Dec. 1, 2021

Is Cash Really King in Real Estate?

Is cash really king when purchasing real estate? The short answer to that question is yes, and there are some good reasons why that’s the case.

Contracts to purchase a home typically have a number of contingencies and deadlines in them that allow a buyer and/or seller to cancel the contract if certain issues aren’t resolved within the stated timeframe. Because two of these contingencies only occur when there’s a mortgage application involved, a cash transaction has fewer potential obstacles and is, therefore, more likely to close successfully.  Hopefully, the seller’s agent requested proof of funds (bank or brokerage statements showing that the buyer has the full purchase price available) before the offer was accepted.

The first contingency is the appraisal which is only required when the buyer is seeking a loan approval. If the appraisal value is less than the purchase price, the buyer can cancel the contract and have their escrowed good-faith money refunded. Perhaps the buyer is already experiencing “buyer’s remorse” and can’t sleep at night worrying about the deal. They may welcome the opportunity to be able to walk away. A buyer may also not be willing to pay more for a property than the appraiser’s stated opinion of value. They might feel that they are overpaying and that maybe they’re not getting their money’s worth. They may be so upset that they’ll walk away without giving the seller a chance to negotiate. It happens.

 

The second financing-related contingency is the loan approval. If a lender doesn’t approve the buyer’s loan within the stated timeframe, and the buyer has cooperated with the loan officer and provided all requested documentation in a timely fashion, the buyer can walk away. Before accepting an offer, an experienced seller’s agent will request a pre-approval letter and a positive conditional approval report from the buyer’s loan officer’s DeskTop Underwriter (DU) loan application evaluation software.

Finally, a delay in obtaining a loan approval can cause the closing date deadline to be missed. If this happens, either the buyer or seller can cancel the deal. There is NO obligation to extend the deadline. Perhaps, the seller has more favorable backup offers that they are willing to pursue if the current deal falls through. It happens.

So, if I was the seller and two comparable offers came in, I’d pick the cash offer even if the offer price was lower. There are fewer deadlines and a greater possibility of a successful closing. Works for me. Long live cash!

Posted in Buyers, Everyone, Sellers
Nov. 28, 2021

Florida Wind Insurance Tips

Florida wind insurance is not a requirement for residential homes in Florida. However, if you live in South Florida, mortgage lenders will definitely insist on the coverage. There is a reason why wind insurance is also known as hurricane insurance. We can, on occasion, get battered.

Homeowner’s insurance can be quite costly in South Florida. Policies usually consist of two sections, one for wind coverage and another for hazard, and each section has its own deductible. So, the first way to lower your insurance cost is to increase the amount of the deductible.

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Posted in Everyone
Nov. 21, 2021

What's a WDO Inspection Contingency?

A WDO Home Inspection Contingency, as it is presented in the standard Florida Realtor’s Residential Contract For Sale And Purchase, protects both the buyer and the seller. The Wood-Destroying Organism (termites, wood-eating beetles and wood destroying fungi) inspection and the buyer’s request for repairs must be completed by the inspection deadline stated in the contract. If left blank, it defaults to 15 days after the contract was signed and delivered to all parties (Effective Date).

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Posted in Everyone
Nov. 14, 2021

What's a Home Inspection Contingency?

A Home Inspection Contingency, as it is presented in the standard Florida Realtor’s Residential Contract For Sale And Purchase, protects both the buyer and the seller. The home inspection and the buyer’s request for repairs must be completed by the date stated in the contract. If left blank, it defaults to 15 days after the contract was signed and delivered to all parties (Effective Date). If the buyer fails to send the inspection report or the request for repairs within this timeframe, the home inspection contingency is null and void, and the seller is no longer required to repair or replace anything.

In South Florida, home inspections can include an assessment of the following General Repair items: roof, structure, electrical, plumbing, pool, central air and heating systems, screens, docks, and seawalls. (A complete list is on page 6 of the contract.)

On page 3 of our standard 14-page contract, there’s a section entitled COSTS TO BE PAID BY SELLERS and includes the maximum amount of money the seller will be required to pay for the repair (General Repair Limit) of the General Repair items. If a dollar amount or percentage of the purchase price is blank, it defaults to1.5 percent of the purchase price.

Once the seller receives the request to fix or replace General Repair items, they have 10 days to proceed in one of three ways: complete the repairs, deliver an estimate of the repairs, or order a second inspection and send that report and an estimate of those repairs to the buyer. If the two reports are substantially different and the buyer and seller can’t agree, they will split the cost of a mutually-chosen third and final inspection.

If the required work costs less than the General Repair Limit, the seller will have the work completed before closing. If the estimate of required work exceeds the General Repair Limit, buyer and seller have 5 days after receiving the last estimate to do one of two things: seller can agree to exceed the General Repair Limit and make all the repairs, or the buyer can submit a list of selected repairs whose total value does not exceed the General Repair Limit. The buyer will then assume responsibility for the rest of the reported defects.

One final note: In an As-Is contract, the seller isn’t required to make any repairs, but the buyer has the right to notify the seller and cancel the contract within the stated home inspection deadline. They don’t have to produce a home inspection report and explain why they’re canceling. They don’t even have to have a home inspection.

Posted in Everyone
Nov. 6, 2021

What's a Financing Contingency?

Three situations (contingencies) allow a home buyer to cancel the contract and recover their escrowed Good Faith (Earnest) money. These conditions are: home needs repairs, appraisal value is lower than the accepted offer price, and the inability to receive a mortgage loan approval.

If the buyer is planning to finance the purchase of a home, then the contract will list the conditions that must be met in order for the buyer to avoid defaulting and losing their escrowed Good Faith money.

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Posted in Everyone
Oct. 30, 2021

Low Appraisal Consequences

What happens to a financed home sale when there is a low appraisal value?

Lenders fund a home purchase loan based on the accepted offer price or the property appraisal value, whichever is lower. So what happens to the deal if the appraisal value is lower than the offer price? In cases like these, the buyers and sellers have a few alternatives.

  • If it’s a conventional loan, the buyer could apply with another lender who hopefully will use a different appraiser. This will cost the buyer more money, but it may work out. (FHA appraisals are tracked by property address and can’t be re-done.VA appraisals are performed by a much smaller select group of people, and there is a significant chance that a new lender will use the same appraiser.)

  • The buyer can pay the difference between the offer price and the appraisal value as part of a larger down payment. Frequently, the seller may agree to pay half of that difference as a credit to the buyer at the closing.

  • The seller can accept the appraisal value as the new purchase price.

  • If none of these options are acceptable, the buyer can walk away from the deal. This is one of the reasons why many sellers may prefer a lower cash offer where there are no appraisal or loan approval contingencies that allow a buyer to cancel without penalty. Cash is king, usually.

Posted in Everyone
Oct. 14, 2021

6 Tips When Buying A Home

Buying a home can be a frustrating journey full of pitfalls and unexpected expenses. Here are some important things to keep in mind that should ease your path.

  1. Check your credit report and score. Unless you are paying cash for your home, your credit can make or break you. Check to make sure that any reported accounts were opened by you and not by someone who has stolen your identity. If you dispute some delinquent charges, now is the time to act. Get the report cleaned up.

  2. Talk to a loan officer. Your credit score will partially determine the type of loan that is available to you. If your score is too low to qualify for a mortgage, the loan officer can suggest ways that you might increase it.

  3. Save your Money. Buying a home is an expensive endeavor. You’ll need to pay for:

    •     home inspection,
    •     property appraisal,
    •     down payment (20% of purchase price if you’re buying a condo in South Florida),
    •     one year of homeowner’s insurance in advance,
    •     lender’s fees,
    •     enough money in the bank to cover 2 months of mortgage payments.
  4. Narrow your choices. After you visit the loan officer and receive a suggested maximum purchase price, search on a real estate website for neighborhoods in that price range. Drive around and see what appeals to you.

  5. Re-visit the loan officer. When you have completed the 4 previous steps, go back to your loan officer and request a preapproval letter. You’ll need to bring the following documents:

    • 2 years of tax returns
    • 3 months of bank or brokerage statements
    • Last paystub
  6. Select a Realtor. Try to find an individual who has the experience to help you through the minefields. Word of mouth, yard signs in the neighborhoods that appeal to you, and websites that caught your eye are all good ways of finding someone to help you.

I hope these tips help you to find the perfect home for you.

Posted in Buyers
Oct. 14, 2021

5 Tips For Selling Your House

Everyone would like to get the best price possible when selling their home. Here are a few tips to optimize your property’s appeal.

  1. Clean it. Clean the oven, and wash the windows and blinds. Let the sunshine light up your spaces in soft, natural light. Shampoo the carpets, and don’t forget the paddle fans. Those blades can collect a lot of dust.
  2. Reduce clutter. Clean off the kitchen countertops, and store toys in a bin. Remove knick-knacks. Think about re-locating excess furniture to a neighbor’s house; this will make the room look bigger and more inviting. Let the prospective buyers move around your home and imagine that they’re living in it.
  3. Make minor repairs and touchups. The kitchen and master bath are two rooms that should sparkle. Re-grout the tub area and floors if it needs it. Freshen up the paint if it will help. Make sure the fixtures and stainless steel appliances gleam.
  4. Enhance the entryway. The front of the house is the first thing the buyer sees. Paint the door if needed and polish brass door knockers and handles. Replace a wooden door sill if it has seen better days. Have a flowering potted plant by the door.
  5. Maximize curb appeal. Cut the grass, trim the shrubs, and cut back any tree limbs hanging over the roof. Plant flowers. Re-surface the driveway if it’s old and stained. Remove or paint over stains on the exterior walls.

 

 These are tried and true ways of maximizing your profits. Plan ahead and give yourself plenty of time to spruce up your place.

 

Posted in Sellers
Oct. 9, 2021

Home Service Warranties

If you’re thinking about selling or leasing a home with older appliances and/or systems, a home service warranty might be right for you. But what exactly is it?

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Posted in Everyone
Sept. 25, 2021

One Important Fact for Home Sellers

When someone decides the time’s right to sell their home, they usually clean it, remove clutter, and maybe improve the landscaping curb appeal. Once everything is bright and shiny, they’ll probably start to look for a Realtor.

The first thing most people want to know is the suggested list price which is immediately followed by a commission discussion. That’s great, but many owners never ask one of the most important questions of all: What kind of lockbox will you be using?

In South Florida, unless the seller wants the agent to be present during all the showings, the house keys will need to be secured in one of two types of lockboxes: combination or electronic (Supra).

Everyone’s seen combination locks. There’s some type of panel where you either press numbers in a specific order, or there’s a wheel where you line up numbers in a particular order. When the sequence is correct, pressing a lever will open the front panel, allowing the showing agent to retrieve the keys from the interior compartment. The locks are relatively cheap, and anyone can open the box if they’ve got the code.

That’s the problem. Anyone can open the box if they’ve got the code. Many lazy real estate agents who don’t want to get off their ample duffs and who don’t give a damn about the seller will give the code to prospective buyers. Anybody who calls them can access the keys to your home!

Okay, that sounds bad. What’s the alternative? The answer is to require them to use an electronic Supra lockbox which they can lease from their Realtor association. If they refuse to do it, move on to your next choice.

There are multiple advantages to using a Supra box.

  • Only Realtors have the app downloaded on their cell phones that allow them to open the boxes via a Bluetooth connection.
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  • The listing agent gets a message whenever anyone opens the box, displaying the agent’s name.
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  • The listing agent can configure the software to request feedback from the buyer’s agent for multiple days after the showing.

Be smart and protect yourself and your belongs.

Posted in Sellers