Buyer

Top Qualities To Look For in A Short Sales Agent

When searching for a real estate agent that would help you purchase your first property on a short sale, it's best to remember the three main qualities they should have: Experience, Good Reputation, and Local Expertise.

The short sale process could take as much as four to five times the amount of work compared to a regular sale. That’s why it is very important to make sure that your agent would know the ins and outs of the processes and how to make it easier for you to go through it.

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Experienced Short Sale Agent

Short sale agents are specialized real estate professionals that could help sell your home with the least amount of hassle possible. Understanding how to close short sales quickly and successfully is one of the traits that an experienced short sale agent should have. One transaction will not be the same as another, which is the case not only in the short sale but also in the real estate world. Issues requiring expertise could include properties having both a first and second mortgage, HOA liens, mechanics liens, and unpaid taxes. Without an expert short sale agent, getting these types of properties to successfully close with a clean title would be extremely difficult.

It is important to work with a short sale agent that understands various expectations from banks. Knowing the exact package to put together for each bank involved in the transaction decreases the amount of time that needs to be spent in closing a short sale. For example, expectations from Chase or Wells Fargo could be very different than what Bank of America would require. With the number of details involved, it’s usually a bad idea for a homeowner to do the negotiations for their own deal. Homeowners and buyers or investors alike should be open to hiring a professional short sale negotiator to avoid frustrations in going through the processes. Certifications for short sale agents are relatively high level compared to other industry designations. However, it’s best to look for a streetwise agent that has a higher percentage of closing short sales on top of having the actual certifications.

 

An Agent with a Good Reputation

An agent who values his reputation should make a personal commitment to giving the short sale industry a good name in serving the best interests of the buyers and sellers. Look for a short sale agent who is dedicated to his craft and looking to do more short sale business while maintaining a high rate of sales closed. Before seeking help from an agent, it’s best if you check on the client reviews, sales success rates, and experiences of previous clients.

The duration of the short sale process would depend on the strategy that your short sale agent would use. Take note that you would be spending time with your agent throughout this process so it’s best to hire someone who would always keep you in the loop throughout the process, answers your queries from time to time, and would give you the best experience in closing this short sale.

 

Local Expertise

Maintaining a good local reputation also gives authority to short sale agents because they know the ins and outs of the local communities and real estate market, making it easier for potential buyers and sellers alike to know the competition, bank expectations, and the processes that would lead to a quick short sale completion. Knowing that you’re dealing with an agent whose focus is on specific locations will give you the assurance in getting the deal done on top of insider information on what to expect within the community once you’ve purchased a property on short sale. You might even be provided with better options within the neighborhood courtesy of your trusted local short sale agent.

Thinking of Buying A Home With Cash? Here are the Pros and Cons

Can you imagine your life as a homeowner without a mortgage? It’s entirely possible if you buy a home with cash!

That’s right. You don’t have to be a millionaire or a retiree to purchase with cash. In fact, these deals are surprisingly common and provide certain advantages over those who would rely on a mortgage. 

A recent report from ATTOM Data Solutions revealed that “all-cash sales made up 29% of single-family home and condo sales in 2017.” More buyers are now opting to pay all cash for their residential real estate, especially in hot housing markets. These all-cash sales are a sign of a stronger economy since there will also be fewer foreclosures.

Likewise, according to the REALTORS® Confidence Index (January 2017), “buyers of homes for investment purposes, distressed sales, and second homes are also more likely to pay cash.”

There are plenty of situations where buyers may find paying for a home in cash is a good option: they might have a large sum of savings at hand, could have just won the lottery, or could be flush with equity as already long-term homeowners.

If you’ve ever seriously considered purchasing a home in cash, it’s a good idea to make sure you understand all the pros and cons before you sign on the dotted line.

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PROS

1. It’s a Smart Strategy in a Tough Seller’s Market

In a Redfin study, an all-cash offer ranked as the most effective strategy for winning a bidding war. It improves a competitive offer’s chances of success by 97%, proving that buying a home with cash can help buyers cut through the competition. In a luxury market, it also increases a buyer’s likelihood of success by over 400%. Yep, that’s fourfold. It can also be an advantage since it typically comes with shorter escrow periods and fewer contingencies. In hot markets where bidding wars occur, cash is truly king! 

 

2. It’s a Money Saver

Purchasing a home with cash can help you save money on many of the expenses that are loan-related, including closing costs, lender’s title insurance, and other fees that lenders usually charge to take out a mortgage. Sure, there are expenses you need to deal with, such as processing and filing fees and title insurance, but these will considerably be lower compared to when you get a mortgage. 

Since closing costs can equal to about 2-5% of the purchase price of a home, a buyer who pays with cash can avoid many of these expenses. 

 

3. Save up on Mortgage Interest

And speaking of savings, not getting a mortgage loan means you won’t have to pay mortgage interest for the next 15 or 30 years. Even if the current interest rates are low, paying interest tied up to the loan can cost homeowners thousands of dollars. A cash purchase can save you this additional cost, and you can add up the money you saved into your savings, retirement fund, or other investments later on.

 

4. Streamlining the Sales Process

Because a lot can get in the way when a buyer is getting a mortgage, an all-cash purchase tends to close sooner or faster because there’s lesser paperwork and no lender involved. Buyers and sellers will avoid encountering any delays related to a subpar credit score, mortgage approval, or even a poor home appraisal. It can assure both parties that there will be fewer things that can go wrong with the deal. 

 

5. Can Provide You Extra Peace of Mind

Without a mortgage, you can live your life without worrying about monthly payments. For many home buyers who gave an all-cash offer, this reason alone is enough because it gives them security and peace of mind. 

Even if you lose your job or things turn bad financially, you’re assured that you won’t foreclosed on because you already own your home. Also, all you need to pay on a monthly basis are the property taxes and homeowners’ insurance. 

 

6. Get Around Bad Credit History

Getting approved for financing can be quite a challenge for buyers who have less-than-stellar credit but otherwise have a steady income and a considerable amount of savings. Paying a house using your hard-earned cash can save you from the hassle of the mortgage process and the need to worry about your credit history.


CONS

There are, however, some disadvantages to an all-cash offer:

 

1. Limited Liquidity

Buying a house with cash could seriously limit your liquidity since you’ll be paying a huge amount of money upfront. This is why home buyers are only recommended to give an all-cash offer if they will still have money left for emergencies. 

 

2. Possibly Limiting Your Investment Opportunities

If an all-cash home purchase means tying the majority of your money into just one asset, then this is another important thing to factor into your purchase consideration. 

Even billionaires, including Facebook founder Mark Zuckerberg, prefer the mortgage route when they are more than capable of paying for their house upfront. They understand the value of a diversified investment portfolio.

 

3. Say Goodbye to Mortgage Interest Tax Deductions

One of the most popular financial incentives that attract buyers to is the major tax deduction from mortgage interest. But if you’ve paid your home with cash, you won’t be eligible for this tax benefit. A home paid for in cash becomes ineligible for this advantage. However, by the same token, not paying for mortgage interest is already a huge advantage.

 

4. It Takes Two to Tango to Streamline The Purchase Process

Because cash offers can close faster due to fewer contingencies and no mortgage delays, it can be a challenge if the seller is not yet ready to completely move out or they still haven’t found their next place. It can put the seller in an awkward position if their home sells faster than they initially thought. 

 

5. An All-Cash Home Purchase Won’t Contribute To Your Credit Score

Despite the hassle that comes from making mortgage payments psychologically and financially, your personal credit can actually benefit from these contributions. Having a long history of timely payments can positively impact your credit score — one thing you can’t get if you’ve paid your home with cash.

 

No matter the climate of your housing market, always consider the following before making your investment: What is our financial situation? What are our long-term investment strategies? Can we really afford to tie up so much money into one asset?

Buying a home can be your biggest financial commitment — more so if you’re paying with cash upfront. Aside from the home purchase itself, it’s smart to consider the other costs associated with homeownership and how exactly this will affect your finances.

Should You Hire A Realtor When Buying New Construction Home?

There are unmistakably unique allures built into every newly constructed home: the window for personal customization sits open, wide as it ever will. A bevy of brand new appliances, amenities and of-the-moment upgrades come ready for you and your family to experience. Lest we forget the most fundamental pull—there’s the personal privilege to christen it yours, first.

If you’re wondering whether you can employ a real estate agent for a newly-built home purchase, the answer is an unequivocal “YES!” While the developer’s agent will be always ready to assist potential buyers, you're definitely going to want an expert of your own ready to represent your side of the deal. Suffice to say purchasing new vs. purchasing resale is a whole other ballgame, one requiring a buyer’s agent to successfully navigate complex headwinds, and protect your involvement at every step. Let’s break this down for a closer look.

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The Builder’s Agent vs Your Real Estate Agent

The Builder’s:

It’s important to identify who’s on what side of the transaction, along with the roles each person plays. In this situation the builder plays a dual role also functioning as the “seller.” The agent representing the builders sales office functions as that builder/sellers agent. It should go without saying the primary duty of this agent is to generate sales for their builder. Consequently, the agent's attention won’t be devoted to your best interests, but that of the builder. 

While price negotiations with this agent (especially without your own agent) are bound to produce some spirited discussions, you can in fact rely on them for some valuable information. Builder agents can be a wealth of knowledge on things such as background details on home construction and housing development in regards to a newly built home.

Your Agent

Your realtor is your personal advocate. Not only will they ensure you’re aware of your rights at the table, securing the most value out of your budget is of top mind. These benefits and more all come together making for a relatively painless purchasing process. 

Should you decide to move forward on a new home purchase working with an agent, make sure to disclose this detail to the selling party on your initial visit to the model home. It’s ideal to clarify upfront that you will have a representative, and that the builder agrees to this. This is good to remember because most builders require a serious buyer to be accompanied by a real estate agent on their first visit.

 

Here are some of the biggest reasons why you should hire a real estate agent to represent you:

A real estate agent will round out your knowledge of the builder, the home and its construction quality.

While the builder’s agent is unquestionably knowledgeable there’s a risk in relying solely on their word. You may likely be getting just a narrow, potentially biased perspective of a fuller picture. It isn’t for lack of insight, but more-so about what can sometimes get lost in a property breakdown. An experienced real estate agent will be well familiar with every major area builder and their work quality, cluing you in on things that may have been omitted from the seller agent. If you’re at all unsure of where to buy, a qualified realtor can recommend the right builder and neighborhood for you.


They will help you make the right choices according to your budget.

Especially if you’re a first time home buyer, purchasing new construction can not only be overwhelming, but expensive to boot. Considering the endless array of upfront upgrades and modifications to choose from your agent can help guide you through the personalization process, delivering the best options for your budget. From floor plans to the latest amenities, you can think of your realtor as your personal shopper here. They can make informed considerations on items better to install at present, versus items that are easier to improve upon in the future. An added bonus: if you’re thinking about selling your property a couple of years down the line, your realtor can appraise you on the features and amenities likely to attract future buyers in the long-term.


They're your negotiator.

An experienced agent will come into talks knowing prior what “is” and “isn’t” on the table for discussion. In this approach, your realtor can better broker on things such as paint color, style of utilities and even closing costs. This is especially valuable since builders are far more likely to negotiate on fees or upgrades than they are on the purchase price of the home. It’s important to note, varying builder by builder, whether or not one is even willing to negotiate. Your agent will act as your guide through all of this, additionally making you aware of any “builder promotions” available to take advantage of. 


No realtor fees on your end.

That’s right. Hiring a realtor to buy new construction comes at no cost to you since the builder will be the one paying your agent’s commission. Builders rely on outside agents to bring clients to them. As such, they view commissions as part of their cost of doing business, usually adding it into the marketing budgets of the homes. However, this doesn’t mean the builder would credit you the commission should you forego a realtor; they would much rather dole it out to an agent on your behalf. Builders are also unlikely to reduce the price of the home because it sets the comparison price for future home sales in that neighborhood.


Your realtor will help you set and oversee a home inspection.

You may be thinking, “Why do I need a home inspection if it’s a newly built home?” Well, even with the best construction, using only the best materials, contractors, etc., new homes can still have their fair share of defects just the same as resale homes. The builder’s agent is unlikely to push for or offer up an inspection, likely because the builder doesn’t necessarily want to inspect it themselves. You may be thinking you  can depend on a new home warranty to cover unaccounted for issues despite this, but let’s just say we wouldn’t hold our breath on that.

It’s up to you and your real estate agent to set up a home inspection. An excellent realtor has connections to multiple independent inspectors who will work in your best interest. Your agent will help you set up an appointment then review the inspection report to identify potential areas of negotiation with the builder. Also, it’s best to attend the walkthrough with your agent so they can help spot errors on the new home. 


What you see is NOT what you get.

You might be amazed when you tour the model home and see top tier granite countertops, upgraded appliances, crown molding, rough-in plumbing—you name it. However, it’s prudent to remember that the model you visited is not necessarily the home you’ll end up purchasing. That model is worth more than the base price being advertised precisely because of all those amenities. In this case, keep that old adage in mind. Like buying a new car, your home could feel distinctly different from what you see on the showroom floor. 

With the help of your realtor, you can differentiate between base price and whatever comes at the cost of an upgrade. With this you can accurately price compare between a model brimming with every possible bell and whistle, and a more sensible option, possibly with a little less flash, but a healthy amount nonetheless.


Your realtor is also your contract and paperwork guru.

Be honest, how familiar are you with real estate contracts? Unfortunately, every real estate purchase involves some level of exhaustive paperwork that can not only be confusing but also very intimidating. When buying new construction, you will have to sign a builder’s standard contract, which covers all the pertinent details of a new-home purchase. Your agent, being an expert in the industry, will review any contracts you sign to ensure everything is in order, and most importantly, that you are protected. They will guarantee your comfort and understanding pertaining to every aspect of the agreement. Whatever has been agreed upon by you and the builder (fees, timelines, upgrades) a realtor is going to ensure it is incorporated into the contract. Moreover, they will make sure that all other paperwork is reviewed and filed correctly for a smooth transaction.


They can recommend financing.

A builder will typically have a preferred lender and will even offer incentives to ensure a buyer works with that lender. This reassures them that the buyer is a good credit risk. However, the smartest thing you can do is to shop around and find the best loan that works for you and your situation. Your agent can help you with your search by exercising their rolodex of connections, partnering you with only the most reputable of lenders and letting you compare rates. At the end of the day, you will need to find the best loan for you and not for the builder—an agent is a great resource to rely on.

Turning Foreclosure Homes Into Profit

Do you find yourself attending open houses or looking in the classified ads when you're thinking of upgrading to a new house? You might even have a real estate agent's number handy so you could have them show you new homes. But have you ever considered checking on foreclosure listings? Rather than paying the market price of a new home, you can opt to buy a foreclosure that just needs a little TLC. You might even get a good bargain on the house, ending up with a home that would be worth much more than what you paid for it.

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If you've been following the real estate market trend then you’ve observed the rise in foreclosure inventories. An increase in foreclosures is an opportunity—that is if you're willing to put money and time into purchasing foreclosures to have it rented out or flipped—buying and selling in a short period of time without actually living in the home. Now is a great time to invest in foreclosures, however, just like any type of investment you must do your research and consult an expert before you dive in.

Take note that not every foreclosed property would be a great deal. Profiting from foreclosures can't be guaranteed and if you want to get into the business you must approach the process carefully and always know when to drop the sale. The time that you have to retain the ownership on the purchased foreclosure may vary by the demand for houses in the location. Learning how to profit from a foreclosure requires you to determine how to add value to a property and effectively budget the purchase price and repair to maximize your profit.

There are four things that you should check out before diving into the process of profiting on a foreclosure. First, you should have a list of foreclosed property or properties that have potential. Next, research the area pricing and the demand for real estate properties in the market. Of course, you have to consider your budget from purchasing the foreclosed property to renovating it. Lastly, you have to find a reliable contractor that would take care of all the renovations and ensure that the foreclosed property could be listed back to the market.

Once you've decided to try out profiting from foreclosure properties, here are five things that you need to keep in mind throughout the process:

1. Start Now, Revisit Later

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Even if you're not yet ready to start investing in foreclosures, it's best to prepare ahead of time. Start tracking distressed properties now to give you a practical idea about the workings of the foreclosure process. You can attend foreclosure auctions to see how the buying process works. In these auctions, you can also get a chance to talk to other investors to discover how they have profited from buying and selling foreclosures as well. It may get too overwhelming so you might want to consider finding a knowledgeable local real estate broker who specializes in foreclosures. Some brokers work with banks that have foreclosed homes in their inventories. They could help you find repossessed homes a little more easily than just waiting for another auction.


2. Get Local

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Take advantage of being in the know of foreclosed properties in your area and start preparing before other real estate investigators get wind of the distressed property. Foreclosure properties which have been mentioned in public records, advertisements, and real estate listings attract investors into diving head first to get the deal. Being a resident of the area, you could get dibs on the property, review the price that the investor bought the home for, how long he held the property, the amount it sold for and when it was sold, long before the information becomes available in the county clerk's or country assessor's office.


3. Rent or Sell

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Check out the foreclosure property if it has been vacant for a long time. Chances are, damages may have worsened over time or it was vandalized by the former owners if they have been forced out. Depending on the location of the property, you should find out if the home has been winterized causing bad pipes and other problems. After assessing scopes for fixtures, decide whether you want to buy and rent out the property or repair and sell it as quickly as possible.


4. Calculate for Repairs

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Before the foreclosure sale, it's high time to contact the homeowner of the distressed property. While there is not much competition to deal with at this stage, going with this strategy would have the homeowner give in and get rid of his debt in whatever way he can before the tedious foreclosure process begins. Advanced assessment of the property would allow you to budget for repairs up to a certain degree of cosmetic touch-ups. Take into consideration the hiring of contractors when you plan for repairs.


5. Set Your Limits

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You might get carried away in winning your first bidding war leading to spending more than what you had intended to. Always consider at least 20% in profit when setting a price after bidding and repairs costing estimate. Also, since you're still a beginner, focus on one property at a time and learn to test the waters before venturing on the next opportunity.

 

Foreclosure investments are a fast-paced environment and may make you feel that you have to move quickly to not lose the opportunity. However, if you're just trying out foreclosure investment as your new venture, it would be best to be cautious with your steps to not incur substantial losses on your first try.

Millennials and Young Homeowners: Here’s Your Guide To Building Home Equity

Owning a house and having good credit at the same time? In this economy?

What if we tell you it’s possible? It’s common for young people—those who are below 35 years old (also known as millennials)—to complain about not having money. And typically, they attribute their woes to a poor economy.

What people don’t know is that they can actually create wealth through homeownership! How? It isn’t exactly free money, but it’s almost just as easy. You’ll just have to build your home equity.

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Home Equi-what?

Equity, specifically home equity, pertains to how much of the property you actually own. This is usually expressed in percentages, and is basically how much of the property’s selling price you’ve already paid for.

If you just bought a home, for example, you’ve probably made a down payment. If this down payment is 5% of the seller’s price, your current home equity automatically becomes 5%.

If you’ve owned the property for a while, you may calculate home equity by subtracting any outstanding home loans you have from the property’s current market value.

So where’s the additional wealth? After paying your down payment, you still have to pay off the property’s outstanding balance. This means that you have time to increase the value of your property, and even improve your credit while doing so.

 

How to Grow Equity

Unlike debt and other expenses, as a homeowner, an increase in home equity is a good thing. Why? Because you are improving your credit through the home’s market value, your diligence is paying for your mortgage, and you’re gaining true ownership of your home.

Here are some ways that home ownership can create wealth for you:

1. Appreciate Your Home

And we’re not just talking about your sentiments towards your home. This refers to ways you can increase your property’s worth.

Like they say, buying a home is an investment in itself.

a.   Rising Home Prices

Before you even buy a home, check the surroundings. Is it accessible? Are there upcoming developments in the area? Is the market doing well? These factors can increase your home’s market value effortlessly, consequently affecting your home equity.

b.    Home Improvements

If you can, try upgrading areas of your property! Consider adding a shower in the downstairs bathroom, installing a newer stove and fridge, or maybe even planting some trees on your property line.

While these improvements may cost you some, they benefit you by increasing your home’s property value.

c.     Home Maintenance

This simply means preserving the home’s livable condition, as you normally would.

A few tips include having regular repair checks on the house and around your property, and preserving unique features, like outdoor decks.

 

2. Mortgage Payments

Mortgage payments are no fun, but this expense can ultimately help you create wealth.

For starters, it is important to know that the larger your outstanding loan balance is, the greater amount of interest you pay on it. However, don’t worry; we’ve listed a few ways you can avoid this.

a. Make a Larger Down Payment

Even before you can call a property yours, you can start creating wealth by preparing a bigger down payment.

Home property down payments can be as low as 3%. But as previously mentioned, a higher loan balance means more money paid towards interest in the end. It’s also important to note that once you hold 20% equity in your home, you start saving on the cost of private mortgage insurance.

This can be an attainable goal for you, but you don’t have to pay for the whole 20% right away. Just consider a slightly higher down payment.

For example, saving for a 5% down payment instead of a 3% one gets you that much closer to that 20% home equity target.

b. Shorter Mortgage Terms

This is tricky because this requires higher payments compared to a long-term mortgage. But if you budget wisely, this is a sure way to build home equity quickly.

c. Bi-weekly Payments

If the above is too taxing, look into making mortgage payments every two weeks, rather than once a month.

The difference? This can result in your 30-year mortgage transforming into a 25-year mortgage. This is because your 12 monthly payments paid annually turns into 13 monthly payments per annum.

d. Regular Payments

If your budget won’t allow for this, then simply make sure to pay your mortgage on time. This will keep your credit positive, and you’ll gain equity in your home with every payment.

 

In fulfilling these kinds of commitments, it is up to you to strike a balance between your monthly budget and savings. See what works best for you, so that you can create wealth as a homeowner, by making the most of your home equity.

Why Do Home Sales Fall Through? 5 Common Reasons Why The Seller or Buyer Walk Away

Why do home sales fall through? Why is it that sometimes, the buyer or the seller walk away from a home sale, causing it to fall apart and for the home to return to the market?

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Let’s rewind: You’ve put your home on the market and have been doing everything to prepare your home for upcoming showings. An offer (or even multiple offers) comes in and you accept it. Both parties sign a real estate purchase contract and hope everything goes as planned. You’re definitely a step closer to a closed sale.

But then, life throws a curveball — an issue comes up that turns out to be a major deal-breaker, causing the sale to fall through. Here are some examples:

 
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An inspection could reveal serious flaws affecting the home sale. If major defects, like structural issues, wet basements, leaky roofs, high radon levels, or mold were discovered in the home, it could be a major deal-breaker for the buyer.

These issues could cause the buyer to panic and open further negotiation on the price, or they could ask for a credit or relief from the seller as compensation. If the buyer included a home inspection contingency in their offer, it also allows them to renegotiate the price or walk away due to those issues.

The seller, in return, has three options: 1.) They can fix the problems by hiring contractors; 2.) They can credit  the buyer so they can make the fixes themselves; or, 3.) They can reduce the selling price of the property.

The problem comes if the seller refuses to do any of these. The buyer can then cancel the home sale and simply walk away, although they may lose the earnest deposit they made when signing the contract.

How to prevent this:

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Sellers should never underestimate the power of a home inspection. Especially for older homes, they should hire a home inspector prior to placing their house on the market. The “pre-listing inspection” will help them address any issues the house may have and give them time to fix them. Once you put your property on the market, and potential buyers order an inspection, you will know what to expect and be able to negotiate more easily.

 
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There are cases where a buyer puts in an offer with the condition that they need to sell their current home before they can purchase a new one. They may include it as a home sale contingency, which makes the contract contingent upon the success of selling their own home within a specific time frame. Not all people can afford to handle two mortgage payments at once. The contingent offer will give them a set number of days to sell their current home.

However, if for any reason, their home doesn’t sell within the timeframe, it could cause delays with your home sale or cause it to fall apart. You may be left searching for another buyer or having to proceed with a backup offer and begin a new transaction all over again.

How to prevent this:

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Home sale contingencies can be very risky for you as a seller as it can cause the home sale to fall apart. You can avoid this by prioritizing buyers who don’t need to rely on the sale of their current home to proceed with the transaction. If possible, reject an offer with a home sale contingency and choose another buyer who loves your home and doesn’t need a contingency in order to make the purchase.

 
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Your buyer has been pre-approved; you’ve agreed on a final purchase price; you’ve both signed the contract. So far, everything is going great—until the buyer just gets rejected for a mortgage.

Keep in mind that a mortgage is not guaranteed until the buyer has signed a final agreement with the lender. While waiting for the mortgage to close, buyers should avoid making significant financial changes, such as taking out a new loan for a car, changing or losing a job, etc. These changes could affect their debt-to-income ratio, which may make them ineligible for the mortgage loan for which they originally applied. Once the buyer’s financing falls through, the pending home sale will go back to active and the transaction falls out of escrow.

How to prevent this:

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To ensure that the sale won’t experience any hurdles related to the buyer’s financing, it’s best to accept offers from buyers who already have a mortgage pre-approval. If they are pre-approved, they are less likely to be rejected for a mortgage loan. This means they can get the financing they need to close on the home.

With the help of your listing agent, you can request that buyers be pre-approved and only enter into a contract with a serious and qualified buyer. The only exception is when the buyer wants to make a cash purchase. In this case, there won’t be any financing contingency to deal with.

 
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Buyers who apply for a mortgage will be asked by their lender to pay for an appraisal of the property. Unfortunately, sometimes the home appraisal comes in at less than the asking price. This can be a huge deal breaker to buyers because banks will only lend them the appraised value of the home, and not all buyers can afford to pay the difference. This situation is common in a seller’s market where there’s limited housing inventory and the rampant bidding wars cause prices to go beyond the normal home value.

If this situation occurs, the buyer and seller have a few options. The buyer can order another appraisal from a new professional. If not, they will have to pay the difference in cash. However, not all buyers have the extra amount to bring to the table. They may also ask the seller to reduce the sale price so it’s more in line with the appraisal. Sellers need to be prepared for this negotiation.  The seller can attempt to justify their own appraisal, with comparables in the area, to prove their higher asking price.

However, if both parties cannot reach an agreeable solution, the buyer can walk away, and the pending sale will most likely fall through.

How to prevent this:

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To avoid this situation, it’s best to list your home with a fair and accurate asking price. Consult with your real estate agent so you can come up with an asking price based on comparable home sales in your neighborhood.  

 
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Buyer’s remorse or “cold feet” is real. It’s when the buyer backs out of a deal at the last minute after they realize that they don’t want to buy the home. It happens to both first-time and repeat buyers. After all, buying a home is a huge financial decision and is far from simple.

Once a buyer places an offer, he or she is legally bound. However, buyers can get scared or overwhelmed with the difficulties of the process. Once they realize they don’t want to continue with their purchase, they will do anything they can to get out of it, whether it be contingencies stated in their offer or loopholes in the contract.  

When this happens, the seller is left in a bad position. This is why the earnest deposit is important. This deposit, which is typically 1 percent of the home’s final sale price, is made when the buyer signs the purchase contract. It serves as protection for the seller in case the buyer changes their mind. If the buyer chooses to walk away from the deal due to a change of heart, they will lose their deposit money to the seller.

However, it’s still a heart-breaking situation for the seller because they now need to put their home back on the market and start from scratch.

How to prevent this:

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While this issue depends entirely on the buyer and there isn’t much you can do as the seller, there are ways you can avoid it. With the help of your agent, make sure that there are no undisclosed points in the contract that a buyer can use to make their offer null and void. Also, in the case of multiple offers, favor a buyer whose offer has fewer contingencies and is confident enough to proceed with the purchase.

For buyers, especially first-time home buyers, get the help of an experienced real estate agent who can walk you through the real estate process and eliminate any misconceptions you have about buying a home. Realtors can also provide counseling if they notice any signs of cold feet from their client.

 

Of course, there are other reasons a home sale could fall through that are out of the seller’s control. Regardless, it can be very frustrating and time-consuming when you have to start from square one and put your house back on the market. Whether you are the seller or the buyer, it’s important to know and understand these deal-breakers so you can actively prepare and attempt to avoid them as much as possible.

The 5 Biggest Challenges of Buying A Home When You Have Student Loans

What’s the biggest barrier to purchasing a home that requires a mortgage? For millions of college graduates — both older and younger millennials — it isn’t their credit card debt. Rather, it’s their student loans that are preventing them from fulfilling their dream of homeownership.

To explain it further, here’s the summary of the latest student loan debt statistics:

Statistics from personal finance site Make Lemonade reported that over 44 million people carry a collective debt of $1.5 trillion.

  • According to Student Loan Debt and Housing Report 2017: When Debt Holds You Back by the National Association of Realtors (NAR), 17% of borrowers owe more than $100,000 in student loans.

  • More than 7 in 10 student loan borrowers believe their debt has impacted their ability to purchase a home.

  • Student loan debt has now become the second highest consumer debt category - second only to mortgages.

Moreover, paying off their student loans isn’t the only challenge they encounter when qualifying for a mortgage.

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Nonetheless, if you’re a student loan borrower, there are steps you can take to overcome these hurdles. Homeownership doesn’t happen overnight, but anyone can make it happen with ample planning and preparation.

Challenge #1: Debt-to-income ratio (DTI)

According to the NAR report, 52% of younger millennials don’t qualify for mortgages due to their debt-to-income ratios, which includes student loan debt. It’s one of the main things that delays a home purchase.

Your DTI ratio is simply what you owe compared to how much you make or the amount of recurring debt you have versus your monthly income. Most of the time, lenders focus on this ratio, more than your credit score, or even how much you have set aside for a down payment. They assess whether you can still balance your living expenses while paying off your debt obligations. As a rule of thumb, they want to see a low DTI, with a ratio, ideally, falling below 36%.

Your lender will also calculate both your front-end and back-end DTI to determine if you qualify for a mortgage loan. The front-end DTI is known as the housing ratio, which is the amount of monthly gross income spent on housing expenses. On the other hand, the back-end ratio includes all of your debt obligations, such as student debt, car payments, and credit card bills.

Pro tip: Control and reduce your DTI.

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Before house-hunting, try to reduce your DTI by paying existing debt and/or increasing your income. If you have credit card debt, remember that most lenders will use the minimum payment balance when calculating your ratio. With that said, it’s ideal to pay off your debt every month to reduce the amount of money paid in interest.

 

Challenge #2: Credit score

While a high percentage of student loan borrowers are denied mortgages because of steep DTI ratios, your credit score plays a role as well. Your ranking affects whether you get a low mortgage interest rate, although only 8% of millennials were denied because of a low credit score.

The average FICO credit score is 700. A credit score of 750 or higher is considered excellent while a score of 649 below is considered poor.

Pro tip: Build up your credit score—the higher, the better!

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If you’re hoping to get a mortgage, paying your debts on time will help boost your credit score. Keep your score healthy by not skipping or missing any of your payments. Check your credit report every year and if you find any errors, take the necessary steps to resolve them.

 

Challenge #3: Establishing a good record of paying bills on time

The most important factor in your credit score is your payment history. It must show that you are not only financially capable but also responsible when making payments. Lenders prefer to lend their money to a borrower who has a solid financial reputation.

Pro tip: Avoid skipping any payments and always pay on time.

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To avoid being late, you can set up auto-pay for all your accounts to ensure you’ll make full and on-time payments. If you have a delinquent payment, pay the balance so you don’t damage your credit score and can start to build a good payment history.

 

Challenge #4: Credit utilization

Aside from your credit score and DTI, lenders will also evaluate your credit card utilization. It is your monthly credit card spending as a percentage of your credit limit, which should be less than 30%.

Pro tip: Keep it low.

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The ideal way to manage your credit utilization is by using as little of your available credit as possible. For example, if you have a $3,000 credit limit and you spent $1,000 in one month, your credit utilization is 30%. It’s even better if you can keep your utilization at less than 10%. You can set up automatic balance alerts to monitor your credit utilization and pay off your balance multiple times a month to reduce it.

 

Challenge #5: Saving for a down payment

Whether you’re a student loan borrower or not, it’s understandable that the biggest challenge of purchasing a home is saving for a down payment. At least 85% of non-homeowners say their inability to save for a down payment has delayed their ability to buy a home.

Pro tip: Look for down payment assistance and other ways of saving.

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Look out for government assistance programs available to first-time buyers and student loan borrowers. Federal programs, such as the FHA or USDA loans, will allow you to purchase a home with less than 3.5% down. Likewise, there are existing local programs where you might qualify. Don’t be afraid to check out their eligibility requirements or talk to a mortgage lender to help you understand the process.

Another thing you can do is to look for creative ways to save for a down payment. Even if that means delaying your dream of homeownership for a few years, try saving all “found” money that comes down your way. To achieve this, you can save any money you got from bonuses, overtime pay, and cash gifts from relatives and friends or even allocate income tax refunds to be used specifically for your down payment and closing costs when it comes time for you to buy a home.

 

Bottom Line

To get a lower monthly payment so you can manage your finances better, see if you can refinance or consolidate your student loans. However, it still depends on your circumstances and if you’re confident in handling your monthly payments. Before you start house-hunting, just remember to set a realistic budget and focus on your financial goals to finally achieve the American Dream.

Don’t Make These 7 Mistakes When You Buy Your First Home

It’s easy to fall in love with your dream house (and the idea of finally buying one)! However, your judgment may be easily clouded when you are enamored with an amazing home and feeling the pressure to pull the trigger. Stakes are high when you’re purchasing a house, so here’s a list of major mistakes you should avoid at all costs:

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1. Underestimating (or forgetting) the added costs.

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Buying a house entails many additional expenses on top of the price of the house itself. There are loan application costs, mortgage insurance, and closing costs, just to name a few. You may also need to spend on renovations once you move in. One tip: a quarter (or better, half) of the price of the house should be stashed in your account in order to cover for these expenses.

 

2. Not getting a buyer’s agent.

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Securing your own buyer’s agent allows for a critical eye over deals and transactions. Negotiating solely with a seller’s agent who’s legally obligated to work for their client’s interests can be a mistake.

 

3. Falling prey to “too good to be true” home values.

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These advertised low rates are all over the internet, and online home valuation sites can set unrealistic payment expectations. It’s good to have an experienced real estate agent explain the rationale on market prices by conducting a comparative market analysis based on internal industry data.

 

4. Not doing research on the neighborhood.

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You might have found the house of your dreams, but, it doesn’t exist in a bubble. It’s best to know about the status of the location of the house in terms of the ease of transport around the area, crime levels, the presence of earthquake fault lines, proximity to schools, hospitals, and police stations, etc. After all, location is key.

 

5. Going house hunting without a pre-approved mortgage.

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Getting pre-approved for a mortgage plan requires a professional evaluation of your credit report and credit score. This can help you evaluate your finances—how much can you borrow and how much can you realistically afford to pay.

 

6. Skipping a home inspection.

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A house may look like it’s in top shape, but there may be hidden defects lurking out of sight. A certified home inspector with a trained eye can easily spot problems which you may have missed, like termite infestations and gas leaks. If significant issues are detected, you may be able to negotiate with the buyer to lower the price.

 

7. Failing to see it as a long-term investment.

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It may be appealing to you to own a great house, but there are a lot of things to consider. Ask yourself: can I live and work around this location for more than 3 years? Can my family live a peaceful and thriving life in this neighborhood? If the answer is no, you may want to reconsider, as homes need time to appreciate in value and you may be throwing away your hard-earned money if you need to move too quickly after purchase.

Notice Of Intent to Foreclose: Know Your Options

As a homeowner, there’s an f-word that is avoided as much as possible. Even though we don’t want to say it we have to talk about it. Why? Because like most problems, that’s how it’s handled. So say it with us, foreclosure.

Most of the time, when people find out that their dream house is facing foreclosure, their world stops. No one buys a house and puts in all the effort into making it a home only to one day realize that it will be taken away from them. Getting a Notice of Foreclosure is something that people dread, and even ignore in the hopes that the problem will go away.

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Ignoring Your Foreclosure Notice

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What happens if you don’t respond to the notice of intent for foreclosure?

When you receive a notice of foreclosure, the best thing to do is take charge. Getting a notice of foreclosure doesn’t mean that the world has stopped because there are many options for you!

Even when you get the notice, you can still avoid having foreclosure and bankruptcy on your record. So, to answer the question, ignoring your foreclosure notice will only limit your options and ultimately lead to losing your home.

If you’re reading this, and you still haven’t received a notice of foreclosure—in which case you’re at the stage of dreading it—what can you do?

 

Foreclosure Avoidance Plan

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Banks offer Foreclosure Avoidance Plans for those who want to be extra-sure about their home loans.

Always consult with your lender about this first. It will seem like a fair deal, but don’t forget that this is actually an additional loan. So now, you’re paying for your mortgage and an additional foreclosure plan.

If this is something you can handle, then by all means, go for it!  If you’d rather work on your primary loan before adding another one into the equation, it’s also okay not to enter into a foreclosure plan.

 

Filing for Bankruptcy

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What if you just totally forget the foreclosure of your house, and file for bankruptcy instead?

The good news is, yes, you can do that. Your foreclosure will be curbed if you do this. What happens when you file for bankruptcy is that your lender will not be able to collect the debt from you. The bad news is, courts cannot discharge secured debts that include mortgage payments.

What happens here is that since you are filing for bankruptcy, you don’t have to pay for your mortgages yet.  However, as soon as your bankruptcy process is complete, your lenders will definitely be back for your debt.

In cases like this, homeowners usually struggle with paying for their mortgages after filing in the courts. The worst part is that, most times, these homeowners end up with not just a bankruptcy but also a foreclosure on their record.

 

Your Financial Status

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Let’s say you don’t go with bankruptcy and are looking at simply foreclosing your home. How does this affect your financial status?

Your foreclosure report will be on your record for seven years.  Not only that, after those seven years, you may also have to write a report to three major credit agencies to have the foreclosure removed from your record.

Although lenders have been more lenient over recent years, those who are approved for new loans, and even credit lines, have to pay higher interest rates. You can’t really blame them, though. They see those who have a record of foreclosure, with or without bankruptcy, as more of a liability than those who have a clean record.

 

You’re Not Alone

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Yes, getting a Foreclosure Notice is something you might have never thought would happen to you. It has been found that this has actually become more common recently.

A 2013 study found that over 4.1 million foreclosures were completed in the United States during September 2008-December 2012. This is quite a big number and does not even include those who avoided foreclosure through some of the methods mentioned above, those who opted to sell their homes, or those who found ways to work things out with their lenders.

5 Ways To Look For A Great School District When Buying A Home

Proximity to good quality schools is one of the most important factors considered when purchasing a home, especially for young families or young couples who are planning to have children. Homes that are located near top-quality school districts generally have higher property values and huge resale potential. Many home buyers are willing to forgo certain home amenities just to have access to quality schools.

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Here are some things you can do to choose a good school district when searching for a home:

1. Create a checklist of the qualities and values that are important to you and your child’s education.

If you consider a good school district as one of the major factors in your home-buying decision, contemplating what values matter to you most when it comes to your child’s education is also relevant. A school will be your child’s second home, so you need to be clear about your preferences. Do you want a traditional or an alternative style of learning? How important are extracurricular and skill enhancement activities to you and your child’s development? What are your child’s skills, strengths, and weaknesses, and how can these be improved? What sort of contributions are you willing to make to improve your child’s learning? These are just some of the questions you have to ask yourself when deciding what type of school you would like your children to attend.

 

2. Do your online research.

Most schools and school districts have respective websites where anyone can get extensive information. Spend some time checking the sites of each school you’re considering and read local reviews. Also, check out other resources that provide valuable information, such as GreatSchools.org, NeighborhoodScout, and the National Center for Education Statistics, among others. Take time reading downloadable school newsletters and calendars to familiarize yourself with local news and events. It is also worth looking at some of the following information:

  • Standardized test scores

  • The offered curriculum

  • The latest rate of students attending higher education

  • Awards and certifications the school has recently received

  • Student-to-teacher ratio

  • The educational qualifications of most teachers

  • Languages offered

  • Any specialized programs for gifted students or students who need extra assistance

 

3. Consult your local real estate agent.

The next best resource for neighborhood and nearby school knowledge is your local real estate agent. They have a good understanding of the local school districts and can provide you with an objective opinion. Consider their tips and recommendations, as in many cases, data and rankings may not properly guide you to the school that’s truly the right fit for you and your child.

 

4. Learn from other parents whose children already attend the school system.

You may have done your online research about particular schools and their reputation, but hearing about the personal experience of local parents whose children already attend the school system is more valuable. Speak to them or read reviews so you can get a general understanding of what a specific school is really like to attend. This way, you may also learn whether their children attend any amazing after-school programs or individualized education programs that could also be great for your children.

 

5. Get the real picture by actually visiting the school.

Once you’ve narrowed down your choices, actually visit the school so you can see how it operates and how interactions are taking place. Is the school generally clean and orderly? Are you confident about campus security? Learn more about the school’s culture and values by observing its people and surroundings. How well does the front office interact with the kids? How are the students’ works and achievements being displayed? Is the school secretary good-natured and professional? And don’t forget to ask enough questions to make sure you’re comfortable about the school you choose. Just make sure to call first and ask permission before visiting as some schools may have certain visitor restrictions.