lender, both of whom have money at stake and stand to gain from selling at the highest price possible.  Also, there could potentially be additional lenders involved.  Since all of the lenders have to approve the short sale, getting a response from an offer can take months.  A lender might never respond at all to your offer if they deem it too low, or they could respond and you could get all the way to escrow only to find out that the bank has been entertaining other offers and you’ve been beat out after spending money on an inspection and title report (this would normally be considered unethical in a real estate transaction).  

Short sale homes can also have expensive problems that arise from the seller’s lack of funds to maintain the home.  Typically, the seller has been living in the home (as opposed to foreclosures) and so it will be inhabitable.  But problems related to neglect can become costly.  This is why it is important to get a home inspection.

Keep in mind that the home is likely sold “as is,” meaning that the lender is not looking to give the buyer credits for home repairs or do any home repairs prior to selling the home.  They are unlikely to lower the price based on the inspection report nor will they be paying a buyer’s closing costs.  However, it is still appropriate for the contract to have an inspection contingency and for the potential buyer to be able to back out of the deal based on the inspection report.  The details of this part of the contract will be something that an experienced realtor can help you with.   

What if I still really want to buy a short sale home?   

Perhaps you’re thinking, “The home I love just happens to be a short sale.  I still want to go for it!”  You’ve already taken an important step by researching the details of a short sale and understanding what you might have to look forward to.  You’ll want to take some additional steps to protect yourself and have the transaction go as smoothly as possible:

  • Find out if the short sale has already been approved by the lender.  Even if it is listed as a “short sale,” the bank might not have approved it as such.  If the sale has not been approved yet, this can add approximately two months per lender involved to the process.
  • Make sure you have your financing in order.  Cash offers are best, but preapproval with a large down payment and flexible timeline will make your offer more attractive.
  • Get an inspection.  Be prepared to take on additional costs for problems and maintenance that arise from the home having been neglected.
  • Keep looking for other properties—the bank might be keeping their options open as well.  Ultimately, if you find a home that you can buy directly from a seller, that process will probably be much easier.
  • Do your own market research.  Just because a home is a short sale does not mean that it is priced cheaply.  Understand the market in the listed home’s area.
  • Most importantly, hire a real estate agent who has experience in short sales.  Having the help of an experienced professional like me will be crucial in navigating this complex process and will ensure that all of the above items are addressed.  

 

Why you should leave your property on the market in winter

Although many people believe that the best time to buy and sell real estate is during the spring, there are many good reasons to keep your house on the market during winter months.  Here are just a few of the most important considerations to make before you pull your house off the market for winter:

 

People coming to visit their hometown during the holidays might want to look at real estate–and buy!  This means there’s an opportunity to tap into an otherwise-unavailable pool of buyers. Keeping your house on the market allows those buyers to see it.

 

Serious sellers, and serious buyers.  The cliche is that spring is the best time to buy and sell homes.  But there are also serious buyers out there during winter, and the right one might come along.  You only need one person to buy your house.  People who are forced to move due to a job or family issue are motivated buyers who need a place and don’t have the luxury of waiting until spring.  

 

Nostalgia of the holiday season.  People are oriented toward cozy indoor life and the spirit of holiday buying.  Use seasonal decorations and small touches to help warm the place up in the cooler months.  Show the house during the daylight if possible, and clean windows and use brighter light bulbs for more cheer.  You can also display pictures of your house in spring and summer so that people can experience the curb appeal you would benefit from in those seasons.

 

Your own finances.  The costs of owning the home for longer might be more than selling at a lower price.  Consider dropping the price and talk with your Real Estate Agent about this option before taking your property off the market for winter.  As with any time of year, appropriate pricing is the most important component of a home sale.

 

Less competition.  Again, serious buyers are out there.  And if there are fewer houses on the market because some people pull theirs during winter, you’ll be one of the limited options available.  You can dress up your home to make it brighter and more appealing by using light and color, but remember, it’s all relative.  Other winter sellers are dealing with the same curb appeal as you. You’ll want to be prepared for questions about utilities and heating, and do everything you can to make the house as energy efficient as possible.

 

As with any real estate transaction, I have a wealth of knowledge on this subject.  Let my experience and input guide you, and rest easy–your buyer will find you!