In the spirit of motivating buyers to submit offers, I thought it might be helpful to share what exactly goes into an offer…so that you can make an offer…today…because time is running out! (I hope I’m making myself clear).
Your Realtor® will help you understand the terms and conditions of the sale and plan a strategy for achieving an accepted offer. Sometimes this process involves an initial offer and several counter offers. Oral promises are not legally enforceable when it comes to the sale of real estate so every offer is presented in a formal written contract. This contract specifies price and all the terms and conditions of the purchase. For example, if the sellers said they’d contribute $2,000 toward your closing costs, be sure that is included in your written offer and in the final completed contract, or you will not have grounds to collect it later. After the offer is drawn up and signed, it will be presented to the seller agent by your Bella Casa Realtor® .
What the Offer Contains The offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest money agreement or deposit receipt). It’s important, therefore, that it contains all the items that will serve as a “blueprint for the final sale.” Items may include such things as:
Address and sometimes a legal description of the property
Terms — for example, all cash or subject to your obtaining a mortgage for a given amount
Seller’s promise to provide clear title (ownership)
Target date for closing (the actual sale)
Amount of earnest money deposit accompanying the offer, and whether it’s a check, cash or promissory note, and how it’s to be returned to you if the offer is rejected — or kept as damages if you later back out for no good reason
Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
Provisions about who will pay for title insurance, survey, termite inspections and the like
Type of deed to be given
Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing
A time limit (preferably short) after which the offer will expire
Contingencies, which are an extremely important matter and are discussed in detail below.
Contingencies If your offer says, “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. The following are three common contingencies contained in a purchase order:
The buyer obtaining specific financing from a lending institution. If the loan can’t be found, the buyer won’t be bound by the contract.
A satisfactory report by a home inspector “within 10 days (for example) after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void.
The sale is dependent on the buyer selling his current home.
When the Offer is AcceptedAfter many signatures and lots more initials, we have a willing seller and a willing buyer. Congratulations! Now the work begins:
The Realtor® representing the seller will open escrow with a copy of the Earnest Money Agreement. The title company will begin producing a Preliminary Title Report.
Copies of the Earnest Money Agreement will be given to the buyer’s mortgage broker to begin the loan process immediately (a contractual requirement).
Earnest money offered by a promissory note must be deposited by the due date, or you risk losing the property and your earnest money.
The buyer hires a home inspector and notifies an insurance agent to obtain homeowner’s coverage.
In order to claim the tax credit, Home buyers must sign a purchase agreement between November 30, 2009 and April 30, 2010, and close by July 1, 2010.
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress passed legislation that grants a tax credit of up to $8,000 to first-time home buyers and $6,500 for existing homeowners who have lived in their home consecutively for 5 of the previous 8 years. (More Details Here)
Venessa provided this FHA loan scenario to illustrate how waiting to purchase will hit your pocketbook in just a short 6 weeks from now. You will notice three upcoming changes that will affect your out-of-pocket expenses:
The UFMI rate is increasing from 1.75% to 2.25% (Up Front Mortgage Insurance is an insurance premium collected by FHA at the time the loan is initially made. It is in contrast to private mortgage insurance (PMI), which is collected by the lender each month when a buyer’s down payment is less than 20% of the purchase price.)
The allowable Seller Contribution will decrease from 6% to 3%. For example, a seller can only contribute up to 3% toward the buyer’s settlement charges (formerly called “closing costs”).
The Homebuyer Tax Credit expires on April 30. Buyers must be under contract, having a signed purchase agreement in hand by April 30th, but you have until June 30th to close the financing. If a first-time homebuyer misses this April 30th deadline then you will miss out on $8,000.
Now take a look at this chart. In the case of $193,000 loan, there is a potential difference of $14,965 by purchasing after April 2010.
The lending industry has undergone big changes this past year, resulting in different paperwork, requirements to qualify for loans, and more complexity. Bella Casa firmly and absolutely encourages all buyers to ONLY seek financing from LOCAL mortgage lenders. You need to be able to sit face-to-face with your lender so they can educate you about the process and your loan, and also so that you can hold your lender accountable.
We realize that these figures can be confusing, so we highly recommend that you call a local lender to discuss your specific situation.
This is the first post in a series about the FHA (Federal Housing Administration). In short, the FHA is an agency of the federal government that helps borrowers get amounts they qualify for, and assists lenders by reducing their risk in issuing loans. The FHA is the largest insurer of residential mortgages in the world, insuring tens of millions of properties since 1934 when it was created.
An FHA refinance mortgage or FHA loan allows for the refinance or purchase of a home with a low down payment. These loans are great for the first-time homebuyer.
The Fed has told us repeatedly that their massive purchasing program of Mortgage Backed Securities is just about over – and this translates to home loan rates rising in the near future.
As you can see in the chart below, the amounts of Mortgage Backed Securities the Fed is purchasing are slowly dwindling, as the program is set to wrap up by March 31st, and are clearly trying to ration out the remaining portion. Last week, the Fed purchased $11 Billion in Mortgage Backed Securities, which leaves them with $66 Billion to spend out of their original $1.25 Trillion allotment. So about 95% of the total has already been spent and has purchased about 3 out of every 4 home loans during the past year. When such a large buyer leaves the market, it is very likely that prices will worsen.
This is very important because as the Fed has less money to last through the remaining months of the program, their ability to keep home loan rates low via their purchasing power will wane.
And to those who can take advantage of currently low home loan rates, DO NOT WAIT, as the clock on these historically low rates is ticking.
Most people buy when everyone else is buying and they may pay too much. People often sell when everyone is trying to sell and they probably lose too much. There has never been a better time to reform your ways!!! Continue reading “It is a Buyer's Market”
In a recent Forbes magazine study, Portland was named one of the top 10 cities in the nation where it is smarter to buy than rent. Market conditions are such that now is a particularly good time for some renters to become homeowners.
To rank the cities, Forbes computed the premium to buy—the spread between what a consumer would spend to rent and what they would pay for a mortgage—and also identified locales where economists predict home prices will go up the most over the next five years.